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Foreign fund inflow rises

New Delhi, Dec. 18: Foreign capital inflow increased 65 per cent year-on-year to $7.2 billion in the first half of this fiscal, commerce minister Kamal Nath said.

He said the increase in foreign direct investment was a result of big ticket investments by Vodafone and Matsushita Electric.

He said the country maintained its position as the second most preferred destination for global investors as measured by the AT Kearney FDI Confidence Index, 2007.

India has displaced the US on the AT Kearney index.

“FDI inflows continue with great momentum,” Nath said while releasing the figures.

He said China retained the number one position on the index, as the US and Asian investors flocked to the dragon land. However, India was the most preferred investment destination of the European firms, he added.

India received $15.7 billion as FDI in 2006-07. The data showed that Vodafone Mauritius, Matsushita Electric Works, GA Global Investments, Emmar Holdings and Merrill Lynch were the five major foreign investors in April-September, 2007-08. The services sector topped the table of FDI inflows, followed by telecom and real estate.

Nath said the government planned to allow foreign direct investment in the small scale sector without any cap. With changes in laws governing small and medium enterprises, FDI will be allowed in the services sector without any cap, he added.

The Micro, Small and Medium Enterprises Act does not provide for a 24 per cent equity cap on any industrial undertaking in the SSI sector, the minister said.

“This will be a major policy decision in the interest of competitiveness of the small scale sector and will lead to spatial spread of industry and create employment in hinterland,” he said.

Officials said the number of items reserved for small-scale industries will remain the same at 114 but the restrictive clause will go and they will continue to get excise and other benefits.

They said if someone wants to set up an SSI unit and ancillary units, they cannot fund it because it is not allowed. Once the restrictive clause goes, big industrial houses, either domestic or foreign, can own SSI units. FDI will be allowed, but it will be governed by the investment policy.

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