INDIA BUSINESS WORLD - APRIL 1st - APRIL 15th - 2008
ASIAN ISLANDS OVERTAKE US AND UK IN TERMS OF BRINGING FDI INTO INDIA IN FY’08
There’s a major change in the sources of foreign direct investment (FDI) pouring into India in FY’08. Singapore and Japan have overtaken the US and UK in terms of bringing long-term investments into India. With tax-haven Mauritius continuing to lead the charts—many firms route their investments through the country—the top three sources of FDI in India are all from Asia.
The latest FDI report, which captures inflows between April-December ’07, shows foreign investments from Singapore cumulating to $1.4 billion against $1.2 billion from the US, UK and Germany combined. Last year in the first nine months of FY’07, the US, UK and Germany had together brought more than $2.2 billion to India.
Japan, the most developed Asian economy, also ramped up India investments this year to $637 million as against a mere $419 million in the three-year period between April ’04 and March ’07.
One of the reasons for the surge in foreign investment from Singapore could be linked to inflows from the two sovereign wealth funds—GIC and Temasek. The duo has been active private equity (PE) investors in the country in the recent past, with Temasek emerging as one of the top PE firms. For instance, Temasek and GIC together announced deals worth $3.4 billion plus in India during calendar year 2007. This was about 18% of the total PE deals struck last year. However, the source of FDI as captured by government statistics may not necessarily indicate all the inflow actually originating in the respective nations. For instance, tax havens like Mauritius are used by investors from across the world, including large multinationals in the West, to invest into India.
While Mauritius remains the number one source of such FDI routed into India, other tax havens are also catching up.
For instance, European tax haven Cyprus, which brought in FDI worth a mere $151 million between April 2000 and March 2007, has become another hot channel for foreign investors to bring in funds into the country. For the April-December ’07 period, FDI worth $534 million flowed into India through Cyprus, pitchforking it among the top 10 source of FDI in India since April 2000 on a cumulative basis.
Overall, the quantum of FDI for the first nine months of FY’08 shows a 45% jump with the total FDI moving to $15.34 billion from $10.59 billion in the same period during FY’07. A major contributor to this is the reinvested earnings, which represent the investments made out of earnings in India by Indian arms of foreign firms. Reinvested earnings more than doubled to cross $2 billion during FY’08 compared to the nine-month period in FY’07.
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