With $31 billion of foreign capital inflows, India has pulled ahead of China and US to emerge as the world’s number one destination for foreign direct investment (FDI) in 2015, according to a report published in The Financial Times newspaper. “India received $31 billion in foreign capital inflows in the first half of 2015; China was second with $28 billion and US third with $27 billion,” the report said.
After the report appeared in the public domain, the Finance Ministry was in high spirit and immediately circulated the report to media, saying that India’s efforts are paying off. “Satisfying, our efforts are paying off. India becomes the highest FDI destination for green field projects,” Finance Minister Jaitley said in a tweet on Tuesday.
“A ranking of the top destinations for greenfield investment (measured by estimated capital expenditure) in the first half of 2015 shows India at number one, having attracted roughly $3 billion more than China and $4 billion more than the US,” the FT report said.
But, it is utter surprise to know how the FT arrived at the $31 billion figure. The paper’s compilation possibly includes the estimated investments and the domestic capital expenditure commitments by foreign companies operating in India. Even then, there is a huge difference between the data put out by the Commerce Ministry’s Department of Industrial Policy and Promotion (DIPP) and the Reserve Bank of India (RBI) on FDI and the figure what has been reported by the FT.
According to data available by the Indian Government’s DIPP website, the total FDI investments India received in January-June period of 2015 was $19.4 billion and in the whole of 2014, the country received $28.8 billion. In 2013, India received $22 billion FDI and $22.8 billion in 2012. While the RBI data says, India received $18.9 billion in the first half of 2015 and $26.4 in 2014 and $25.6 in 2013.
But the FT report said that India ranked the top destinations for greenfield investment in the first half of 2015. “A ranking of the top destinations for greenfield investment (measured by estimated capital expenditure) in the first half of 2015 shows India at number one, having attracted roughly $3 billion more than China and $4 billion more than the US,” the FT report said.
Reacting to the report, the Government expressed satisfaction on spurt in FDI and improvement in global competitiveness index, saying that it reflects the success of India’s policy initiatives. “This success has been achieved at the point of time when globally FDI has fallen by about 16 per cent. India has seen a huge surge in FDI inflows and this is largely because this Government has opened up vast sectors,” Department of Industrial Policy and Promotion (DIPP) Secretary Amitabh Kant said.
Defending the report Kant said, “lot of red-tapism has been cut. We have made things extremely easy, we have created a sense of competitiveness among states and you will see this competitive spirit among states driving India forward far more vigorously.”
If the development is reviewed, then it would mean that the world is finding India as an important destination, when others aren’t doing well, courtesy to the strong economic fundamentals of the country and its huge untapped potential. This is indeed good news. The numbers are certainly a booster dose to the Narendra Modi Government, which is facing investor-pessimism.
However the DIPP Secretary expressed hope that due to these initiatives, FDI inflows would further accelerate. “We expect this momentum to further accelerate,” he said, expressing confidence that India’s ranking would improve in the World Bank’s report on ease of doing business.
“We are looking at a three-year plan. We expect India’s position to improve next year and in the third year and India may come in top 50. I think the major improvement will take place in second and third year,” Kant said.
India is currently ranked 142nd among 189 nations in the World Bank’s ‘Ease of Doing Business 2015’ study. With the exception of two parameters getting credit and protecting minority investors, India does not feature in top 100 in the remaining parameters. “Improved ranking will help in attracting both domestic and foreign investments. On further opening of sectors for FDI, the opening up has been pretty radical in the last 15 months,” he said.
last but not the least, the Modi Government manages to use the current phase to set the economy on the high growth path and address the basic structural issues, which include sorting out the problems in taxation, repairing the critically damaged banking sector and ensuring ease of doing business by facilitating enabling factors like land, water, electricity, necessary clearances etc to begin a business in India.