The Union Minister for Commerce & Industry, Shri Kamal Nath addressing at the Business Luncheon organized by the FICCI, in New Delhi on April 29, 2008.

 As India becomes more and more attractive as a market, offering decent return, foreign direct investment (FDI) is also growing sharply. In 2007-08, the country received FDI of $24.5 billion as against $15.7 billion in 2006-07, showing a growth of 56%. In 2005-06, the growth was even sharper at 184%, up from $5.5 billion in 2004-05.

Encouraged by the performances in the last four years, commerce and industry minister Kamal Nath expressed confidence that India will receive $35 billion FDI in financial 2008-09. Nath said rise in FDI shows the growing confidence of the foreign investors over the Indian economy. He said even when entire world is facing a financial turmoil, India continues to be a safe and stable investment destination.

Nath said the proactive measures taken by government also pushed FDI in the country. He added that recently announced civil aviation policy also helped in attracting foreign investment.However, on the issue of opening up of retail sector, he was non-committal and the government is reviewing the issue.

The commerce minister further said foreign investments of about $9 billion, for which shares of the respective companies could not been issued in 2007-08, have already been carried forward into the first month of the current fiscal. With this, he said, "I am confident the momentum will continue," he added.
In 2006, India ranked fourth after China, Hong Kong and Singapore as a major investment destination in Asia. "We now expect our position could have reached at third position, after China and Hong Kong," Nath said.

If reinvestment of the foreign earnings is accounted for, FDI in 2007-08 will be $ 30 billion as against $ 19.5 billion. Global firms have brought in most of the investment through tax havens like Mauritius and Singapore during 2007-08. Therefore, Mauritius and Singapore are the two biggest investors in the country. The inflows from Singapore have more than doubled to $1.67 billion in 2007-08 as against $ 578 millin in the previous year. Investments from Japan have grown the fastest from $ 55 million in 2006-07 to $761 million in 2007-08. Besides Mauritius and Singapore, US and UK are the largest source for FDI in the first 11 months of 07-08 - $1.12 billion and $1.02 billion came from UK and US respectively.

Nath said 80% of the FDI inflows in 2007-08 are for greenfield projects and not for expansion or acquisitions of the existing projects. The major sectors that attracted FDI are telecom, real estate, construction activities, electrical equipment, software and hardware and banking sector. CMP Asia, Mauritius, has invested $654 million in HDFC Housing Finance. Singapore-based Biometrics Marketing invested $459 million in Relogistics Infrastructure in the petroleum and natural gas sector. Lot of investment is expected to flow into petroleum, manufacturing and electronic hardware sectors.

Indian investors have emerged as the most optimistic lot across Asian markets in the first three months of 2008, although the country like the rest of the region is not insulated against the uncertainty in the global market, a latest report says. According to a survey by global financial institution ING, India retains the position of being the most optimistic market in the first three months of 2008.

India's investor sentiment index rose to 168 for the first quarter (Q1) of 2008 from 167 in the fourth quarter (Q4) of the calendar year 2007.
The ING Investor Dashboard survey measures and tracks sentiment and behaviour of mass affluent investors each quarter from 13 Asia-Pacific markets including India, China, Hong Kong, Indonesia, Taiwan, Thailand, Japan, Australia and New Zealand.

Each market covered is assigned an investor sentiment score ranging from 0 (least) to 200 (most optimistic). Although Indian and other Asian investors remain cautiously optimistic for longer term and might think the worst is over, domestic investors are among those who are more bullish about the market, the survey revealed.

Moreover, while both have adopted a 'wait and see' investment approach, Indian investors are moving towards lower risk investments, it added. As the region continues to deal with the impact of the sub-prime crisis, global credit crunch and US economic slowdown, the ING Investor Dashboard's pan-Asia sentiment index fell to 125 for reviewed period from 135 in Q4 2007.

Source: The Financial Express