Colour of FDI In­flows is Turn­ing Brown

The Economic Times - - Finance & Commodities - Times­


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.”

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