FDI flows down 26% in October

Foreign Direct Investment (FDI) inflows into the country dipped 26 per cent in this October at $1.49 billion, as compared to $2.02 billion in the same month a year ago.

Foreign equity inflows into the country had increased by 19.5 per cent in the same month last year.

If the decrease in the pace of FDI inflows continues in the November, India may miss the $35 billion FDI target set for 2008-09. FDI inflows help bridge the current account deficit and slowdown in equity capital into the country would widen the deficit, thereby putting further pressure on Indian rupee. This is the first time FDI inflows dipped in 10 months.

In the April-October 2008, FDI inflows to India stood at $16.67 billion, which is 80.2 per cent higher than $9.25 billion seen in the same period last year.

"Foreign Direct Investment (FDI) inflows during April-September 2008 showed an increasing trend each month in comparison to the same period in the previous year," Commerce Minister Kamal Nath today informed the Lok Sabha in a written reply.

The October FDI numbers come at a time when the Indian economy is facing headwinds arising out of the global financial meltdown. Foreign Institutional Investors have so far pulled out nearly $14 billion from Indian equity markets since January this year, as their parent companies are in need of liquidity.

Moreover, exports during the month had dipped over 12 per cent, the most in five years, while industrial production also dipped by 0.4 per cent in for the first time in the 15 years, as Indian factories cut down production on account of waning demand from both domestic and global markets.

Nath said that it would be difficult to access the impact of the worldwide slowdown on the ongoing projects in the country. Quoting studies done by international agencies, he cautioned that FDI inflows to developing nations would decline.

Meanwhile, the Department of Industrial Policy and Promotion (DIPP) had proposed a series of measures for the consideration of the Union Cabinet to attract more FDI into India. Proposals include scaling up of FDI in single brand retail to 100 per cent, as well as allow 51 per cent FDI in multi-brand retail of electronics goods, computers, sports goods as well as watches.