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Dollars flood Indian economy

FDI inflows in India rise 92 per cent in the first four months of current fiscal, reports KA Badarinath.

india Updated: Oct 07, 2006 06:04 IST

Foreign direct investment (FDI) inflows rose 92 per cent on year in the first four months of the current financial year, underlining a bullish outlook on economic growth. Manufacturing industries are receiving a significant share of the inflows, Commerce and Industry Minister Kamal Nath said on Friday.

FDI inflows of $2.9 billion in the April–July period rose from $1.5 billion in the comparable year-ago period, giving room for confidence that the target of $12 billion for FDI inflows in 2006/07 (April-March) would be achieved, Nath told reporters.

A senior Industry Ministry official told Hindustan Times that foreign investments worth $3 billion are in the pipeline, including some from firms such as German steel maker Thysson and Japanese automobile giants Nissan and Mitsubishi.

Investments by these companies are likely to materialise in the next few months, the official added. Industry Ministry officials said that Thysson was likely to locate its plant either in Bihar, Jharkhand or Chhattisgarh, close to iron ore mines.

“The record growth in investments during the first four months would contribute handsomely to the GDP (gross domestic product) growth hovering around 8.5-9 per cent,” he said. “Most of these investments are first mile inflows. So, sustained inflows are bound come in the medium term as projects get executed,” he added.

In July alone, FDI inflows jumped 259 per cent to $ 1.16 billion from $324 million in the corresponding month last year. Singapore-based Barclays Bank emerged as the single largest contributor to FDI inflows, pumping in $ 380 million.

“The healthy growth in investments and FDI inflows would have a soothing impact on the economy that has come under pressure due to an exponential growth in government expenses and inflationary pressures,” said a top Finance Ministry official.

The Reserve Bank of India (RBI) has reported that cumulative FDI since economic reforms began in 1991 have crossed $50 billion, of which $16 billion has come in after April, 2004. These include both equity investments and reinvested earnings, the minister said.

The manufacturing sector received a major chunk of foreign investments, and would help the sector contribute to 25 percent of the GDP against the current 17 per cent, the minister said.Mauritius, US, Japan, Netherlands, UK, Germany, Singapore, France, South Korea and Switzerland are the major investors in the Indian manufacturing sector, especially in areas such as electrical equipment, services, telecommunications, energy and pharmaceuticals.