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LATEST NEWS UPDATES | Why FDI data on India is causing confusion -Subodh Varma

Why FDI data on India is causing confusion -Subodh Varma

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published Published on Oct 1, 2015   modified Modified on Oct 1, 2015
-The Times of India

A recent report by a data consultancy owned by the Financial Times of London created a stir by estimating that India is now the most favorite destination for foreign direct investment, beating China and the USA. The fine print indicates that they are talking about "estimated capital expenditures" in greenfield, that is, new ventures. By this estimate, India attracted $31 billion compared to China's $28 billion in the first half of 2015.

Reserve Bank of India (RBI) data for foreign investment flows does not appear to reflect this, causing much puzzlement in India. The total foreign direct investment that flowed into India between January and June 2015 is pegged at $20.6 billion. If you deduct the outflow from India in the form of outgoing FDI from India, this gets pared down to $19 billion.

Besides this inflow, there is also foreign portfolio investment mainly by institutional investors in the stock market. This was about $17 billion in the first half of 2015.

Putting these two components of investment - direct and portfolio - together yields about $31.5 billion for the same period. But this could hardly be what the FT report is talking about since much of this is neither greenfield nor capital investment.

The other puzzling aspect of the FT report is the comparison with China. According to the National Statistical Bureau of China, foreign direct investment into China in the first half of 2015 was a whopping $68.4 billion, more than three times that of India's $20.6 billion, between January and June 2015.

A comparison of RBI data between the first halves of 2014 and 2015 shows that incoming FDI has increased by about 16% in 2015 but outgoing FDI has drastically declined, probably due to weakening economies around the world. Hence net FDI inflow to India has jumped up from $8.8 billion to $19 billion.

Analysis of this data by India's Department of Industrial Policy and Promotion (DIPP) indicates that most of the foreign direct investment has come into the IT sector followed by automobiles, trade and the financial sector. Major sources of FDI in India remain Singapore and Mauritius followed by the Netherlands, US and Germany.

Net portfolio investment has however sharply declined by about 23 percent from $21.7 billion in the first half of 2014 to $16.8 billion in the comparable period of 2015.

As a result of these opposing trends, the net foreign flows into India have shown only a marginal increase from $30.5 billion to $31.5 billion between the first halves of 2014 and 2015.


The Times of India, 1 October, 2015, http://timesofindia.indiatimes.com/business/india-business/Why-FDI-data-on-India-is-causing-confusion/articleshow/49175954.cms


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