India still 2nd best FDI spot, recent dip temporary: Nomura | business | Hindustan Times
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India still 2nd best FDI spot, recent dip temporary: Nomura

Nomura India has said despite recent massive slump in FDI inflows, the country remains the hottest investment destination in the world after China and that inflows will return to the pre-crisis peak by early 2012.

business Updated: Apr 10, 2011 12:26 IST

Nomura India has said despite recent massive slump in FDI inflows, the country remains the hottest investment destination in the world after China and that inflows will return to the pre-crisis peak by early 2012.

Foreign direct investment (FDI) inflows plunged 25 percent in April-January period to $17 billion Y-o-Y. The figure was more alarming in January when it nosedived 48% to $1.04 billion.

Attributing the recent decline to primarily global factors, Nomura India Vice-President and economist Sonal Varma said following the 2008 crisis, other emerging markets too saw sharp drop in FDI inflows but picked up steam after two years unlike India.

"Of the $12-billion decline in FDI inflows between 2008 and 2010, around 60% was due to weak inflows into services spaces like computer software and hardware, financial services, banking, and construction," Varma said.

"The sharp drop in inflows into banking and other financial services is unsurprising as the crisis led firms to restructure operations. As a result, share of infrastructure in total FDI inflows rose to 24.7% in 2010 from 16.3% in 2007 and that of manufacturing rose to 32.1% from 19.6 percent, despite an fall in the absolute numbers in FY11," he said in his report.

While globally, overcapacity, credit crunch, fragile growth and increased risk aversion led multinational corporations to curtail investment, locally, the environment sensitive policies pursued appear to have affected the investor sentiments, he said.