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28/07/2015

India Attracts Enough FDI to Join Global Top Ten

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Even as most countries attracted less foreign direct investment last year, investment in India surged on hope its economy is set for take off. 

Asia’s third-largest economy received $34 billion as FDI in 2014, according to report released by the United Nations Conference on Trade and Development. That’s a 22% jump from the previous year, meaning India was the country that attracted the ninth largest amount of international investment last year. The year before the South Asian nation’s ranking was 15th.

Total global FDI fell 16% to $1.2 trillion during the year as a fragile global recovery and geopolitical risks hurt investor confidence. While much of Asia saw increased inflows, India was among the countries that showed the biggest increases.

The government’s efforts, including Prime Minister Narendra Modi’s “Make in India” program aimed at attracting global companies to produce locally, are helping strengthen interest the country’s manufacturing sector, the report said.

China attracted $129 billion in 2014, helping it dislodge the US as the highest FDI attracting nation.

13/07/2015

Shell Looks to Expand in India

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Global oil & gas giant Royal Dutch Shell Plc, a $421-billion company, is eyeing investment opportunities in the Indian downstream segment, especially with the recent deregulation of diesel prices and opening of the market. The company is planning to expand its retail outlet network utilising its existing licence to set up 2,000 fuel stations.

The Netherlands-based energy and petrochemical group might also look at the upstream exploration and production segment and is pinning its hopes on the indications that the government would introduce an open acreage licensing policy (OALP).

India had deregulated diesel prices in October last year, linking the domestic rates of the transport fuel with global benchmarks. Since then, multiple companies, including Reliance Industries Ltd (RIL), Essar and ONGC subsidiary Mangalore Refinery and petrochemicals (MRPL), have announced plans to set up retail pumps, even as existing retailers - public-sector firms Indian Oil, Bharat Petroleum and Hindustan Petroleum - brace for competition.

Shell has already invested close to $1 billion in India and is the only global major to have a fuel retail licence in the country. Against its licence from the Centre to set up a network of up to 2,000 outlets, it has around 75 outlets currently operational. Shell also operates the Rs 3,000 crore Hazira LNG storage and regasification terminal. Besides being a major private supplier of crude oil products, chemicals and technology to public- and private-sector oil companies, it has interests in the lubricants and bitumen segment.

Royal Dutch Shell was recently in the news for its $70-billion acquisition of the BG Group. The announcement, which came in April, was the first major oil-sector merger in about a decade. The deal is yet to be closed. The company had also recently announced setting up an information technology project development centre in Bengaluru, in addition to a research & development technology centre in that city.

02/06/2015

RBI Cuts Interest Rates To Boost World’s Fastest Growing Economy

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IndusView, Tuesday 2 June 2015 (London): The Reserve Bank of India (RBI) has today reduced its interest rates by 25 basis points to 7.25%, the third cut this year, taking advantage of subdued inflation to lend more support to India’s economy.

The Wholesale Price Index, India's most closely watched inflation gauge, has been in the negative zone since November 2014. In April last year, it was 5.55%. Deflationary pressure continued for the sixth month in a row with inflation dropping to a new low of (-) 2.65% in April, mainly on account of decline in prices of fuel and manufactured items even as food prices increased.  

“High inflation has been a constant roadblock for policymakers struggling to breathe life into Asia's third-largest economy and the RBI can’t be complacent about meeting its medium term inflation target,” said Bundeep Singh Rangar, Chairman of London-based advisory firm IndusView. “Today’s decision is unlikely to be the last in the current situation but we are predicting only one more 25 basis point cut.”

The cut comes after the Indian economy registered 7.5% growth in the January to March quarter compared with a year earlier. That made India the world's fastest growing major economy, overtaking China's 7% growth in the same quarter.

Current account deficit (CAD) is estimated to be around 1.5% of the GDP in the current fiscal, helped by sharp fall in oil prices even as gold imports rose in the past few months, the Reserve Bank said today. Gold imports spiked in the month of March and remained elevated in April owing to regulatory relaxations and festival demand. In the first half of the 2014-2015 fiscal, CAD was at 1.9% of the GDP or $18 billion.

South Asia's economic outlook is largely favorable since most economies are expected to experience a strengthening of growth in 2015-2016 on the back of stronger domestic consumption and investment, and a pick-up in exports. According to the United Nations report, the region is projected to reach a GDP growth of 6.7% in 2015 and 6.9% in 2016, up from an estimated 6.3% in 2014.

While portfolio and direct foreign investment flows were buoyant during 2014-2015, with net foreign direct investment into India at $36.6 billion and net portfolio inflows at $41 billion, the year 2015-2016 has begun with net portfolio outflows in the wake of a reduction in global portfolio allocations to India.

“There is a need to further improve the business environment. Reforms in the last one year are welcome, but more needs to be done in order to build foreign investors confidence,” said Rangar. “Decline in foreign investments could put pressure on the country’s balance of payments and also impact the value of the rupee.”

Australia and New Zealand have recently joined Japan in order to persuade India to open its rapidly growing e-Commerce sector for foreign investments. These countries want to include the sector in the 16-nation regional trade pact that's being negotiated.

India does not allow Foreign Direct Investment (FDI) in the business-to-consumer (B2C) segment but 100% FDI is allowed in business-to-business (B2B) transactions, marking the difference in rules for retail and wholesale. It allows 49% FDI in multi-brand retail but with restrictions.

The government is under pressure to come out with a policy on the e-commerce sector in four months as brick-and-mortar retailers have filed a case in the Delhi High Court on the issue.

The pact includes 10 Asean countries and the six partners with which they have free trade agreements (FTAs), including Australia, China, India, Japan, Korea and New Zealand.