Foreign
Direct Investment
(FDI) inflows amounting
to US$4.06 billion were received during the financial year 2001-2002,
the highest received so far, as against US$2.46 billion received
in 2000-01, registering a 66% growth.
The above
figures are based purely on foreign equity investments (including
preference shares) other than foreign portfolio investment.
It also excludes investments by offshore venture capital funds/domestic
venture capital funds set up by foreign venture capital investors,
which strictly speaking should form part of the FDI inflows.
Apart from this, it also excludes reinvested earnings and other
direct capital flows, which are treated as FDI as per IMF standards.
The IMF definition of FDI as laid down in its Balance of Payments
Manual (5th Edition), which is adopted by most countries
and also by UNCTAD for reporting FDI data in its annual publication
entitled World Investment Report, treats both reinvested earnings
and other direct capital flows such as debt securities, trade
credits, grants, etc. as part of FDI.
The FDI
inflows into India if recalculated on the basis of international
reporting practices as stated above, will work out to be much
higher than what is currently reported. Accordingly to a recent
study conducted by International Finance Corporation (IFC),
adoption of international standards for computation of FDI would
raise India’s net annual FDI inflows from the present level
of US$2-3 billion to about US$8 billion, which works out to
approximately 1.7% of India’s GDP.
With
a view to aligning our FDI reporting system with the international
computation standards and updating the FDI inflows into the
country accordingly, the Government has recently set up a joint
committee comprising representatives from RBI and the Department
of Industrial Policy & Promotion. The Committee is expected
to complete its work shortly.’
