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Foreign Direct Investment

May, 2010

Improved global sentiment and strong industrial output numbers in India are increasingly attracting foreign investors in the country. Other factors being attributed to the revival in foreign direct investment (FDI) in recent times include increasing consumer confidence.

India has been ranked at the third place in global foreign direct investments in 2009 and will continue to remain among the top five attractive destinations for international investors during 2010-11, according to United Nations Conference on Trade and Development (UNCTAD) in a new report on world investment prospects titled, ‘World Investment Prospects Survey 2009-2011' released in July 2009.

The 2009 survey of the Japan Bank for International Cooperation released in November 2009, conducted among Japanese investors continues to rank India as the second most promising country for overseas business operations, after China.

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 fourth most attractive foreign direct investment destination in 2010. However, it is ranked the second 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 eyeing 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$ 1.2 billion during March 2010. The cumulative amount of FDI equity inflows from August 1991 to March 2010 stood at US$ 132.4 billion, according to the latest data released by the Department of Industrial Policy and Promotion (DIPP).

FDI equity inflows during financial year 2009-10 were US$ 26 billion.

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$ 4.4 billion during April-March 2009-10, while construction activities including roadways and highways attracted second largest amount of FDI worth US$ 2.9 billion during the same period. Housing and real estate was the third highest sector attracting FDI worth US$ 2.8 billion followed by telecommunications, which garnered US$ 2.6 billion during financial year 2009-10. The automobile industry received FDI worth US$ 1.2 billion while power attracted FDI worth US$ 1.4 billion and computer software and hardware sector garnered FDI to the tune of US$ 919 million during April-March 2009-10.

During the financial year 2009-10, Mauritius has led investors into India with US$ 10.4 billion worth of FDI comprising 43 per cent of the total FDI equity inflows into the country. Mauritius is followed by Singapore with US$ 2.4 billion and the US with US$ 2 billion, according to latest data released by DIPP.