Foreign Direct Investment Last Updated: February 2011 India has been ranked at the second place in global

foreign direct investments in 2010 and will continue to remain among the top five attractive destinations for international investors during 2010-12 period, according to United Nations Conference on Trade and Development (UNCTAD) in a report on world investment prospects titled, 'World Investment Prospects Survey 2009-2012'. The 2010 survey of the Japan Bank for International Cooperation released in December 2010, conducted among Japanese investors, continues to rank India as the second most promising country for overseas business operations. A report released in February 2010 by Leeds University Business School, commissioned by UK Trade & Investment (UKTI), ranks India among the top three countries where British companies can do better business during 2012-14. According to Ernst and Young's 2010 European Attractiveness Survey, India is ranked as the 4th most attractive foreign direct investment (FDI) destination in 2010. However, it is ranked the 2nd most attractive destination following China in the next three years. Moreover, according to the Asian Investment Intentions survey released by the Asia Pacific Foundation in Canada, more and more Canadian firms are now focusing on India as an investment destination. From 8 per cent in 2005, the percentage of Canadian companies showing interest in India has gone up to 13.4 per cent in 2010. India attracted FDI equity inflows of US$ 2,014 million in December 2010. The cumulative amount of FDI equity inflows from April 2000 to December 2010 stood at US$ 186.79 billion, according to the data released by the Department of Industrial Policy and Promotion (DIPP). The services sector comprising financial and non-financial services attracted 21 per cent of the total FDI equity inflow into India, with FDI worth US$ 2,853 million during AprilDecember 2010, while telecommunications including radio paging, cellular mobile and basic telephone services attracted second largest amount of FDI worth US$ 1,327 million during the same period. Automobile industry was the third highest sector attracting FDI worth US$ 1,066 million followed by power sector which garnered US$ 1,028 million during the financial year April-December 2010. The Housing and Real Estate sector received FDI worth US$ 1,024 million. During April-December 2010, Mauritius has led investors into India with US$ 5,746 million worth of FDI comprising 42 per cent of the total FDI equity inflows into the country. The FDI equity inflows in Mauritius is followed by Singapore at US$ 1,449 million and the US with US$ 1,055 million, according to data released by DIPP. Investment Scenario In the year 2010, India has assumed a notable position on the world canvas as a key international trading partner, majorly because of the implementation of its consolidated FDI policy. The consolidation, first undertaken in March 2010, pulls together in one

document all previous acts, regulations, press notes, press releases and clarifications issued either by the DIPP or the Reserve Bank of India (RBI) where they relate to FDI into India. According to the modified policy, foreign investors can inject their funds though the automatic route in the Indian economy. Such investments do not mandate any prior government permission. However, the Indian company receiving such investment would be required to intimate the RBI of any such investment. The FDI rules applicable to such sectors are, therefore, fairly clear and unambiguous. Enhanced international response and powerful sectoral productivity ratios in India are incessantly drawing the attention of the global investors in India. Other aspects being characterized to the resumption in foreign direct investment (FDI) recently entail growing client assurance in the market.

India proudly features in the third slot of global direct investment destinations, despite of the recession and as per the latest report by United Nations Conference on Trade and Development (UNCTAD), it will retain its slot in the next two years. India drew FDI influx of US$ 1.74 billion during November 2009 which is 60% more than US$ 1.08 billion procured in the previous fiscal. As per the information produced by Department of Industrial Policy and Promotion (DIPP), the collective amount of FDI influx 1991 to 2009 stood at US$ 127.46 billion The services industry entailing fiscal and non-fiscal services drew FDI valued US$ 3.54 billion during 2009-10, while software and hardware industry acquired around US$ 595 million. In the same period the telecommunications industry obtained US$ 2.36 billion of FDI.

FDI Scenario in India

The aggregate cost of 32 domestic mergers and acquisition (M&A) agreements in India in January 2010 stood at US$ 2,167 million against 8 deals amounting to US$ 1,324 million and 28 deals amounting to US$ 223 million in 2009 and 2008, respectively. In the fiscal year 2009, developing economies gained a massive share of 51.6% FDI, more than what the developed nations gained, as per the survey by Ernst & Young on globalization. This was chiefly because of major decline in FDI into industrial markets, that was 50% less than FDI in 2008. From 4% of 2004 to 8% of 2005, the nation's endowments in infrastructure industry doubled, as per the report by Planning Commission of India. With the fiscal structure gaining momentum, endowment proposals in India Inc witnessed an upsurge of around 16% in 2009 to US$ 345.3, as per the report conducted by a premiere

sectoral body. In 2009, nine tenders contributing total FDI of US$ 112.25 million was sanctioned by the central administration. Among the sanctioned tenders, Mitsui and Company of Japan is expected to contribute US$ 69.83 million to set-up a fully governed subsidiary in the warehousing industry. In January 2010, the Indian government gave its consent to 14 FDI tenders which are likely to bring foreign investment amounting to US$ 157.89 million. These encompass: US$ 58.82 million worth FDI tender by Asset Reconstruction Company FDI valuing US$ 44.39 million by Standard Chartered Bank that is likely to elevate to 100% from 74.9% in its portfolio management arm Tenders by SaharaOne, KS Oils and NDTV Imagine NDTV Lifestyle tender worth US$ 54.28 million Tender by India Infrastructure Development Fund based in Mauritius that is likely to bring US$ 517.29 million

FDI in India - Policy Initiatives

The Indian government has assured to release an improvised FDI policy in every six months. The offers announced by Union Finance Minister, Pranab Mukherjee, in Union Budget 2010-11, to enhance investment ambiance in India on February 26, 2010 entail: Measures implemented to un-complicate the FDI system System for computation of indirect foreign investment in Indian firms has been comprehensively classified. Entire liberalization of costing and imbursement of technology transmit charges and trademark, and royalty expenses.

Additionally, the Indian government has permitted the Foreign Investment Promotion Board (FIPB), to sanction FDI tenders of up to US$ 358.3 million. Previously all the tenders that entailed foreign direct investment of more than US$ 129.16 million were presented in front of Cabinet Committee of Economic Affairs (CCEA) for authorization. As the Union Home Minister, Mr P Chidambaram, the exemption would accelerate foreign direct investment inflow.