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India has received a record FDI inflow of 17,266.52 crore rupees (US$ 3.75 billion) in the year 2004(January- December). Since only equity component of FDI has been covered in the inflows data, this does not include the reinvested earnings and other components of FDI, which are compiled at the end of the financial year. In its Annual Report for the year 2004-05 the Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce & Industry, attributes this upturn in FDI to the liberal, transparent and investor friendly FDI policy of the government whereby FDI up to 100 % is allowed under the automatic route in most sectors. FDI under the automatic route does not require any approval but only involves intimation to the Reserve Bank of India (RBI) within 30 days of inward remittances and /or issue of shares to non-residents. Apart from this, the government has undertaken a series FDI friendly initiatives to promote investments. They are:
Press Note 18 has been reviewed and guidelines for approval of foreign/ technical collaborations with existing joint ventures in the same field have been notified vide Press Note I.
FDI equity cap in domestic airline sector has been enhanced from 40% to 49% and NRI investment is permitted up to 100 % with no equity participation by foreign airlines.
100 % FDI under the automatic route has been allowed for the development of township, housing, built up infrastructure and construction development projects.
Procedural simplification announced for the FDI investments.
Besides, the government has also set up the National Manufacturing Competitive Council (NMCC) to provide a continuing forum for policy dialogue to energize and sustain the growth of manufacturing industries. It will suggest various measures to enhance the competitiveness of the manufacturing sector including identification of manufacturing sectors that have potentials for global competitiveness.
FDI from Mauritius accounted for 31.23% of the total FDI inflows into the country followed by the USA with 20.15%. In the sector wise distribution of FDI inflows, electrical equipments ranked first accounting for 26.84 % of the total FDI inflows followed by drugs and pharmaceuticals (10.63%) and consultancy services (8.03%).
Findings of the joint UNCTAD Corporate Location Survey in April 2004 has shown China, India and the United States as the top three investment hot spots for the next four years. A. T. Kearney has in its FDI Confidence Index-2004 ranked India the third most attractive investment destination in the world.
The Annual Report also notes that the efforts of the NMCC to unlock India’s manufacturing potential and the Destination India events organized by the Ministry in association with CII and FICCI have contributed enormously for investment promotion.
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