FDI tangos with economic boom

NEW DELHI: The economic boom seems to have rubbed of on the foreign direct investment (FDI) growth. FDI inflows have surged a record 92% in April-July 2006-07 compared to the corresponding period of the previous year. With inflation contained at a moderate 4.7% level and industrial production touching a record high of 12.4%, the stage now seems set for a major spurt in FDI inflows.

The cumulative inflow during the four-month period has been $2.9 billion as against $1.5 billion during April-July 2005. “During the month of July 2006, FDI inflows went up by a record 259%, increasing to $1.63 billion,” commerce & industry minister Kamal Nath said on Friday. FDI inflow during July 2005 was only $0.324 billion.

The single largest inflow this year has come from Barclays Bank PLC of Singapore, which has invested $380 million in July 2006, Mr Nath added.

Other major investments have been made by Global Communication Services Holding in Aircel and SIERO Investment Holding in Orange Realty, Flextronics and Aspen Pharmacare. The ongoing economic boom, helped by surging industrial growth, is seen as the primary factor behind the FDI surge.

The 10 sectors that have attracted the highest FDI include electrical equipment, services sector, telecommunications, transportation industry, fuels, chemicals, food processing, drugs and pharmaceuticals, cement and gypsum products and metallurgical industry.

“The government also estimates an inflow of $12 billion this fiscal, which is 50% more than the previous year’s inflow,” Mr Kamal Nath said. According to RBI data, India has received a cumulative inflow of $50.1 billion FDI since 1991 to June 2006.

“Of this, $16 billion has been received in the last two years and four months,” Mr Kamal Nath said. Industrial production has also grown by 12.46% this July, which is the highest recorded in the past ten years, he said. In April-July 2006-07, industrial production saw a 10.6% growth as against 8.9% in the same period the year before.

As for manufacturing, the food products segment has grown 26.8% while textile, including wool and silk, have grown 25% in July 2006. Transportation industry, including transport equipment, has grown 22.4% while consumer goods and capital goods have shown a growth of 17.5% and 15.4% respectively this month. Other manufacturing industries have shown a growth of 21.3%, he added.