Chillin' out till it needs to be funded
India’a FDI process received a tremendous boost in March after $2 bln flows in January and February, itself a fair score were boosted to $8 bln for March even as international media slips into a morass using ignorance of India to blindfold and play with Economic Darts which India is well provided with starting with the 4% Current Account Deficit and the double-digit depreciation of the rupee to the curbs on FX trade imposed by RBI since October and added to today with punitively enforced conversion of Export dollars to a local currency. That boost was also needed for the Rupee as it faces severe action by European speculators stunted by the lack of LTRO ritual and a drying up of business back home.
FDI grew in the last month of the fiscal and even allowing for the fiscal end corrections if any in the tabulation, is still agreat score considering that FDI in multi retail was never satisfactory after coalition politics robbed the Indian markets of a great expected boost in the Hindu new year. The $36 bln FDI in 2011-2012 is still below the FDI receipts expected when the Fiscal began last year before it ended on a low note, expectations of growth scaled down to below 7%. Asian competition from China and Indonesia apart, India still expects to see a boom in retail consumption and needs a lot of private participation in infrastructure. Telecoms and GAAR apart as they target specifically sensitive corruption and governance issues, Foreigners remain welcome and banks may not be the only ones growing business in Asia esp India in 2012 and later.
Routing of FDI thru Mauritius has been a special charm for the India story signalling to most Indians on the ground that jugaad is still the order of the day and hence the efforts by the government to re emphasise that india is not one of the banana republics or one scrip economies that Western investors seem to favor. Indonesian and ASEAN FDI story is however more freely linked to Chines e FDI into and from these Countries.
The March rush may be explained by earlier announcements, large ticket investments expected in Mining and Energy from BP and other global players. Rio Tinto is part of a diamond exploration project in Central india.
..Part of earlier Curtain raiser
Though details are yet available till February, the momentum in FDI and the now value equation in India’s Financial Markets has again meant renewed interest in India FDi though the buck stops at retroactive amendments and the recent clarifications on FII portfolio investments thru P-notes a s a measure of investor confidence. In the last three months of November, December and January more than $5 bln in FDI was reported despite the ongoing saga and domestic credit growth also belies expectations of a slowdown at more than 18% growth.
January FDI of $2 bln mostly Added to Services sector for $1.3 bln and Infrastructure construction projects of another $600 mln while there was also a solitary software project investment for $100 mln And February was another $2 bln
That means there was no FDI in sectors like Automobiles, Power and Pharmaceuticals / Healthcare unless new projects have been added in February and March but these sectors will also contribute further in FY2013 along with Financial Services and Transportation/Travel and the ongoing impetus in Infrastructure with the first two India infra debt funds, one with Citi and another with HSBC in play.
Ten month FDI totals have hit $37 bln and Feb and March would at least take it to $40 bln for the Fiscal.
India’s Fiscal Deficit in the meantime hit a few flood signage on way to INR 4.94 Tln for 11 months in FY12 from a INR3.68 tln for the full year in FY11 which was a humongous 68% of the Budget estimates against this years likely overshooting the Revised Estimates of INR 5.15 Tln CPI Inflation was a high 8.8% in /february and thus WPI will also climb from March and April risking the rate cuts planned in early part of the fiscal by RBI