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UN Conference on Trade and Development (UNCTAD) has released annual report on FDI flows globally.
The report states that in 2015 FDI flows into India nearly doubled reaching $59 billion. In 2014 alone, it was estimated that $35 billion worth FDI were made in India. This shows that govt is creating a positive confidence in the international market to come and invest in India.
India seems to be playing bullish in terms of customer/investor confidence, especially given the fact that there is a slowing trend in China. Even the IMF report also projects the growth rate of India at 7.4% and 7.6% in the present and next fiscal respectively, while at the same time China’s growth rate was projected to be lower at around 6.9%. The global growth rate has also come down from 3.6% to 3.3%.
According to the report global FDI flows have increased by 36% this year compared to last year.
Among all the FDIs into India, major chunk is going towards green field investments. The returns or realisation of benefits from these green filed projects takes time, at least 2-3 years. However, one benefit which has directly come is the control of inflation (how?). RBI is aiming to contain inflation at around 5% by the end of this financial year in March.
In the past two years around $2 billion came in the form of private equity. Unlike the World Bank or other large investors, the private equity investors would not wait for long term returns. They put the projects on ground quickly and generate profits and employment very quickly.
The infrastructure sector, which includes roads, railways, power etc, is attracting huge FDI. These are the areas which are directly linked to the real economy and the poorest man is going to benefit directly from them.
Compared to 2014, the developing economies as a whole witnessed 5 percent increase in FDI flows.