Date:27/08/2004 URL: http://www.thehindubusinessline.com/2004/08/27/stories/2004082702570300.htm

Back PHDCCI concerned over low rate of FDI inflow

Our Bureau

New Delhi , Aug. 26

THE PHD Chamber of Commerce and Industries (PHDCCI) has expressed concern over the low rate of inflow of foreign direct investments (FDI) compared to the corresponding approval figures.

In a release issued here on Thursday, the chamber said that the percentage of cumulative actual FDI inflows compared to cumulative total approvals between 1991 till March 2004 is as low as 51 per cent, particularly because of delays caused at the State levels.

While policy barriers have been removed progressively and the time taken for clearing new proposals by the Foreign Investment Promotion board (FIPB) has significantly come down, most of the delays are taking place, thereafter, it said.

This points to the need for an effective mechanism to improve co-operation and co-ordination between the Centre and the States in granting clearances, it said.

According to the analysis done by the PHDCCI, while inadequate infrastructure, lack of transparent guidelines and Governmental delays are acting as bottlenecks to the entry of foreign investors, factors such as non-workability of BOOT (build-own-operate-transfer) and BOLT (build-own-lease-transfer) schemes are also holding up the progress.

The PHDCCI analysis shows that FDI inflows, which stood at $97 million in 1990-91, reached a peak of $3,557 million in 1997-98. In 2000-01, the FDI inflows were $4,029 million as compared to $4,675 million in 2003-04. Out of $4,675 million in 2003-04, the share of equity investment was $2,387 million, while reinvested earnings were placed at $1,800 million and inter-company debt transactions of FDI entities (other capital) stood at $488 million.

On the positive side, the analysis has pointed out that the realisation rate of actual to approved FDI till 1997 was hovering around 30 per cent but eventually went up each year till 2001 when it stood at 71.7 per cent.

Then onwards it jumped to 191.1 per cent in 2002 and 236.8 per cent in 2003 and finally to 317.5 per cent till March 2004.

According to the PHDCCI analysis, in order to attract greater inflows of FDI, the FDI policy of the country would have to be flexible, consistent, unambiguous and transparent with long-term objectives and with minimal mid-course policy changes to boost the foreign investors' confidence.