FDI in India in 1990s

Ulhas Joglekar ulhasj at SPAMbom4.vsnl.net.in
Tue Jan 16 19:10:22 MST 2001


Business Standard

Last updated 1630 hrs IST, Friday, January 05, 2001

ECONOMY
80% FDI cleared between '91-'98 remains on paper
Bhupesh Bhandari & Rashmi Das in New Delhi
After the hype, here comes the bitter truth. Almost 80 per cent of the
foreign direct investment (FDI) approved between 1991 and 1998 has not
fructified.
According to statistics put together by the Confederation of Indian Industry
(CII), only 21.7 per cent of the FDI cleared during the period has actually
been brought into the country. The rest has remained on paper.
While FDI approvals during 1991-98 added up to $55.1 billion, only $11.9
billion actually flowed in. The FDI approvals include those given by the
Foreign Investment Promotion Board, the Secretariat of Industrial Approval
and the Reserve Bank of India (RBI).
The actual inflow is monitored by RBI. CII has culled the figures from the
various economic surveys put out by the finance ministry.
For a global perspective, it has converted the figures from rupees to
dollars at each year's average exchange rate, thus factoring in the
depreciation of the rupee.
The CII study shows that while the actual inflow was 47.7 per cent of the
approvals during 1991, the first year of economic reforms, the percentage
dropped to 13.1 per cent the next year and has since climbed steadily to
reach 32 per cent during 1998, the last year for which such information is
available.
The study does not specify the sectors where the ratio has been particularly
low. The reasons for almost four-fifth of the FDI approved not finding its
way to India, according to CII deputy director general Manasi Ray, are
procedural delays and red tape, which put off most prospective investors.
"At CII, we have been making representations to the government to remove the
procedural hassles and to harmonise policies at the Central and state
levels," Ray told Business Standard.
Though the CII study does not say what has been the experience of other
emerging economies in this respect, it says that countries that got lesser
FDI than India a few years ago are now way ahead of India.
Thailand, for instance, got actual FDI of $2.06 billion in 1995 as compared
to India's $2.11 billion; but in 1998, its FDI inflow of $6.96 billion was
almost thrice that of India's $2.25 billion. During the same period, the
actual FDI in South Korea improved from $1.77 billion to $5.14 billion.

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