Investor confidence eroding, says UN report

Just at the time when the government is moving forward to ease limits on foreign direct investment (FDI), a United Nations report has said that eroded investors’ confidence in Indian economy has caused these investment shrink as much as 29 per cent last calendar year.

 According to the UNCTAD World Investment Report 2013, Indian economy experienced its slowest growth in a decade in 2012 and also struggled with risks related to high price inflation.

 “FDI inflows to India dropped by 29 per cent to be at  $26 billion in 2012. This is primarily due to slow growth rate and associated risks of high price inflation which eroded investors’ confidence,” the report said.

 Investment outflows from India, the region’s dominant FDI source, decreased to $8.6 billion, due to a shrinking in the value of cross-border mergers and acquisitions by Indian companies.

 The total amount of FDI coming into India has been falling over the past three years. There are virtually no investments in greenfield projects. The investments are coming in only in brownfield projects.

For example, this week saw global consumer goods giant Unilever make a $5.4 billion open offer to increase its stake in Hindustan Unilever, its local subsidiary.

Similar investments have been made in the past by British Petroleum, Vedanta Resources and Vodafone in the past.

 Analysts say, the major reason for falling FDI investment in India is the delay in procedural requirements and increasing cap is not a panacea to the country’s foreign direct investment woes.