Colour of FDI Inflows is Turning Brown
Mumbai: Record foreign direct investment (FDI) flows into India now have a distinctly regional flavour. Asia’s richer neighbourhoods have begun rivalling AngloAmerican investors of late in building factories in the continent’s third-largest economy, seemingly drawn by Prime Minister Narendra Modi’s initiatives toward boosting local manufacturing.
The share of Asia in the total FDI has more than doubled in the past four financial years. It has averaged about 28% a year between FY14 and FY17, show data from Care Ratings. The 10 Asian countries included in the analysis are Singapore, South Korea, Hong Kong, Chi n a , Mal ay s i a , Indonesia, Thailand, Philippines, Taiwan and Sri Lanka.
“This FDI is coming in to support India’s consumer demandforelectronics,” said Rahul Shukla, head of Corporate Bank, Citi South Asia. “Make in India is a big theme in electronics manufacturingtoday.Wehaveayoung, aspiring population that consumes electronics, and also jobs in this space are more aligned with the aspirationsandcapabilities of our vast talent pool.” “Our time has come to occupy centre-stage globally in electronicsmanufacturing,” Shukla said. Asia’s share in Indian FDI was always about 5-10%. It is now 25-30%, and the biggest contributions arepouringinfromSouth Korea, Taiwan, China, and Japan, according to Citi. In the calendar 2016, the 10 Asian countries cited above collectively invested $11 billion while during the JanMarch quarter this year, they investedat$1.7billion.Singaporehas emerged as a key origin market.
“Singapore is the main origin for FDI as it holds special tax advantages for companies,” said Madan Sabnavis, chief economist, Care Ratings. “Non-Singapore Asia has shown some increase, although not significantly. This can be due to enhancing of limits in certain sectors by the government and opportunities seen in investing in the world’s fastest growing economy.”