INDIA BUSINESS WORLD - AUGUST 2006
THE MONTH THAT WAS...

FDI INFLOW SURGES 47% TO $1.74 B IN APRIL-JULY '06

INDIA attracted FDI of around $1.74 billion during April-July 2006, registering a 47% growth over the inflows during the corresponding four months of the previous year. Only $1.18 billion came India 's way during April-July 2005.

Of the total FDI, equity capital during June amounted to $534 million — a 102% increase compared to the previous year's $264 million, commerce and industry minister Kamal Nath said on Friday.

A significant chunk of this FDI flow is first-mile investment, which is likely to increase. Mr Nath also said multi-nationals like General Motors, Suzuki, Nissan, Honda and Mitsubishi have committed to invest in India in the near future. GM has signed an agreement with the Maharashtra government to invest $300 million; the company will set up a plant spread across 300 acres on the Pune-Mumbai Highway .

Nissan and Suzuki too have entered into a joint venture with plans to invest $700-800 million for setting up passenger car and mini-van manufacturing base at Manesar. The two will use it as a base to export about 0.34-million ‘A' segment passenger vehicles to Europe .

Similarly, Honda has committed a $200-million investment to expand its Noida facility to produce new brands and car models. Mitsubishi, meanwhile, plans to spend $370 million to expand its Haldea petrochemicals facility. Also, while Global Communication Service Holding has committed $278 million and Citi Consumers would invest $120 million, Flextronics has plans to pump $40 million, he added.

The government is keen to promote FDI in the manufacturing sector so as to increase the segment's share to 24-25% of the GDP. The minister said continuous rationalisation and liberalisation of the FDI policy and simplification of procedures have resulted in a steady increase in FDI into the country. India is also trying to woo investments from Taiwan , Korea and Singapore , which are looking for sites here to set up manufacturing facilities.

FDI, as a whole, has shown an investment growth by 37% over 2004-05, recording cumulative inflows of $7.7 billion in 2005-06.