Gradual delicensing of sectors and ease in doing business for global companies has led to foreign direct investment (FDI) more than doubling its share in the total investments in India between 2003-04 and 2006-07 with inflows recording a five-fold rise in the last three years.

“As a percentage of total investment, this (share of foreign direct investment) has gone from 2.55 per cent in 2003-04 to 6.42 per cent in 2006-07,” a year-end review of Department of Industrial Policy & Promotion (DIPP) has showed. It said after receiving FDI of $15.7 billion in the last fiscal, an ambitious target of $30 billion had been set for 2007-08. Till August this fiscal, inflows of $6.44 billion were recorded with maximum funds coming through tax haven Mauritius. Reflecting the growing interest of foreign investors into the country, share of FDI in India’s Gross Domestic Product has also gone up from a mere 0.77 per cent to 2.31 per cent in the last financial year. “Due to progressive delicensing, only a handful of sectors remain within the ambit of compulsory licensing on account of safety, security and environmental concern,” the review showed. India has also improved in the World Bank’s ranking of Doing Business 2008 to 120 in 2008 from 138 in 2006, the review report said.

Industrial sector

Consequent to the policy undertaken, the share of industrial sector to the GDP (at constant prices) has grown from 25.6 per cent in 2003-04 to 26.6 per cent in 2006-07.

This has been possible due to growth of the industrial sector from 7.4 per cent in 2003-04 to 10.9 per cent in 2006-07 and along with a double digit growth of manufacturing sector from 6.6 per cent in 2003-04 to 12.3 per cent in 2006-07.

The capital goods sector recorded a growth of 13.9 per cent in 2004-05, 15.8 per cent in 2005-06 and 18.2 per cent in 2006-07. This indicates a robust capacity addition in industrial sector.