India improves FDI ranking

India�s position in a UN agency�s inward Foreign Direct Investment (FDI) performance index has improved eight notches.

The country�s rank on the index, which covers 141 countries for the year 2006, stood at 113, as against 121 in 2005. This is the highest annual jump recorded by India on the index, which started in 1982.

In addition, the country also improved its position by nine places in the outward Foreign Direct Investment (FDI) performance index from 65 in 2005 to 56 in 2006.

The index is prepared by the United Nations Conference on Trade and Development (Unctad) and is part of the World Investment Report, which was released here today by the body.

While India strengthened its position in the index, China�s rank fell by seven places and stood at 69. However, India�s $16.88 billion worth of FDI inflows in 2006 was dwarfed by China�s $69.46 billion in the same year. FDI inflows into India during 2006 registered a growth of 153 per cent over $6.67 billion in 2005.

�The increasing FDI inflows of the country can be attributed to the high rate of economic growth seen in the last few years. As a result, foreign companies are pumping in market seeking investment,� said Masataka Fujita, head of investment trends and data section, investment technology and enterprise development, Unctad.

Fujita added that private equity (PE) firms are increasingly investing money in India. �As merger and acquisitions activity increases in the coming years, more such firms will be investing in India,� added Fujita.

The Unctad report took note of the US-based Kohlberg Kravis Roberts and Co�s acquisition of 85 per cent in Flextronics Software System, a deal which was valued at $900 million.

The report also revealed that India�s FDI inflows, as a percentage of gross fixed capital formation has been increasing over the years. While in 1999-2000, FDI constituted 1.9 per cent of gross fixed capital formation, it rose to 8.7 per cent in 2006, against 2.6 per cent in the year ago period.

Moreover, as a higher number of Indian companies invested overseas, FDI outflows from the country increased to $9.67 billion in 2006, a rise of 288 per cent over $2.49 billion in the previous year. China�s outward FDI inflows in 2006 increased by 31.56 per cent to $16.13 billion against $12.26 billion in the year ago period.

�Resource seeking FDI from China and India continue to increase. In addition, efforts of Chinese state-owned enterprises and Indian privately owned conglomerates to acquire strategic assets abroad, as highlighted by the $11 billion acquisition by Tata steel of Corus group have led to greater FDI flows from these countries to developed countries,� the report said.

However, India�s rank in the Unctad�s FDI potential index, which takes into account 12 social and economic factors, fell by two positions to 85 during 2005 against 83 in 2004.

�India�s record in the potential index over the past few years has been good. In fact, it has always been better than the performance index, which shows that there is more potential of foreign investment flows into India,� said Fujita.

The report also said that global FDI inflows during 2006 stood at $1,306 billion, rising by 38 per cent over nearly 810 billion in 2005. http://www.business-standard.com/common/storypage.php?autono=301497&leftnm=3&subLeft=0&chkFlg