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FDIs to fall short by US$ 7-8 bn in 08-09, ASSOCHAM

26 Jun '08

4 min read

India's ambitious target to receive US$ 35 billion of foreign direct investments (FDIs) in fiscal 2008-09 is likely to fall short by US$ 7 to 8 billion due to global slowdown and continued volatility on its economic and political front, says a Survey of Chief Executive Officers conducted under the aegis of The Associated Chambers of Commerce and Industry of India (ASSOCHAM).

The survey in which 400 CEOs opinions were polled on Realistic Assessment of FDI's inflow towards India, 350 CEOs said that India could optimally receive about US$ 28 billion in 2008-09 against the target of US$ 35 billion.

The reasons cited for lower FDI's include adverse sentiments in the stock market, bottlenecks on infrastructure, continuation of Press Note 1, government inability to sign nuclear deal, no initiatives on disinvestments, rising interest rates and volatility on economic and political front because of inflation and forthcoming elections.

Nearly 300 CEOs held a view that services sector followed by computer software and hardware, telecom, construction activities, housing and real estate will respectively receive FDI's in 2008-09 as happened in the last fiscal that came to an end on 31st March 2008.

It may be mentioned here that the Ministry of Commerce had set the target of FDI's in last fiscal for US$ 30 billion of which, the total FDI receive were to the tune of about US$ 25 billion.

Ever since, the economy was opened up in July 1991, in the last 17 years, the total FDI's received are estimated around US$ 61 billion.

Releasing the survey, the ASSOCHAM President, Mr. Sajjan Jindal said that the financial year 2008-09 has begun with difficult time in which the inflationary pressures mounted beyond manageable limits, the adverse impact of which on Indian Inc has been substantial in the sense that the yearly profitability of Indian industry would suffer a beating to an extent of 15-20%.

The sentiments are extremely negative as not only industrial production has been falling because of manufacturing sector not doing too well.

No doubt, agriculture has done better and is expected to do still better because of anticipated good monsoon but agriculture alone doing well will not enhance the country's GDP.

230 CEOs held that mining, refining, petrochemicals and petroleum sector including cement and steel have not been doing well despite their demand in the market. This again will not augur for well as their contributions to GDP is not going to be significant.

According to 280 CEOs, stock market will continue to remain in dampen mood as large number of investors have shifted their investments to traditional source of savings channels.

All these factors put together do not send good signals to investors especially overseas and their strategy will be that of wait and watch in which the FDI's will suffer towards India.

About 320 CEOs were of the view that foreign investors are keeping a watch on elections in four state and thereafter, their outcome and again the Parliamentary pool in 2009.

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