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Anand Sharma sees FDI inflows increasing this year

Especially worrisome for the global economy is the contraction in the manufacturing activity of China's private factories for the seventh month in May.

Inside an IKEA store in Stockholm, Sweden
Inside an IKEA store in Stockholm, Sweden

Commerce and Industry Minister Anand Sharma on Saturday expressed confidence that the country would be attracting more direct overseas investments this fiscal.

"Despite the gloomy world economy, we received highest FDI of USD 50 billion last fiscal and we are hopeful of attracting more this fiscal," Sharma told reporters here on the sidelines of a powerloom industry function.


The Minister's statement comes in the wake of negative investor sentiment on account of General Anti-Avoidance Rules (GAAR) which seeks to retrospectively tax corporate deals such as Vodafone-Hutch that took place in tax havens but had underlying physical assets in the country.

The FDI inflows spiked last fiscal to a record level on account of a spate of big-ticket deals such as Cairn-Vedanta and Reliance-BP. As stock valuations dipped, overseas investors were eager to buy stakes in domestic firms.


The country received $34.8 billion in FDI in 2010-11, but foreign investors also pulled out a record $10.7 billion in the 2011 calender year, according to a Nomura report. However, overall the total FDI flows are still in the positive territory with an estimated $20 billion as of FY12.


On the worst macroeconomic numbers in the past nine years, the Minister said, "GDP growth rate of 5.3 per cent is very alarming and we hope this is now bottoming out."


He also said "the immediate challenge for the country is to appropriately calibrate the macroeconomic policies for addressing the downside risks... provide an investment climate that encourages foreign capital flows".


Admitting that the economy is facing problems with regard to rupee depreciation, declining exports and moderation in industrial production, Sharma said the earnings in hard currency is important at this stage.