India's April FDI declines 40 pc

Steps to attract investors have failed

After an eight-fold increase in foreign direct investment (FDI) flows into India last month, April again saw a decline of over 40 per cent in overseas flows, in an evident sign that the government’s steps to attract investors has not yielded much result.

India received $1.85 billion FDI in April, compared to $3.12 billion in the same period last year. In March, India had received the highest ever monthly inflows of $ 8.1 billion.

The April numbers came hours after Finance Minister Pranab Mukherjee assured that the government was taking steps to improve inflows of foreign investments. He, however, said that the measures will take some time to show result.

Economy watchers fear that April FDI inflows may have taken a hit due to retrospective changes introduced in the tax laws in this year’s budget. Rating agecies Standard and Poor’s and Fitch downgrading the country’s credit outlook to negative is also expected to affect the flows in the coming months.

The news on dwindling FDI comes on the back of an already slowing economic growth, stalled factory output and spiralling inflation, that together have played their role in shattering investor sentiment.

“The government should take important and key reforms immediately like allowing FDI in multi-brand retail and permitting foreign airlines to buy stake in domestic carriers. These moves would help in increasing FDI inflows into the country,” Ficci Secretary General Rajiv Kumar said.

Prior to this, FDI inflows had plunged 30 per cent in February and as high as 48 per cent in January this year.

Analysts also attributed global economic woes and slow recovery in the west as the major reasons for a decline in foreign investments.

The sectors which received large FDI inflows in April included services, pharmaceuticals, construction and power.

Mauritius accounted for the highest FDI flows, followed by UK, Netherlands, Singapore and Cyprus.

FDI from Mauritius was at $633 million, the UK $366 million, The Netherlands $357 million, Singapore $146 million and Cyprus $69 million, the official added. The inflows had aggregated to $19.42 billion in 2010-11, down from $25.83 billion in 2009-10.

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