India may face a slowdown in FDI: Moody's

NEW DELHI: India may see a slowdown in foreign direct investment in the days ahead as investors are staying away from emerging markets due to risk aversion amid global financial crisis, says a report by the economic wing of Moody's.

"India is also (along with China) about to face a slowdown in foreign direct investment, although the total (investment) for the first half of 2008 already exceeded the figure for all in 2007," Moody's Economy.com, a subsidiary of Moody's Corporation, said in a report.

The report said that the biggest concern for India now is the rapid capital outflows. "The repatriation of funds by portfolio investors, who had entered India in the last couple of years and contributed to the bull run, has now intensified the stock market tumble and the sharp depreciation of the rupee," the report said.

It added that India, a popular outsourcing destination, depends on robust service industries in advanced economies, most of which are battling recession.

"For India, the biggest concern perhaps is over its important outsourcing industry, as the practice of shifting US jobs overseas had come under fire during the US presidential campaign," the report said.

It added that India's industrial production has slowed down markedly, which is a sign of weakening domestic consumption.

"Unable to maintain industrial production and prevent a sharp slowdown themselves, it is difficult for India (and China) to support their economies," Moody's said.

It further said that amid a global slowdown, India's export will also be hurt, although the impact may not be realised as quickly as in China.