India Eyes $250bn FDI in Five Years.

Jan. 22--NEW DELHI -- India is considering allowing foreign direct investment (FDI) in the retail and defense sectors as part of its efforts to increase FDI inflow up to $250 billion in the next five years, according to the country's top officials.

"The (Indian) government is taking steps to attract FDI by simplifying policies and also considering easing FDI norms in sectors such as multi-brand retail and defense among others," said the country's Commerce and Industry Minister Anand Sharma while addressing a India-Korea business forum along with Kim Jong-Hoon, South Korean minister for trade.

Separately, Planning Commission Deputy Chairman Montek Singh Ahluwalia also backed opening up the multi-brand retail sector to FDI saying it would benefit farmers and also help contain food inflation.

"The Planning Commission supports FDI in (multi-brand) retail. Farmers will benefit from modern retail marketing. No doubt that modern retail marketing is good," Ahluwalia said at a program organized by news channel CNBC-TV18.

India's Commerce Ministry -- which is responsible for making FDI policy -- recently floated a concept paper on permitting foreign investment in the politically sensitive multi-brand retail sector.

At present, 51 percent FDI is permitted in single brand retail, while 100 percent is allowed in the wholesale cash-and-carry segment.

Earlier, trying to allay fears about "mom-and-pop" stores going out of business if the sector is opened up, Ahluwalia asserted that large-scale multi-brand retail will be a difficult proposition in India because land is not easily available in commercially viable locations.

"In the next five years, we are aiming to have $250 billion worth of FDI coming into India," Sharma said at the event organized by the Confederation of Indian Industry in New Delhi.

The target of $250 billion seems quite ambitious in the wake of India receiving cumulative FDI of $124 billion into equity in the last 10 years. This fiscal FDI inflows stood at $14 billion during April-November 2010-11, a decline of 27 percent over the same period last year.

Sharma said that during the global economic crisis, India remained one of most attractive destination for foreign investors.

"We have an investor-friendly policy regime," he added.

The Indian minister also said that the country is in the process of establishing large investment regions called National Manufacturing Investment Zones to attract investments in manufacturing.

On his part, Kim, the Korean trade minister, said that the bilateral trade between India and Korea increased by more than 44 percent to about $17 billion last year since the implementation of Comprehensive Economic Partnership Agreement (CEPA).

Both Sharma and Kim said that the bilateral trade target of $30 billion by 2014 is achievable, adding that the CEPA review is aimed at deepening and further expanding bilateral economic ties between the two countries.

However, Kim called for lowering of entry barriers for Korean companies willing to invest in India to facilitate investment by Korean companies.

More than 200 Korean companies, including Hyundai, LG and Samsung, are already present in India and many other firms, such as Dusan Heavy Industries and Hyundai Constructions, have shown interest in the Indian infrastructure sector, Kim added.

Source : istockanalyst.com