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Foreign Direct Investment

July, 2011

The constant efforts of the Government of India in making the country an investor friendly destination are reaping dividends. Alongside the United Nations Conference on Trade and Development (UNCTAD) ranking India at second place in global foreign direct investments (FDI) in 2010, in its report titled, 'World Investment Prospects Survey 2009-2012' has added to the initiative to a great extent . The report further forecasts, India to be among the top five attractive destinations for international investors during 2010-12.

FDI inflow rose by more than 100 per cent to US$ 4.66 billion in May 2011, which is the highest monthly inflow in 39 months, while the cumulative amount of FDI equity inflows from April 2000 to May 2011 stood at US$ 205.96 billion, according to the latest data released by the Department of Industrial Policy and Promotion (DIPP).

The service (including financial and non-financial) sectors attracted highest FDI equity inflows during April-May 2011-12 at US$ 910 million. India received maximum FDI from countries like Mauritius, Singapore, and the US at US$ 56.31 billion, US$ 13.25 billion and US$ 9.71 billion, respectively, during April 2000-May 2011.

India's foreign exchange (Forex) reserves have increased by US$ 2.29 billion for the week ended July 22, 2011, according to the weekly statistical bulletin released by the Reserve Bank of India (RBI). In the week under consideration, foreign currency assets went up by US$ 2.23 billion to US$ 284.53 billion.

Furthermore, India may emerge as US Export –Import Bank's (Ex-Im) largest market in next 12-18 months. “During the last nine months, we have approved 173 transactions involving 100 companies and US$ 1.4 billion in financing of US exports to India,” as per Fred P Hochberg, the bank's Chairman and President.

Investment Scenario

The total merger and acquisitions (M&A) and private equity (PE) (including qualified institutional placement (QIP)) deals in the first half of 2011 include 524 deals valued at US$ 32.48 billion, according to data released by Grant Thornton India. The global M&A activity has been increasing so far in 2011 (Jan-June 2011) clocking deals worth US$ 1.5 trillion.

In addition, the total value of outbound deals-Indian companies acquiring businesses outside India-in the first half of 2011 was recoded at 86 deals worth US$ 5.89 billion. PE deals amounted to 203 deals worth US$ 5.09 billion in the first half of 2011 as compared to 125 deals worth US$ 2.95 billion during the corresponding period in 2010.