FDI approved via FIPB hits 5-yr low

In a year of policy flip-flops, foreign direct investment (FDI) approved through the Foreign Investment Promotion Board (FIPB) has fallen to a five-year low. FIPB, a nodal agency in the ministry of finance for approving FDI proposals that cannot go through the automatic clearance route, had approved FDI worth Rs 12,258.51 crore in 2011-12. FIPB had approved FDI of Rs 19,191 crore in 2010-11, Rs 15,377 crore in 2009-10, Rs 19,550.41 crore in 2008-09 and Rs 20,256 crore in 2007-08, shows an analysis of the approvals granted by FIPB through the years.

In contrast, the total FDI equity inflow into the country rose from Rs 88,520 crore in 2010-11 in 2011-12 (till February 2012) to Rs 133,181 crore. The total FDI flow was estimated at Rs 123,120 crore in 2009-10, Rs 142,829 crore in 2008-09 and Rs 98,642 crore in 2007-08, according to data available with the Department of Industrial Policy & Promotion (Ministry of Commerce & Industry). FDI inflow into India is permitted either through the automatic route or through the FIPB.

Experts said while the FIPB approval data for 2011-12 may appear to indicate policy sluggishness, the total FDI inflow cleared during the year gives a contrary impression. Akash Gupt, executive director at PricewaterhouseCoopers (PwC), told Business Standard, “The processes for foreign investment are substantially liberal now.” He added the FIPB approval trend may have shown just that. The much higher volume of total FDI shows India has relaxed its foreign investment regime significantly, he said.

DWINDLING SHARE FDI inflow into India over 5 years  (Rs cr)
Year	Total FDI equity inflow into India	FDI approved through FIPB
2007-08	98,642	20,256
2008-09	142,829	19,550
2009-10	123,120	15,377
2010-11	88,520	19,191
2011-12	133,181 (Apr ‘11 to Feb ‘12)	12,259  (full year)

However, speaking on the condition of anonymity, an economist argued government indecisions and a policy paralysis had played a role in reducing the FDI cleared through the FIPB in 2011-12.

In fact, the value of foreign investments sought in December 2011 had dropped to a fourth of that in November 2011, after the government had put on hold a decision to allow FDI in multi-brand retail. The value of FDI applications declined 75.2 per cent to Rs 444.45 crore in December from Rs 1,799 crore in November. This was in contrast to the continuous increase in the value of FDI proposals reaching FIPB after July. On July 23, in a positive signal to foreign investors, the committee of secretaries, headed by Cabinet Secretary Ajit Kumar Seth, had recommended opening multi-brand retail trade.

In terms of share of the total FDI inflow into the country, approvals routed through FIPB 2011-12 were the least in the last five years. While in 2011-12, only nine per cent of the total FDI inflow into the country was routed through FIPB, the share was 21 per cent in 2010-11, 12 per cent in 2009-10, 13 per cent in 2008-09 and 20 per cent in 2007-08.

FDI proposals across sensitive sectors like telecom, media, defence, aviation, trade and retail continue to be routed through the FIPB.