FDI inflows into India contract 38% in 2012-13

Analysts said one year data could not substantiate whether reforms are yielding results or not and one would have to wait little bit longer to assess a trend

Much-touted foreign direct investment (FDI) reforms notwithstanding, India received 38 per cent less of such inflows into the country at $22.4 billion in 2012-13 against $35.1 billion in the previous year, data released from The Department Of Industrial Policy & Promotion (DIPP) showed.

This is in sharp contrast to 2011-12, when FDI inflows grew 64 per cent from $21.4 billion, despite the fact that the year saw some controversial decisions like retrospective amendments to the Income Tax Act.

Analysts said one year’s data could not substantiate whether reforms are yielding results or not and one would have to wait longer to assess a trend.

After accusations of policy paralysis, the government undertook major FDI reforms such as opening up multi-brand retail up to 51 per cent FDI, hiking FDI in single brand to 100 per cent from then the  51 per cent, allowing foreign airlines to pick up 49 per cent stake in domestic airlines, bringing clarity to FDI in power trading exchanges etc.

Though multi-brand retail has been opened to FDI with a cap of 51 per cent, these proposals are contingent on  states' approval. No proposal has come up for approval so far on this front.

In big ticket single brand retail, the Cabinet Committee on Economic Affairs had recently approved Swedish furniture maker, IKEA's proposal, which will bring in $1.9 billion over the next 10-15 years.

Its first store would take a couple of years to come up.

Another Swedish firm, HNM, also proposed to come in the single brand retail space with an investment flow of $129 million.

The proposal is yet to be taken up by the Foreign Investment and Promotion Board.

After FDI reforms, the Jet-Etihad deal was also struck with a promised FDI inflow of $370 million. However, the inflows will take time to come.