FDI in India Slumps 78% in June

Aug. 24, 2012
Investors have been deterred by a string of graft scandals, suffocating red tape, high inflation, sharply slowing growth and the government's inability to further open up the economy in the face of fierce political opposition

Amid mounting worries about corruption, bureaucratic delays and lack of economic reforms, direct investment in India slid by 78% in June, official figures showed on Friday.

Foreign direct investment (FDI) in June tumbled to $1.24 billion from $5.66 billion in the same month a year earlier, figures posted on India's Department of Industrial Policy and Promotion website showed.

For the financial first quarter to June, FDI tumbled year-on-year by 67% to $4.43 billion, according to the department, with big drops in construction, real estate, mining, and business and financial services.

Overseas investors have increasingly been giving a wide berth to the country of 1.2 billion people, until recently seen as a hot destination for foreign money.

They have been deterred by a string of graft scandals, suffocating red tape, high inflation, sharply slowing growth and the government's inability to further open up the economy in the face of fierce political opposition.

The central bank said India could help reverse the investment decline by shortening investment approval times and sorting out land acquisition issues.

On Thursday, central bank governor Duvvuri Subbarao cited the example of Singapore, an investment hub, to stress the importance of doing away with cumbersome rules that deter business.

"There is a need to make doing business easy by adopting models like the one in Singapore where multiple agencies/ministries sit together to quickly give a decision clearing investment projects," he said in the bank's annual report.

However, the same day, the government postponed deciding on proposed changes to a long-awaited land acquisition legislation intended to ease the land acquisition process for industrial projects.

Experts say foreign investment is vital for India, which needs to fund a $1 trillion scheme over the next five years to overhaul its dilapidated ports, airports, highways and other infrastructure seen as key to boosting growth.

Among a host of stalled high-profile projects are South Korean steelmaker POSCO's plans to build a $12-billion mill. The scheme has hung in limbo since 2005, running into trouble over land rights and environmental clearances.

The government set out an ambitious plan to revive stalled economic reforms in current legislative session. But it has been jeopardized by a new deadlock in parliament over allegations the treasury lost out on billions of dollars in revenue when the government gifted away coal mining rights.

Copyright Agence France-Presse, 2012

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