Why FDI in India plunged 48% in January

With economic recovery in the rich countries, especially European nations, remaining fragile, FDI inflows to India plunged by 48 per cent to $1.04 billion in January over the same period last year.

Countries including Mauritius, Singapore, US, UK, Netherlands, Japan, Germany and UAE are the major investors in India.

In January 2010, India attracted foreign direct investment (FDI) worth USD 2.04 billion. During the ten month period (April-January 2010-11) of the current fiscal, FDI declined 25 per cent to $17 billion over the year ago period, a source said.

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India had received $22.9 billion FDI during April-January 2009-10. "The numbers are reflecting that, we will not be able to touch the FDI figure of the previous fiscal," the source said adding "it is a matter of great concern".

In 2009-10, the country's foreign direct investment had declined to $25.88 billion from $27.33 billion in the previous financial year.

"The numbers are bad. Going by the trend, it appears that India will receive less FDI in 2010-11 compared to the previous fiscal. The global economic recovery is fragile," CRISIL Principal Economist D K Joshi said.

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After falling consecutively in October and November 2010, in December last year, foreign direct investment in India increased by about 31 per cent to $2 billion over the same period last year. FDI inflows in October 2010 dipped by about 40 per cent to $1.4 billion over the year ago period.

In November too, it fell by 7 per cent to $1.6 billion. In view of declining foreign investment inflows, the Reserve Bank of India (RBI) is considering setting-up a panel to find out the reasons for FDI slowdown and suggest ways to encourage it.

The sectors that attracted FDI include services (financial and non-financial), telecommunications, housing and real estate, construction activities and power.

As far as FII inflows are concerned, they too dipped in January, declining to $1.19 billion from $1.84 billion during the same period of January, 2010.