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Saturday, Mar 30, 2002

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FDI approvals hit a nadir since 1995

Ambarish Mukherjee

NEW DELHI, March 29

FOREIGN direct investment (FDI) proposals approved during 2001-02 stand at Rs 17,489 crore, which is just 6.51 per cent of total FDI approved since 1991 amounting to Rs 2,68,300.52 crore. This is the lowest since 1995.

The single largest FDI proposal approved during the current financial year is Reliance Petroleum's proposed Rs 5,000-crore GDR issue. But following the announcement and the actual merger of Reliance Petroleum with Reliance Industries, the petroleum company will cease to exist, and so the approval will no longer remain valid.

This brings down the approval level to a meagre Rs 12,489 crore, which is just 4.65 per cent of the total FDI approved since 1991. In fact, only during the first four years of liberalisation, approvals were lower than what it is in 2001-02.

In 1991, FDI approvals were a miniscule Rs 534.11 crore. But then onwards, it increased steadily. Since 1995, each year the total approvals were higher than Rs 28,000 crore, which is almost 60 per cent higher than the corresponding figure for the current fiscal.

According to the latest figures available with the Department of Industrial Policy and Promotion (DIPP), which are yet to be released officially, the cumulative FDI approved since 1991 till date stands at 2,68,300.52 crore. Of this, Rs 17,489 crore was approved during 2001-02, which is just 6.51 per cent of the total FDI approved since 1991.

According to Government sources, however, low FDI approval figures do not necessarily reflect low FDI because increasingly most of the sectors where foreign investors are coming in in a big way have been put under the automatic route. FDI have actually increased during the year compared to the earlier years if one takes into account the total approval under the RBI automatic route and the FIPB route, officials said.

Industry sources, however, feel otherwise. "You will find that a large number of cases that come to the FIPB are actually qualified for the automatic route but an FIPB approval gives a definite comfort level which is lacking in the RBI route. So, most foreign investors prefer to come through the FIPB for a hassle-free entry and FIPB figures cannot be ruled out as not relevant or not reflective of the actual FDI scenario," a senior chartered accountant with a global consultancy firm specialising in FDI consultancy said.

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