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|February 23, 2001||Feedback|
'Policy reforms in the FDI regime needed'
Expressing concern over the decline in India's share in total Foreign Direct Investment (FDI) flows to the developing nations, the Economic Survey underlines the need for policy reforms in the FDI regime.
''The falling share is a cause for concern and underlines the need for even greater policy reforms in the FDI regime'', said the survey 2000-01 presented in parliament on Friday.
India's share in total FDI to developing countries declined from two per cent in 1997 to one per cent in 1999. This is despite the fact that the inflow of FDI to developing countries has been progressively increasing throughout the decade of 1990s. China, on the other hand, continues to be the largest absorber of these flows among the developing nations, while South Korea experienced rapid jump in volume of FDI inflows in 1998 and 1999.
In terms of aggregate annual inflows, the FDI maintained its declining trend for the second successive year after 1997-98 for India. The FDI inflows for 1999-2000 ($2155 million) were lower than the previous year ($2462 million). However, inflows in the current year, 2000-2001, are showing signs of improvement.
During April-December, aggregate FDI inflows have been higher ($1916 million) than the comparable period of 1999-2000 ($1489 million). Mauritius and the USA continue to be the largest sources of the FDI for India despite decline in inflows routed through Mauritius. Inflows routed through Mauritius declined to $501 million in 1999-2000 compared to $590 million in the previous year. FDI from the USA fell from $453 million in 1998-99 to $355 million in 1999-2000. Japan, Italy and the Netherlands were the other three major contributors of FDI during 1999-2000.
The engineering industry continues to attract the largest volume of FDI inflows. In 1999-2000, the sector experienced aggregate inflows worth $326 million. Electronics and electrical equipment industries were the second largest recipient of the FDI with aggregate inflows of $172 million.