Mauritius Continues to Be Largest Channel for FDI to India

Based on a census that it undertook, a report by India’s central bank, the Reserve Bank of India, said, “Mauritius was the largest source of foreign direct investment (FDI) in India (21.8 percent share at market value) followed by the U.S.A., the U.K., Singapore and Japan, while Singapore (19.7 percent) was the major overseas direct investment destination (ODI), followed by the Netherlands, and the U.S.A.” The census yields comprehensive information on the market value of foreign liabilities and assets of Indian companies arising from FDI, ODI and other investments.  Historically foreign investors who expect capital gains from the ultimate sale of their stake prefer to invest via this tiny island nation due to a favored tax deal between India and Mauritius.

Reserve Bank of India logo

Other key findings of the census were:

  • Of the 18,667 companies that participated in the census, 17,020 had FDI/ ODI in their balance sheets in March 2017
  • “96 percent of the responding companies were unlisted in March 2017 and most of them had received only inward FDI; unlisted companies had a higher share of FDI equity capital compared to listed companies”
  •  Over 80 percent of the 15,169 companies that reported inward FDI were subsidiaries of foreign companies (single foreign investor holding over 50 percent of the total equity)
  • Non-financial FDI companies had a much higher share in total foreign equity participation compared to financial FDI firms.
  • “The ratio of market values of inward to outward direct investment, increased to 4.3 in March 2017 from 3.6 a year ago; equity participation accounted for 94 percent and 79 percent shares in inward and outward FDI, respectively,”
  • The manufacturing sector accounted for nearly half of the total FDI at market prices; information and communication services and financial and insurance activities were the other major sectors that attracted FDI.
  • Total sales, including exports, of foreign subsidiaries in India increased by 18.7 percent during 2016-17 whereas their purchases, including imports, increased by 20.1 percent.

January 24, 2018   No Comments

Foreign Investment into India at All-Time High

According to India’s Department of Industrial Policy and Promotion,  cumulative foreign direct investment (FDI) into India reached $498.9 billion in the 17 years from April 2000 to June 2017. During the last two financial years,  FDI flows into India totaled $114.4 billion says a new KPMG report; this is an incredible forty percent higher than the three years preceding.

“In the financial year 2017, the country received the highest-ever FDI flow worth $43.5 billion,” KPMG said. UAE investors such as the  Abu Dhabi Investment Authority, NRI-Emirati Investor’s Group announced $2.5 billion worth of investments in India last month alone.

 

Magazine with Investment Report written on itReaders of this blog know that companies such as Coca Cola and PepsiCo have committed to investing over $5 billion in India in the next five years. In the last 12 months alone, The India Expert has reported on billion dollar investments by  Dell-EMC , by Juniper Networks and by Canada’s Brookfield, while FoxConn of Taiwan has committed to $5 billion. We have also blogged about  industry reports indicating $8 billion into India’s automotive business and $4.2 billion into India’s real estate.

Tim Worstall of Forbes notes that FDI inflows into a country is a good thing, but this cannot happen unless there is also a current account, or trade, deficit. What needs to be recognized is that they are the same thing: the balance of payments does indeed balance, always and everywhere. This underscores India’s status as an island of economic stability, especially as FDI flows worldwide slumped 13% in 2016 . India’s FDI in the April-December period rose 22% to $35.8 billion from the year earlier.

The Government of India liberalized the country’s FDI policy in the last two years to bring several sectors under the automatic approval route as part of efforts to encourage overseas investment. “India also witnessed an increase in private equity/venture capital investments led by its growing start-up segment. Between January and September 2017, India received $17.6 billion of private equity and venture capital spread across 402 deals,”  the KPMG report added.

fDi Intelligence, a division of The Financial Times Ltd., says that India retained its position as the world’s topmost greenfield destination for Foreign Direct Investment for the second consecutive year, attracting  $62.3 billion in 2016.  In the 2017 A.T. Kearney FDI Confidence Index,  India jumped one spot to rank 8th. According to Kearney, 70 percent of the respondents planned to maintain or increase their FDI in India in the coming years. Reform efforts by the current government have improved the country’s investment environment. India’s vast domestic market is an added attraction for foreign companies

November 6, 2017   No Comments

India’s Growth Rate Will Improve to 7.4 percent in Fiscal 2018

The Asian Development Bank said that India’s growth rate will improve to 7.4 percent during 2017-18 and go up further to 7.6 per cent in the next fiscal year

In the Asian Development Outlook, the bank’s flagship economic publication, reasons given for this forecast are: “The impact of the demonetization of high-value banknotes is dissipating as the replacement banknotes enter circulation. Stronger consumption and fiscal reforms are also expected to improve business confidence and investment prospects in the country.” The report also noted that India’s economic reforms initiative, including the liberalization of the Foreign Direct Investment regime, and the Goods and Services Tax that is expected to roll out from July, are favorable to the country.

economic growth
Commenting on future prospects, it said that in two-thirds of economies in developing Asia, the growth is being supported by higher external demand, rebounding global commodity prices, and domestic reforms, making the region the largest single contributor to global growth at 60 percent, reports the Economic Times.

April 11, 2017   No Comments

Asia Competitive Institute Ranks India’s States for Ease of Business

In a study done by the Asia Competitive Institute which is part of the Lee Kuan Yew School of Public Policy, the Indian states of Maharashtra, Gujarat, Delhi NCR, Goa and Andhra Pradesh are rated as the top five of 21 sub-regional economies in ease of doing business in India.

Maharashtra, Delhi NCR, Tamil Nadu, Gujarat and Karnataka, were rated as the most competitive states, as well as states that lead in attracting foreign direct investment accounting for over 50 percent of the total FDI inflow into the country, said Sasidaran Gopalan, research fellow at the institute.

States of India

States of India

India’s appreciating real effective exchange rates have not significantly affected FDI inflows over the last decade, reports Bloomberg.

“The impact of real exchange rates on FDI in India has been rather negligible so far,” Gopalan pointed out, citing the finding from a recently concluded study by the institute for 2000-2013. The research study, however, also concluded that the volatility in Indian rupee “actually appears to induce more FDI into the country”.

September 17, 2016   No Comments

India Increases FDI to 100% in Defense

Foreign defense firms can now set up fully owned subsidiaries in India following the Indian government’s decision to increase Foreign Direct Investment in the defense sector to 100 percent from 49 percent, reports Defense World.

bullets

Foreign investment beyond 49 per cent has now been permitted through a government approval route wherever it is likely to result in access to modern technology or for other reasons to be recorded. This FDI limit is also applicable to Manufacturing of Small Arms and Ammunition covered under the Arms Act 1959, an official statement said.

 

 

 

September 15, 2016   No Comments