Political

New Delhi, Jun 24 (UNI) After spiralling prices, threats of economic slowdown, interest rate hikes and political uncertainty comes a further bad forecast with an Assocham study projecting FDI flows to fall short by seven to eight billion dollars of the targeted 35 billion dollars in fiscal 2008-09.

The main reason for the slowdown of FDI flows will be continued uncertainties on economic front and political instability as a consequence of the logjam relating to the Indo-US nuclear deal as well as the perception that the global economy is slowing down.

The Assocham survey polled 400 Chief Executive Officers (CEOs) and sought their opinion on the prospects of FDI flows.

As many as 350 CEOs said India is likely to receive about 28 billion dollars in the current fiscal.

The other reasons cited by the CEOs for lower volume of FDIs include the negative sentiments in the stock market, bottlenecks relating to infrastructure, government not withdrawing Press Note 1, government's difficulties in carrying through the nuclear deal, virtual standstill on the disinvestment front and hardening of the interest rate regime.

Nearly 300 CEOs were of the view that certain sectors would receive the same quantum of FDI as last year. These include the services sector, computer software and hardware, telecom, construction, housing and real estate.

The Commerce Ministry had set the FDI traget for last year at 30 billion dollars. As against this, the total FDI received was to the tune of 25 billion dollars.

Since July 1991 when the Indian economy was opened up, the total quantum of FDI received has been of the order of 61 billion dollars.

Assocham President Sajjan Jindal noted that financial year 2008-09 has begun with a somber note with the economy facing inflationary pressures mounted beyond manageable limits, and India Inc is haunted by the spectre of falling profitability to the extent of 15-20 per cent.

Both industrial production and manufacturing output are confronted with a downward movement of their indices.

The silver lining is the encouraging performance of the agricultural sector, thanks to bountiful monsoon.

As many as 230 CEOs felt that certain sectors have been doing poorly despite good demands of their products. These include mining, refining, petrochemicals and the petroleum sector, cement and steel.

Significantly, 280 CEOs saw a bleak future for the stock markets in view of the fact that a large number of investors have shifted their money to traditional sources of savings channels.

These factors put together do not protend well for FDI inflows into the country.

About 320 CEOs were of the view that foreign investors are adopting a wait and watch policy in view of the impending elections to four state assemblies, as also the General Elections in 2009.

UNI SG SR AS1448