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Foreign direct investment (FDI) in India spiked 34 per cent to a record $46.8 billion in 2011-12, latest RBI data show. A spate of big-ticket deals resulted in the surge.
As stock valuations dipped, overseas investors were eager to pick up stakes in Indian companies last fiscal. London-listed Vedanta acquired a controlling stake in Cairn India for $9 billion. British major BP paid $7.2 billion for a stake in oil and gas fields operated by Reliance Industries and Vodafone Group purchased partner Essar's shares in their telecom joint venture.
FDI inflows were less than $10 billion prior to 2005-06. They improved thereafter and the country received $34.8 billion in 2010-11.
Taking a detour
Mauritius chipped in with the maximum funds in 2011-12, putting in a third of the FDI. But its share declined from 36 per cent in 2010-11. In contrast, FDI from Singapore shot up almost three-fold and accounted for 17.8 per cent of all FDI inflows during the period. The fear that the tax authorities might take a closer look at funds flowing from Mauritius could have resulted in incremental flows being routed through Singapore.
UK investments more than trebled and fund flows from Japan shot up by 83.6 per cent. FDI from the US declined by 16.5 per cent.
Which sectors?
In terms of sectors, services attracted the maximum investment this fiscal as per Department of Industrial Policy and Promotion (DIPP) data (April-February). However, in terms of growth, it was drugs and pharmaceuticals that saw the maximum jump, with an over 15-fold increase. In contrast, the automobile and housing and real estate sectors saw FDI decline. Investment in the petroleum sector jumped significantly too.
Portfolio flows lag
In contrast to the upbeat FDI sentiment, foreign institutional investor (FII) flows fell by around 43 per cent to $16.8 billion vis-à-vis the year-ago period. Investment in Indian Global Depository Receipts (GDRs) and American Depository Receipts (ADRs) also fell sharply to $597 million.
> arvind.jayaram@thehindu.co.in
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