Robust increase in FDI inflow in India

Mumbai, Mar 30 (UNI) Foreign direct investment (FDI) flow into India registered a robust increase during the period, April-December 2006, at US Dollars 5822 million, an increase of US Dollars 2475 million over US Dollars 3347 million received during the same period in 2005, according to Reserve Bank of India (RBI).

The RBI attributed the net FDI increase to sustained domestic activity and positive investment climate with inflows channelling into manufacturing, business and computer services.

Foreign direct investment was channelled mainly into financial services, manufacturing, banking services, information technology services and construction.

Mauritius, United States and Singapore remained the dominant sources of FDI to India, a RBI release said.

Outward FDI of India also showed robust increase due to appetite of Indian companies for global expansion reflected in some large overseas acquisitions.

Dominated by the strong bi-directional movement in foreign direct investment and buoyant inflows through external commercial borrowings. NRI deposits and portfolio flows, the country's net capital flows surged to US dollars 27.3 billion from US Dollars 13.4 billion in April-December 2005, the release said.

The net foreign institutional investors (FIIs) inflow during April-December 2006 were, however, lower as compared with the same period last year. The FIIs inflows dipped to US Dollars 5170 million during April-December 2006 against US Dollars 8161 million during the same period last year. The fall in FII inflow was due to the FIIs outflows witnessed in December 2006 against the backdrop of volatility in Asian euity markets subsequent to the tightening of controls by Thailand. Resources mobilised through thre issuances of American Depository Receipts (ADRs) Global Depository Receipts (GDRs) abroad also remained buoyant.

Other major contributors to capital inflows were external commercial borrowings (ECBs) and NRI deposits. Higher recourse to ECBs was enabled by lower spreads on external borrowings and rising financing requirements for capacity expansion domestically, the release said.

Net inflows under NRI deposits during April-December 2006 were substantially higher at US dollars 3210 million against US Dollars 1114 million during the same period in 2005, which the RBI release said was partly attributable to higher interest rates offered by banks in India.

With the strong movement in capital inflows, the foreign exchange reserves recorded an increase of US Dollars 25.6 billion during April-Decembr 2006 (against an outflow of US Dollars 4.3 billion during the corresponding period of the previous year).

At the end of december 2006, with outstanding foreign exchange reserves at US dollars 177.3 billion, India held the fifth largest stock of reserves among the emerging market and sixth largest in the world.

UNI