Nov

15

FDI in India making big gains in 2007

Filed Under Emerging Sectors, IT BPO KPO Services, India Business, India Investment Opportunities, India Real Estate, India vs China, Indian Government, Mobile Telecom 

Before we delve more into trend shown in the recently published FDI (Foreign Direct Investment) in India, it is important to make it clear that we are referring to FDI equity inflows. Reason behind doing this is to ensure that we restrict our discussion to only investments that are coming in for long term and have direct impact on industry. The Department of Industrial Policy & Promotion, India published the FDI numbers for the period of April–July 2007 recently. For the full statistical details, please visit the article on their website (http://www.dipp.nic.in/fdi_statistics/india_fdi_july_2007.pdf).

Let’s start with the macro numbers to begin with. The FDI equity inflow for the first four months in 2007–08 is $5.614 billion which is 97% higher YoY when it was $2.848 billion. This growth rate is very impressive and is reflected in India being 2nd most attractive destination for FDI for 2007, according to UNCTAD’s world investment report published last month.

One note of caution though is that FDI inflow in July 2007 was $705 million, which compared to earlier three months, is significantly lower. We don’t need to read a lot into this but maybe it is good to bear in mind that the credit crisis really started getting serious during the later stages of reporting period and it would be interesting to watch out for next set of numbers coming out.

In the meantime, if we see which sectors of the Indian economy showed most consistent growth, then the top 3 by amount of FDI inflow are: Services Sector, Telecom and Housing & Real Estate. But if we compare the industries on the amount of FDI for last financial year and these four months, the top 3 most attractive sectors appear to be Housing & Real Estate, Construction activities and Telecom. For Telecom, I feel that the sector is now peaking and there are unlikely to be many opportunities in the future to improve on the current growth.

The Real Estate and Infrastructure sectors – both look very promising for investments because infrastructure has been identified as the primary bottleneck for growth in India and the government is making a concerted effort to provide more impetus to the sector. This involves deregulating to make it easier for companies to invest money, either directly, through partnerships or through exchange traded funds. This trend is reflected in the high growth shown by the FDI in the overall real estate structure, and this sector is expected to show similar impressive growth in FDI for next 3–5 years.

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One Response to “FDI in India making big gains in 2007”

  1. Indian Real Estate - Time for bigger Investments & Change : India Business Review on November 28th, 2007 8:37 am

    [...] FDI in India making big gains in 2007 [...]

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