FDI inflows slump to 2-yr low at $1.05 bn in Nov 2012

Global economic uncertainties main reason for decline in inflows

India's foreign direct investment (FDI) inflows declined to a nearly two-year low of $1.05 billion in November 2012, mainly due to global economic uncertainties.

In November 2011, the country had attracted FDI worth $2.53 billion.

For the April-November period 2012-13, the inflows have declined by about 31% to $15.84 billion, from $22.83 billion in the year-ago period, a senior official in the the Department of Industrial Policy and Promotion (DIPP) told PTI.

According to experts, problems in the global economic situation is the main reason for decline in the inflows.

"The global economic slowdown and lack of political consensus on FDI related matters are the reasons for decline," said Krishan Malhotra, head of tax and expert on FDI with corporate law firm Amarchand & Mangaldas.

Sectors which received large FDI inflows during the eight months of the current fiscal include services ($3.63 billion), hotel and tourism ($3.13 billion), metallurgical ($1.26 billion), construction ($1.01 billion) and automobile ($760 million), the official added.

India received maximum FDI from Mauritius ($7.2 billion), Japan ($1.56 billion), Singapore ($1.5 billion), the Netherlands ($1.09 billion) and the UK ($615 million).

The previous low was recorded in January 2011 when the FDI inflows slipped to $1.04 billion.

The inflows had aggregated to $36.50 billion in 2011- 12 against $19.42 billion in 2010-11 and $25.83 billion in 2009-10.

Foreign investments are important for India, which needs around $1 trillion in the next five years to overhaul its infrastructure sector such as ports, airports and highways to boost growth.

Decline in foreign investments will put pressure on the country's balance of payments and could also impact the rupee.