FDI Capital Inflows Into India Despite Credit Crunch

India has received a total of $14.6 billion in FDI during April-August 2008 against $6.5 billion a year ago. India has managed to attract an impressive amount of FDI with 124% increase in the first 5 months of the current fiscal year, while the FDI reported in August reach 180% increase.  The FDI flow is in the backdrop of a global credit crisis and falling market as Indian market is down over 40% from year ago period.  India may have trouble attracting more inflows with the current economic environment with future uncertainty, and investors raising cash positions and further reducing risks in investing.

 

“This (increase in FDI) must be seen in the context of the global economic situation,” Commerce and Industry Minister Kamal Nath said while releasing the FDI data.

 

He said that the target for the current fiscal would be met despite a difficult financial environment in the world. The FDI target for 2008-09 is $35 billion, while the actual inflows during the previous year were $24.57 billion.

 

In August alone, India’s FDI was $2.32 billion, a rise of 180% over the corresponding month last year.

 

The Bright Spot

 

The manufacturing sector received $5 billion during April-August period, showing a rise of 41% over inflows in the year ago period.

 

Readjusting Forecast

 

The foreign direct investment to the country may miss the current fiscal target by as much as $10 billion in the backdrop of a global economic slowdown and the US financial crisis, CEOs said in a survey.

 

In a survey of CEOs by industry body Assocham, majority said India could optimally receive about $25-26 billion of FDIs in 2008-09 fiscal against the targeted volume of $35 billion.

 

Other factors that may hinder the investment flow includes, adverse sentiments in the stock market, bottlenecks on infrastructure, no initiatives on disinvestments, rising interest rates, it said.

 

The target of FDI in the last fiscal was $30 billion, of which the total investment received were about $25 billion, it added.

 

About 300 CEOs opined that like last fiscal, sectors like services, computer software and hardware, construction, real estate and telecom would lead in getting FDI in 2008-09, Assocham President Sajjan Jindal said.

 

During January to June, India received FDI to an extent of $22 billion only. During this period, FDI flow from the US towards India stood at $1.3 billion, which is only 6.11% of total FDI of $22 billion received by India during the period, it said.

Out of 400 CEOs interviewed, 280 said stock market would continue to remain in dampen mood as large number of investors have shifted their investments to traditional source of savings channels.