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FDI inflows to cross $ 7 billion target
By agencies
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Wednesday, 05 October 2005, 19:30 IST
NEW DELHI: India will attract $5 billion foreign direct investment through the equity component alone during 2005-06. This implies that overall FDI inflows may easily cross the estimated $ 7 billion during the fiscal, a business paper reported.
According to the preliminary estimates for 2004-05, total FDI inflows were pegged at $3.75 billion. FDI inflows include equity investments and reinvested earnings. The equity component of FDI inflows for 2004-05 has not yet been compiled, since the RBI is still compiling the final FDI data including details of the reinvested earnings, the Business Standard said.
Traditionally, the equity component of FDI inflows in India has been around 50-55 percent of the total inflows. In 2002-03, of the FDI inflows of $5.03 billion, the equity component was around 55 percent at $2.76 billion. In 2003-04, of the FDI inflows of $4.67 billion, the equity component was $2.38 billion or 50 percent.
The World Investment Report 2005 has pointed out that India and China were the two most attractive investment destinations among transnational corporations.
The Foreign Investment Promotion Board recently approved the investment proposal of Oracle for shares acquisition by an open offer in I-Flex, which alone translates into an equity infusion of $900 million, the paper said.
This is in addition to the preliminary data available with the FIPB on the basis of reports filed by companies, which show that the top 25 inflow cases received during April-July 2005 has already touched $1 billion.
Since most of the sectors are now on the automatic route (not requiring FIPB clearance), officials pointed out that the inflows could be higher once the FIPB data is collated along with the data compiled with the RBI. Most approvals coming to FIPB pertain to permission to set up a subsidiary for undertaking wholesale cash or carry operations.
Equity investments are routed through the RBI or FIPB, but companies are also required to submit details of fresh equity infusion to the RBI within 30 days. The RBI annually through its foreign assets and liabilities survey collects details on reinvested earnings. However, the response of the companies to the survey is poor at around 25 percent, the paper added.