May FDI Of $ 4.66 Billion Second Highest In 11 years.

Foreign direct investment (FDI) into the country more than doubled in May from year ago, touching $4.66 billion against $2.21 billion in May last year.

This is the second highest monthly FDI inflow since 2000. The rebound follows a dismal 2010-11 fiscal in which FDI dropped 25% to $ 19.4 billion.

Foreign investors have shied away from India in the last year even as growth remained robust at above eight percent, amid mounting governance concerns and a decline in overall investment sentiment.

"The recent trend of a dip in foreign direct investment inflows appears to have been reversed in the current financial year, where a significant upward trend is evident," the industry ministry said in a statement on Monday.

The FDI is likely to spurt as a number of acquisition have been cleared against which inflows will come soon. The proposed tie up between BP and Reliance and Vodafone buying share of Essar could alone result in an inflow of approximately $ 12 billion.

Major deals like Cairn -Vedanta are also expected to give an impetus to FDI into the country. "There is a likelihood of another 'surprising' spurt in the coming months with many projects are due for clearance under FIPB. FDIs tend to have a bunching effect under private equity," said Abheek Barua, chief economist at HDFC Bank .

Combined inflow over April and May through FDI has jumped 77% to $7.79 billion, the data showed.

Economists say that continued inflows could be a big positive as the stock market has not been able to attract FII inflows.

The FDI could help in paying for the current account deficit (CAD) at the end of the year. The CAD is expected to be in the range of 2.5-3% of GDP for FY12.

According to data released by Grant Thornton India, 27 more deals were signed in May this year over last year worth $5.4 billion as compared with $1.8 billion May 2010.

The deals include mergers and acquisitions, qualified institutional placements and private equity deals. These include the acquisition by Mundra Port of Abbot Point worth $1.96 billion, Religare-Fortis deal amongst others.

The decline in FDI in the last year had become a cause for concern, as most of the emerging nations had been able to attract huge amounts of FDI inflows. In response the government has simplified a number of procedures and also tried to consolidate the FDI policy.

Source : economictimes.indiatimes.com