Foreign Direct Investment

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Last updated: Apr, 2014

Introduction

Foreign investments provide the much-needed impetus for the growth of the Indian economy. Despite recent problems with the economy, foreign direct investments (FDI) have continued to roll in, across several industries and sectors, proving that investors believe in the strength of India’s markets. FDI inflows to India grew 17 per cent in 2013 to touch US$ 28 billion, according to a United Nations report.

The Government of India’s policy regime and a positive business environment have also played significant roles to ensure that foreign capital keep flowing into the country. The Centre has taken several initiatives in recent years. In 2013, the government relaxed FDI norms in several sectors, including defence, PSU oil refineries, telecom, power exchanges and stock exchanges, among others.

In 2013, Tesco, the UK's largest retailer, Singapore Airlines and Etihad lined up to invest in the country as the government opened more sectors to foreign investments.

Market Size

India has received total foreign investment of US$ 306.88 billion since 2000 – 94 per cent of that amount has come during the last nine years.

During the first 10 months of FY 2013–14, the highest FDI was recorded in the services sector (US$ 1.80 billion), followed by the pharmaceuticals (US$ 1.26 billion), automobiles (US$ 1 billion) and construction development (US$ 966 million) sectors.

Mauritius led inflows into India with US$ 4.11 billion of FDI during April–January, 2013–14, followed by Singapore (US$ 3.67 billion), the UK (US$ 3.18 billion) and the Netherlands (US$ 1.7 billion).

In the period 1999–2004, India received US$ 19.52 billion of foreign investment. In the period 2004–09, foreign investment in the country touched US$ 114.55 billion, further increasing to US$ 172.82 billion between 2009–September, 2013.

Investments

Canada-based real estate major Brookfield has offered to buy Candor Investments, a fully owned Unitech Corporate Parks (UCP) Plc subsidiary that has stakes in real estate projects in Kolkata and the National Capital Region (NCR). Candor Investments holds a 60 per cent stake in six properties, valued at Rs 10,000 crore (US$ 1.66 billion) — three in Noida, two in Gurgaon and one in Kolkata — while the Unitech group owns the rest of the equity.

US-based Leapfrog Investment has bought a minority stake in Chennai-based financial services provider IFMR Capital Finance for US$ 29 million. IFMR helps small businesses, microfinance firms, commercial vehicle financiers and affordable housing companies raise money on the debt markets. This is Leapfrog’s third investment in India, after having earlier backed insurance distribution firm Mahindra Insurance Brokers (subsidiary of Mahindra & Mahindra Financial Services) and Shriram CCL (subsidiary of Shriram Capital).

Karnataka Small Scale Industries Association (Kassia) and Karachi Chamber of Commerce and Industry (KCCI) have signed a memorandum of understanding (MoU) to explore trade development through their institutional members. The MoU was signed by Mr Muhammad Idrees, Vice-President, KCCI and Mr B P Shashidhar, President, Kassia. In March 2014, the Federation of Indian Micro and Small and Medium Enterprises (FISME) and Kassia jointly organised a seminar on opportunities in trade between India and Pakistan.

Oman Oil Refineries and Petroleum Industries Company (Orpic) has awarded a part of its US$ 3.6 billion project to Engineers India Ltd (EIL), acknowledging the Indian state-run engineering consultancy provider's competence. EIL acquired the contract for Orpic's Liwa Plastics Project at Sohar in Oman following international competitive bidding. The contract is valued to be over US$ 40 million and indicates EIL’s steady progress overseas.

Galderma, a Switzerland-based pharmaceutical company owned by Nestle, is looking to tap into India’s Rs 30,000 crore (US$ 4.98 billion) skincare and beauty market . The company is gradually entering the anti-ageing injectible and over-the-counter (OTC) segments in India. Having already introduced three to four products in the aesthetic and corrective segments, the company plans to introduce at least 12 more products in the segment by 2017 – eight of these products are expected to be launched in 2014.

Japanese camera maker Nikon plan to invest Rs 120 crore (US$ 19.93 million) in India in the current fiscal on branding and marketing, similar to what it has spent in FY 2013–14. The company has a market share of 55 per cent in India, and expects a growth of 20–30 per cent every year, with the bulk of the shares coming from digital single lens reflex (DSLR) cameras, according to a company official.

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