Sharma sees Better FDI Inflows in FY11.

New Delhi: Foreign direct investment flows into the country in the ongoing financial year could be better than last year, commerce minister Anand Sharma said on Monday. Due to the ongoing economic meltdown in Europe and the US, India's FDI inflows have been gradually dipping causing some concern among policy makers.

During 2009-10 the total FDI inflows into the country amounted to $25.88 billion which was 5% lower from $27.33 billion in the previous financial year. FDI into India dipped for the second consecutive month, by 49% $1.78 billion in July.

A senior commerce ministry official said, “The global environment is still bleak. Leading economies are yet to come out of the woods that would obviously impact the net inflows of FDI into India.” The official agreed with Sharma that despite the gloom total net flows would be higher than last year's. “Compared to 2009-10 the situation has improved,” he added.

For the April-July period of 2010-11, FDI inflows declined by 27% to $7.59 billion compared to $10.53 billion in the same period last year. Since the collapse of Lehman Brothers FDI inflows into India were significantly impacted from October 2008. Interestingly it was from October 2009 that the situation improved.

Total FDI in October 2009 stood at $2.33 billion about 56% more over the same month the previous year. In November it jumped 60% to $1.73 billion. The increase was 13% to $1.54 billion in December.

A senior trade expert with an industry chamber said, "The Indian growth story is intact hence there is a lot of optimism in the air. However, the huge trade deficit is a cause for concern because one principal way India can bridge the gap is through net inflows."

After more than a year overall merchandise exports started turning around from November 2009. This was primarily on account of the strategy adopted Indian exporters to diversify its overseas markets. However despite the improvement in exports, India has had to fight cheap imports from China which pushed the trade deficit to an all time high of $13.06 billion in August. For the April-August, 2010, period, the trade deficit amounted to $56.62 billion.

Commerce secretary Rahul Khullar had also subsequently altered the trade deficit forecast from $120 billion to $135 billion. “That (trade deficit of $135 billion) is much higher than we ever had it before. It is, therefore, naturally a matter of concern, but I don't think the deficit...

Source : financialexpress.com