Foreign investors abandon India

Bank of India figures show foreign direct investment into India tumbled 65 per cent in the June quarter to $US4.64 billion. Photo: Adrian Pope

Foreign direct investment into India took a massive hit in the June quarter, reflecting possible renewed concerns over the country’s investment climate.

According to Bank of India figures issued late Friday, FDI into India tumbled 65 per cent in the three months ended June 30 to $US4.64 billion. That’s well below FDI inflows of $US13.4 billion in the year ago period.

June alone told a terrible tale for the widely-touted economy, with the Bank of India reporting FDI inflows of just $US1.32 billion, less than a quarter of the $US5.73 billion that was pumped into the country by foreign businesses a year prior.

The Bank of India data also revealed that net FDI (the difference between FDI inflow and outflow) fell 58 per cent to $US3.83 billion in the June quarter, versus $US9.04 billion a year ago.

Coming after blackouts affecting 700 million that earned India international notoriety in recent weeks, the figures led the Indian Institute of Foreign Trade director KT Chacko to suggest to the Economic Times that the decline may be “because of the general lack of overall investment climate and lack of stability in the policy”.

Writes The Times of India: “The government is hoping to reverse the falling trend by liberalizing the norms for sectors such as multi-brand retail, where investment by overseas chains is banned at present, as well as in insurance and banking, where legislative changes are pending. In addition, the government is hoping that some high-profile investment by global players such as Swedish furniture and home accessories firm IKEA and footwear maker Paver’s England in the single-brand retail segment may swing sentiments.”

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