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  HIGHLIGHTS
   
 

Outlook for Infrastructural Improvements looks promising
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  Woolen Weaves of India
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  India as a Meeting
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03. INVESTMENT UPDATE
UNPRECEDENTED 480% INCREASE IN FDI INFLOWS: KAMAL NATH

Foreign Direct Investment (FDI) inflows into India during December 2006 registered an unprecedented increase of 480% over the inflows in December of the previous year 2005, Shri Kamal Nath, Union Minister of Commerce & industry, indicated.

“We received equity inflow of US$ 2.04 billion in December 2006, as compared to US$ 0.35 billion in December 2005. This is the highest inflow ever into the country in a single month. With this, the total inflows from April 2006 to December 2006 are now about US$ 9.3 billion, as compared to US$ 3.5 billion received during this period last year. The total inflows in the year 2005-06 were US$ 5.5 billion, while it is expected that by March 2007, we would have received this year over US$ 12 billion of FDI equity inflows”, he said.

The Index of Industrial Production (IIP) in December 2006 went up by 11.1% over the corresponding month of the previous year. Manufacturing sector, which has an almost 80% weightage in the Index, went up by 11.9%. With this, the overall IIP has grown between April-December 2006 by 10.8% over the previous year, when during this period last year, 8% rate of growth was recorded. “The Ministry of Commerce & Industry is expecting this rate of growth further enhanced in the last quarter of the year, so that during the entire financial year, i.e. 2006-07, the growth rate of industry can reach almost 11% and the manufacturing rate of growth go beyond 12%”, Shri Kamal Nath said.

Meanwhile, In a continuous exercise to streamline the Industrial Policy, in January 2007, the Ministry of Commerce and Industry notified the de-reservation of 87 items from the list of items reserved for small-scale industry. In a meeting of the Advisory Committee held last week, it was decided to further de-reserve 125 items from that list and a notification to that effect is being issued shortly. With this, 212 items would have been de-reserved, leaving only 114 items reserved for SSI units.

Other Highlights

· In A.T. Kearney’s FDI Confidence Index, India’s rank as a FDI investment destination has improved from No. 15 in 2003 to No. 2 in 2006.

· As per J.P. Morgan, the return on equity on investments made in India is the highest in Asia at 18%.

· Services sector has become the top sector in attracting FDI in April-November 2006.

In response to a suggestion from members, Shri Kamal Nath agreed to set up an Expert Committee to look into the sectors into which FDI was flowing and its impact on the rural economy. The purpose of this exercise is to ensure equitable distribution of FDI and to bridge the rural-urban divide. Members agreed with the Minister on the importance of FDI in the country’s economy in terms of not only generating economic activities and jobs, but equally in facilitating transfer of technology and managerial capabilities, thereby enhancing India’s global competitiveness.

“INDIAN COMPANIES ESTABLISHING A GLOBAL PRESENCE AND TILTING SCALES IN GLOBAL MERGERS AND ACQUISITIONS”

Shri Kamal Nath, Union Minister of Commerce & Industry, has said that Indian companies are now establishing a global presence, displaying the muscle and the potential to tilt scales in global mergers and acquisitions.

In pure business terms, the change in domestic mindset is one of the most significant trends that is driving the tide of change in India, he said while delivering the keynote address on “Doing Business with India – Achieving success in a fast-growing economy” organised by The Economist in London “India has begun to invest in the global canvas.

From a tentative mindset that questioned our entrepreneurial capability to survive against global competition, Indian businesses and people are embracing globalization”, he said.

Meanwhile, the world continues to invest in the Indian canvas, the Minister said, emphasising that the intrinsic worth of India’s strong macro-economic fundamentals was being recognised by international investors.

He said that foreign direct investment (FDI) equity inflows alone this fiscal (2006-7), were expected to touch US $ 12 billion, which was more than double the equity inflows of US $ 5.5 billion last year. “Of the $ 53 billion in FDI (equity + other components) up to 2006 (September) since 1991, when the country began its economic liberalisation, a full one-third, i.e., around $ 18 billion, has come in the last two-and-a half years”, he pointed out.

“Indian companies seeking to be listed on the New York Stock Exchange do not make headlines any longer.

The hunger to be globally benchmarked has spread across sectors and regions.From a Hyderabad branded Cyberabad for its technology-focussed growth, to rural communities hooked onto e-kiosks for the latest price and product statistics, technology is spreading its presence in the country.

From technology intensive domains such as telecom, to traditional sectors such as education and healthcare, it has become a ‘new’ way of life”, the Minister said.

Underlining that the real challenge was to ensure inclusive economic growth, Shri Kamal Nath stressed that this was not just of domestic importance, but equally important to foreign investors as it would make for a reassuringly stable social environment and expand the market potential of the country.


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