FOREIGN direct investments (FDI) in May dropped 43% to $2.2 billion compared to the $3.9 billion received in the same month of the previous year, department of industrial policy & promotion (DIPP) secretary Ajay Shankar said.
Despite the sharp decline, the government was confident of the flow of foreign capital into the country improving. Speaking on the sidelines of a Confederation of Indian Industry (CII) seminar, Mr Shankar cited the countryâ€™s â€œpromisingâ€ industrial output in June for a better FDI show in the months to come. â€œWe think, with liquidity improving and confidence in the economy rising, these (FDI) numbers should pick up,â€ he said.
But the FDI numbers since January have been anything, but promising. In April, FDI inflows fell 38% to $2.34 billion from $3.74 billion a year ago. And in the calendar year 2009 up to April, FDI inflows slipped by nearly 46% from the year-ago period to $8.5 billion, as per the latest figures released by DIPP.
Not surprisingly, the government had scaled down the FDI target by $5 billion from $35 billion last fiscal.
The reason for the depleted overseas capital inflows is the reluctance of foreign investors to put their money in risky emerging markets. But some experts see Indiaâ€™s 6.7% growth in 2008-09, when developed countries struggled with recession, bringing back foreign investors.
In the first six months of 2008-09, FDI inflow was $27.3 billion compared to $24.5 billion in 2007-08. Cumulative FDI inflow from April 2000 to March 2009 was about $90 billion, as per DIPP data.
The department collects data on foreign investment from RBI and releases monthly updates. Mauritius, with which India has a double taxation avoidance agreement, is the largest contributor of FDI into India, followed by Singapore and the US.
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