India attractive FDI destination despite some slowdown: Montek

Prakash Chawla

Davos, Jan 29 (PTI)India remains an attractive investmentdestination despite some slowdown in Foreign Direct Investment(FDI) last year, Planning Commission Deputy Chairman MontekSingh Ahluwalia said here today.

"There is some weakening in the last few months in theFDI... Due to the financial crisis in 2008 and 2009, manyinvestors'' decisions were postponed...," Ahluwalia told theglobal CEOs who have gathered at the Alpine resort for the41st World Economic Forum (WEF) meeting.

India remains an attractive destination for investment,he said, adding, "We welcome long-term investments".

During January-November 2010, India''s FDI inflowsdeclined 26 per cent to USD 18.9 billion, compared to USD 25.5billion in the same period last year.

Ahluwalia said India needed FDI to bridge the risingcurrent account deficit. "We have current account deficit(CAD). We need to finance our deficit."

The country''s CAD, representing the difference of inflowsand outflows of foreign exchange, barring capital movements,surged 72 per cent to USD 15.8 billion in the July-Septemberquarter over USD 9.2 billion in the same period last year dueto higher imports.

India''s central bank RBI said in a recent report, "...theexternal sector needs to be monitored closely. The economy isvery well poised to absorb a higher current account deficitfor a couple of years but this cannot remain a persistingtrend."

It said the widening of CAD is a result of factors likelower growth in services receipts, reflecting uneven pace ofglobal recovery.

Besides, there has been a significant rise in importsrelative to exports -- reflecting steep rise in internationalcrude oil prices -- and moderation in FDI inflows reportedlybecause of environment sensitive policies, land acquisitionissues and lack of quality infrastructure.

It added that although larger net capital inflows wereabsorbed in financing higher CAD, the composition of capitalflows poses sustainability risks.

Higher capital inflows were due to big investments incapital markets by foreign funds, external commercialborrowings by India Inc and external assistance.