FDI Inflows Fall 22% In Jan-Feb.

India's foreign direct inflows fell 22.2% during April-February though recent corporate announcements indicate that the declining trend may be checked in the current financial year. According to the latest data released by RBI, FDI inflows during 11 months of the financial year were estimated at nearly $26 billion, compared to $33.34 billion a year ago.

Through the fiscal, inflows have remained below the level seen in the previous financial year and government officials have blamed the economic slowdown in the US and Europe for the decline in foreign direct investment. The declining trend was evident across streams, barring reinvested earnings (see table). Disaggregated data for April-February is, however, unavailable.

During April-January, only three sectors – metallurgical industries, oil and gas and chemicals (other than fertilizers), which between them account for 7% of FDI inflows – saw an increase in investment, while the more attractive ones such as services, IT and telecom saw a steep fall in inflows.

Metallurgical industries saw the most rapid rise, with FDI inflows more than doubling to $1 billion in April-January 2010-11, compared to $407 million a year ago. The story was much the same in case of oil and gas where inflows rose to $541 million from $272 million a year ago, according to data available with the department of industrial policy and promotion.

In case of service sectors, which accounted for over a fifth of FDI inflows between 2000 and January 2011, the decrease was of the order of 31% with investments declining to $3 billion during April-January 2010-11, compared to $4.35 billion a year ago. In case of telecom, inflows nearly halved to $1.33 billion in the first 10 months of the last fiscal, compared to $2.55 billion in April-January 2009-10. Similarly, in real estate, a sector that has been hit hard after the 2008 financial crisis, inflows fell to $1.05 billion from $2.86 billion a year ago. Analysts, however, said the Reliance-BP and Vodafone-Essar deals could reverse the trend. BP could invest nearly $20 billion in acquiring stake in Reliance oil and gas acreages apart from investing in developing these fields.

Source : timesofindia.indiatimes.com