India will continue to see a surge in foreign direct investment (FDI) inflows as growth differential was in its favour as against developed nations, according to a recent statement of the Planning Commission Deputy Chairman, Mr Montek Singh Ahluwalia. Mr Ahluwalia reaffirmed the faith at a recent CII meeting that India was going to provide a very hospitable environment for foreign investments in the years to come.

Meanwhile, the steady FDI inflows into India continued with investors pouring in US$ 1.72 billion in February 2010, while the period April 2009 to February 2010 saw FDI investments totalling US$ 24.68 billion, according to the latest data released by Department of Industrial Policy and Promotion (DIPP).

NRI FDI inflows received under:

• FIPB/SIA (other than acquisition) route during January 2010 was US$ 0.01 million
• Automatic Route of RBI during January 2010 was US$ 32.95 million - 2.55% of total FDI inflows

Further, NRI FDI inflows received April 2009 to January 2010 were US$ 353.01 million – about 1.54% of total FDI inflows, according to the latest SIA Newsletter of Department of Industrial Policy and Promotion (DIPP). Some leading NRI investments into the country have been in firms such as JMC Projects (India) Pvt Ltd, Limberlink Technologies Pvt Ltd, Rolta India Ltd and Allied Digitial Services Ltd.

Overseas Indian Affairs Minister Mr Vayalar Ravi has also informed the Lok Sabha that the country received remittances of US$ 40,810 million (around Rs 2,04,050 crore) during the period April to December 2009.

Significantly, deposits in Non-Resident Ordinary Rupee Account (NRO) increased to US$ 4.77 billion in 2009 by 71% from US$ 2.79 billion in 2008, according to the latest bulletin (End-March) released by the Reserve Bank of India (RBI). In this respect, the findings from the recently released (April, 2010) RBI Survey—Remittances from Overseas Indians: Modes of Transfer, Transaction Cost and Time Taken—and conducted in November 2009, reveal that inward remittances (inclusive of deposits in NRO accounts) in India from overseas Indians have not witnessed any significant negative impact, on the back of global economic crisis. The trend was strong on the back of several factors such as:

• Depreciation of rupee resulting in the rise in inflows through rupee denominated NRI accounts to take advantage of the depreciation
• Hike in interest rate ceilings on NRI deposits since September 2008
• Uncertainties in oil-prices, which might have encouraged the workers to remit their money to India as a hedging mechanism due to its relatively better growth prospects; and
• The attractive returns in Indian capital market, which are often cited as a key factor for higher remittances to India

(Source: Reserve Bank of India)

Noteworthy takeaways from the survey have been:

• A major portion of the remittances received (61%) are utilised for family maintenance
• On an average, about 20% of the funds received are deposited in the bank accounts. A relatively major portion of remittances are put in bank deposits in centres such as Ahmedabad, Chandigarh, Delhi, Jaipur and Kochi
• About 4% of the funds received are invested in land/property/ equity shares, while 3 per cent funds were invested in equity shares
• Geographically speaking, North America continues to be the most important source region of remittances to India (about 38% of the total remittances), while Asian region (Gulf and East Asia) contributes about 32% of the total remittances
• While Kochi and Mumbai receive above 50 per cent of their remittances from Gulf region; Ahmedabad, Bengaluru, Chandigarh, Delhi, Hyderabad and Kolkata received more than 60 per cent of their inward remittances from North America and Europe together

Effectively, these pointers serve as indicators for the current economic scenario that is prevailing in and around India.