Labour-Intensive in total FDI inflows in the country.

However the government is not

Industries Fail to Attract
FDI in India
Despite of emergence of India as
one of the top five Foreign Direct
Investment (FDI) destinations in Asia,
the data available with the depart-
ment of industrial policy and
promotion shows that employment
intensive sectors of the country have
not been able to attract much of the
FDI inflows.
While total FDI inflows during
the last 16 years (August 1991-March
2007) stood at $54.62 billion labour-
intensive sector like leather, on which
more than 2 million families depend
for their livelihood, could attract FDI
inflows worth $60.24 million only
which is only 0.12 per cent of the total
FDI inflow in the country.
Another labour-intensive textiles
sector, which employs about 85
million people after top employer
agriculture, has been able to attract
$575 million which takes a share of
1.22 per cent only in overall FDI
inflows.
On the contrary, capital-intensive
sector like electrical equipment
attracted the biggest FDI inflows
worth $ 8.27 billion which stands at
15.1% of the total FDI inflow in the
country. The service sector grabbed
the second highest share of FDI at
14.4% (i.e. $ 7.84 billion). Telecom
sector attracted $ 3.89 billion as FDI
inflows which shows a share of 7.12%
as % of FDI Inflow into India Country-wi
Total Inflow
from August 1991 to March 2007
This shows that India could attract
the lions share of total FDI inflows
only in technology and capital
intensive sectors while countries like
China and Taiwan became successful
in attracting much volume of FDI in
employment intensive sector like
textiles.
RBI Suggests 3 Year
Lock-in Period for FII
Allotments
The Reserve Bank of India (RBI)
has suggested to the government for
imposing a three-year lock-in period
for share allotment to foreign
institutional investors (FIIs) during a
public offer to plug the post-IPO
allotments and check short term
foreign exchange inflows. The RBI is
of the view that in the absence of a
lock-in-period, the FIIs will opt for
investing in real estate sector during
the IPO for ensuring higher return on
their investments in a short span of
time and then repatriate the funds so
as to shift the flow of funds from the
pre-IPO period to the post-IPO
period, just to take advantage of a no
lock-in period. Investments in real
estate offer higher returns in shorter
span. RBI therefore presents the view
that if a pre-IPO route carries a lock-
in period of three years, the same will
automatically be applicable to post-
IPO allotment which will help in
avoiding rush in foreign exchange
inflows.
100
41.24
12.78
in favour of this RBIs suggestion
because it feels that post-IPO invest-
ments by the FIIs are treated as short
term portfolio investments. It is
worthnoting that a few weeks back,
the government decided to put in a
three year lock in period for the FII
investments in the pre-IPO allotments
of real estate companies and thus
treated FII investments at par with
FDI. FDI in real estate attracts a lock-
in period of three years before the
investos could repatriate the funds.
The review in foreign invest-
ments in the real estate sector is a
fallout of the concern raised by RBI
on the speedy rise in asset prices in
the domestic market. RBI wants to
put a check on rising real estate prices
and hence puts a view for making 3
years lock-in periods for FII allot-
ments.
Parekh Panel Favours FDI
through Automatic Route
The seven member Deepak
Parekh Committee on infrastructure
financing in its final report submitted
to the Ministry of Finance has
suggested that India should allow
holding companies to raise foreign
direct investment through the
automatic route, refinance rupee
loans and relax cost ceilings for
external debt. It is worthnoting that
the committee was set up by Finance
Minister P. Chidambaram on
December 26, 2006 to suggest ways to
facilitate infrastructure financing.
Besides Deepak Parekh, who heads
the financial institution HDFC, other
committee members include key
representatives of the financial

communityHemendra Kothari,
3,857.25 8.68
5.94
4.85
3.68
3.67

1.50
1.21
1.12
1.05
0.98

0.52
1.98

0.85

0.47

2.12
1.68

0.41
0.35
0.34
0.32
0.32

0.29
0.24
0.32

chairman, DSP Merrill Lynch,

Nachiket Mor, deputy MD, ICICI
Bank, Sanjay Nayar, CEO, Citi Bank
2,637.86

54,628.05
18146.81
5,893.99

2,208.51

India, S.S. Kohli, chairman, Indian

1,701.63
1,628.18

Infrastructure Finance Co., Rajiv Lall,

MD and CEO, IDFC Ltd, T.S.
948.62
895.44
South Korea 822.68
Switzerland 692.17
552.64
Bermuda 484.10
Sweden 478.01
UAE 416.18
Hongkong 430.75

Bhattacharya, MD, State Bank of

Belgium 232.93
Australia 208.07

Cayman Island144.29
Cyprus 176.65
Denmark 161.84

Russia 142.51
Malaysia 142.53
Canada 128.39
Br. Virginia139.68

Spain 102.71

in Million India.
US Dollars
The committee has raised
Netherlands
Mauritious

Singapore
Germany

France
Japan
USA

Total
Italy
UK

NRI

infrastructure spending targets from

 *
* incl.
Others
FDI inflow into India from August 1991 to March 2007 amounted to
USD 54,628.05 million (Rs. 23,20,411.07 crore).
Source : Ministry of Commerce & Industry PTI Graphic
$ 320 billion to $ 475 billion in the
next five years. The report also
suggests that the government should
offer tax incentives to investors in
ultra mega power projects and in
unlisted shares of infrastructure

PD/August/2007/224 Real peace comes only to those who control the body and mind with self-discipline.