Business

India next only to China in FDI

NEW DELHI: India has emerged as the top foreign direct investment (FDI) destination after China, but ahead of the U.S., the U.K. and Germany, the United Nations Conference on Trade and Development (UNCTAD) has said.

“China is the most preferred investment location, followed by India and the U.S.,” UNCTAD said in its ‘World Investment Report 2008” released here on Wednesday.

The UNCTAD report noted that bolstered by large investments by trans-national corporations (TNCs) such as Oracle, Holcim and Matsushita, China and India have emerged as the two top preferred destinations not only for the current year but for the next three years as well.

In 2007, India recorded a 17 per cent increase in FDI inflows in the wake of robust economic growth and improved investment environment owing to further opening up of sectors such as telecommunications and retail trade.

During the year, FDI inflows in to the country soared to $ 23 billion and the main reason for the surge were strong cross-border mergers and acquisitions, the report said.

Alongside, owing to the overseas acquisitions by Indian companies, capital outflows during 2007 also went up to $13.6 billion. In particular, Indian firms have been keen investors in developed and developing countries in sectors such as pharmaceuticals, extractive industries and information technology, among others, the report said while noting that the mode of entry in to the host countries were cross-border M&As which went up 4.6 times to $ 30 billion during the year.

The increasing outward flow of FDI, targeted mainly at industries like steel, mining, energy property and construction, the report said, was driven by higher corporate reserves of Indian companies, high profitability and a further relaxation of policies by the government.

The UNCTAD report noted that India would, however, find it difficult to fund the $495 billion infrastructure development programme spread over till 2012.

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