NRIs Beat FDI, Keep the Money Coming

Remittances or private money transfers from non-resident Indians (NRIs) have been rising steadily despite a slowdown of the global economy and have become a more reliable source of funds for many Indian families compared with the tangible volume and benefits of foreign direct investment (FDI). Official data for the past three years show that while FDI inflows fluctuated and even dipped, inward remittances were upwardly mobile.

In 2011-12, NRI remittances were $66.13 billion ( Rs. 3,42,884.05 crore), against an FDI inflow of $46.84 billion into the country. Inward remittances have been on an upswing over the past three years, unaffected by factors, such as a fragile global economy and boosted by a falling rupee, of late.

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The Gulf countries (West Asia) and North America are the two top sources of remittances to India, with Europe placed a distant third. A Reserve Bank of India study finds that 30.8% of total foreign remittances came from West Asia, while 29.4% came from North America and 19.5% came from Europe. The study also said that 40% of all such remittances were used for household expenses. These remittances now account for around 4% of gross domestic product (GDP).

Kerala, Tamil Nadu, Punjab and Uttar Pradesh are among the top remittance-receiving states in India. In 2011, remittances to Kerala clocked R49,965 crore, accounting for 31.2% of its GDP, according a Kerala Migration Survey, conducted by the Centre for Development Studies (CDS) for the ministry of overseas Indian affairs. In other words, remittances were more than six times the money Kerala gets in Union government assistance. According to World Bank estimates, in 2011, the other major inward remittance beneficiary countries were China ($57 billion), Mexico ($24 billion), the Philippines ($23 billion), and Pakistan and Bangladesh ($12 billion each).

However, compared with the Indian official figure, the World Bank’s figure for India was $58 billion. Although, the amounts are different in the two estimates, India tops the chart for top remittance-receivers in the word. The Indian official figure states that remittance to the country was $55.62 billion in 2010-11, which rose from $53.64 billion in 2009-10. When compared with remittance figures, there was no great cheer on the FDI front in 2010-11. That year, India received an FDI of $34.84 billion, which was lower than the corresponding figure of $37.74 billion in 2009-10, according to data from the industrial policy and planning department.

Government officials also say a depreciating rupee and higher interest rate for deposits are driving NRIs to park more of their money in the country. “The interest rates our banks offer are more than that of developed countries and even the Gulf countries, where over six million Indians work,” an official said. S Irudayarajan of CDS, an expert on migration studies, says, “This trend of rise in remittances is here to stay. Indians prefer to park their money back home, which they find a very safe option. The falling rupee has also been a windfall for them.”

News source: Hindustan Times


Hike FDI in Telecom Sector to 100% – Parekh panel

A high-level committee, headed by HDFC Chairman Deepak Parekh, has submitted its interim report to Prime Minister Manmohan Singh on reforms and suggestions on how to find the funding needed for the infrastructure sector, estimated  at close to $1 trillion or Rs. 1 lakh crores during the current five-year plan for the economy.

The Parekh committee has recommended that the limit on Foreign Direct Investment or FDI in telecom sector be hiked from 74% to 100%.   It suggests the government should
raise rail fares and electricity rates. The panel has also stressed the importance to address and correct concerns over General Anti-Avoidance Rules (GAAR), which would target companies and investors routing money through tax havens.  The report asks for a correction of delays in land acquisition and environmental clearances, and the implementation of regulatory reforms “through an overarching legislation.” It says that the inability to address these issues “will impact future and existing investments.”

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These recommendations are aimed at attracting Rs. 51.46 lakh crore for funding infrastructure sector over the next three years. The government, the report says, should
draw “a time- bound action plan … with a view to improving the enabling environment for private investment which is expected to finance about 47 per cent of the projected investment during the 12th Plan”.  In the last five-year plan, the private sector contributed about 38% of the spend on infrastructure.

In July, the government picked Mr Parekh, who is the Chairman of Housing Development Finance Corporation, India’s leading housing finance company, as the head of the
high-level committee to review existing policies and suggest necessary changes in the investment framework for the high-priority infrastructure sector.

News source: NDTV Profit


FDI surpasses $10 billion in the first quarter

India is fast catching up with China in the flow of foreign direct investment (FDI) as capital inflows through this route has crossed $10 billion in the first quarter of this fiscal. FDI in the first quarter of the financial year 2009 has far exceeded the total FDI flows received by the domestic economy in 2005-06, Reserve Bank of India’s data said.

The total FDI inflows into the country in the April-June period amounted to $10.073 billion, nearly one billion more than the total FDI inflows–$8.961 billion– in the 2005-06 period, RBI said in its August report.

The FDI flow into India was less than $10 billion annually until 2005-06. It shot up to $22 billion in 2006-07 and $32 billion in 2007-08. China has averaged $ 50 billion annually in the past decade. If the first quarter trend continues, India could cross this fiscal $40 billion mark in FDI annual inflow for the first time. FDI flows, during April-June, has doubled when compared to the same quarter of financial year 2008, $5 billion.

Full article here.


India Business Updates

India Inc’s M&A bill crosses $50 billion in 07

Merger and acquisitions are set to become one of the most important trends of 2007 for India Inc, with the total deal value crossing 50-billion dollar mark with one more month still to go. According to data compiled by international consultancy major Grant Thornton, India Inc recorded M&A deals worth 940 million dollars in November, taking the total for first 11 months of 2007 to 50.79 billion dollars.

A total of 58 M&A deals were announced in November against 51 deals amounting to 610 million dollar in the previous month, according to Grant Thornton.

Rest of the article here.

Coffee chain Gloria Jean’s enters India

International coffee chain Gloria Jean’s is looking to make India a manufacturing and sourcing hub. It is setting up its second global coffee roasting and blending unit here. According to sources, Gloria Jean’s has finalised on a couple of locations and will tie up with Indian farmers to procure Arabica beans, which will be blended with imported coffee beans from Indonesia and Ethiopia.

The US-based coffee chain, which has more than half of its 770 outlets in Australia, announced on Monday that it was entering India through a tie-up with Citymax India, the hospitality and restaurant arm of Dubai-based Landmark Retail. Citymax will invest around Rs 50 crore for opening 100 stores over the next four years.

Rest of the article here.

India no.2 in AT Kearney FDI confidence index

China and India continue to rank first and second in the 2007 Foreign Direct Investment Confidence Index, a regular survey of global executives conducted by management consulting firm AT Kearney.

China leads the Index rankings for the fifth consecutive year and ranks first among Asian investors, 34% of whom plan to invest there over the next three years. Where as India retains second place in the Index, a position it has held since displacing the United States in 2005.

Rest of the article here.