FDI flow reduced to trickle

India received just $1 billion foreign direct investment (FDI) in November as fund flow turned to a trickle — making the task of matching last year’s receipts a challenge, much less achieve this year’s $35-billion goal.

The FDI inflows of $19.7 billion between April and November have made it amply clear that the current year’s target is far too ambitious to be achieved, given the recession in the US and several other developed economies.

After maintaining robust inflows till September — with a monthly range of $2.5-3 billion — FDI in October slipped to $1.4 billion and further to $1.08 billion in November, according to official figures.

While the foreign investment, other than the stock route remained lacklustre in the comparable period last year as well, it came like flash floods — $10 billion — in the last two months of the fiscal 2007-08. Last year’s total FDI inflow was $24.5 billion.

However, no such thing seems likely this year because of the difficult global economic environment.

“We are certainly not going to meet the target and we will be lucky if it won’t decline further in this fiscal. Even FDI inflows could be weaker in the next fiscal as well,” Indian Council of Research in International Economic Relations (ICRIER) Director Rajeev Kumar said.

Seeing straw in the winds, Commerce and Industry Minister Kamal Nath had himself scaled down the $35 billion target last month. “I hope we will exceed $30 billion. I do believe that momentum will continue,” Nath had said on January 19.

Industry body Ficci is realistic in its assessment. “It is difficult to expect very encouraging investment inflows until the global economy recovers,” Ficci economic advisor Anjan Roy said.

He said the sharp decline in FDI inflows is not surprising given the state of global economy.

Sectors that attracted maximum investment between April and November this fiscal included services, telecom, housing, construction activities, real estate, electrical equipment, computer software and hardware.