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FDI may be $7 bn short of target this fiscal

Corporate heads feel that India's target of attracting $35 bn FDIs this fiscal will fall short on account of eco-political turmoil, a survey said.

business Updated: Jun 24, 2008 17:58 IST

Corporate heads believe the country's target of attracting $35 billion in foreign direct investments (FDIs) this fiscal will fall short by about $7 billion on account of economic and political turmoil, a survey by an industry lobby released on Tuesday said.

Of the 400 chief executive officers (CEOs) surveyed by the Associated Chambers of Commerce and Industry of India (Assocham), 350 said India could optimally receive $28 billion in FDI.

The reasons cited for lower FDIs include adverse stock market sentiments, infrastructure bottlenecks, continuation of Press Note 1, the uncertainty over the nuclear deal, little initiatives in disinvestments, rising interest rates, and volatility on economic and political front because of inflation and forthcoming elections.

The commerce ministry had targeted $30 billion in FDIs in the last fiscal, and managed to attract $25 billion.

“Sentiments are extremely negative, as industrial production has been falling," said Assocham president Sajjan Jindal. "Agriculture is expected to do better because of anticipated good monsoon, but it alone will not enhance the country's GDP.”

Nearly 300 CEOs said the services sector, followed by information technology, telecom, construction and real estate, will attract the most FDI, as had happened in the last fiscal.

About 230 CEOs said critical sectors such as mining, refineries, petrochemicals and petroleum, cement and steel have not been doing well despite high demand. This again does not augur well as their contributions to GDP is not going to be significant.

According to 280 CEOs, the stock market will continue to remain sluggish with many investors now shifting to traditional savings channels.

A vast majority of CEOs also said inflationary pressures will continue, and the expected rise in interest rates will lead to further credit and liquidity crunch that will discourage foreign investors.

About 320 CEOs were of the view that foreign investors are tracking political developments here, and would take investment decisions only after there's some kind stability following next year's parliamentary polls.