Improved global sentiment and strong industrial output numbers in India are increasingly attracting foreign investors in the country. Other factors being attributed to the revival in foreign direct investment (FDI) in recent times include increasing consumer confidence.

India has been ranked at the third place in global foreign direct investments this year, following the economic meltdown, and will continue to remain among the top five attractive destinations for international investors during the next two years, according to United Nations Conference on Trade and Development (UNCTAD) in a new report on world investment prospects titled, ‘World Investment Prospects Survey 2009-2011'.

India attracted FDI inflows of US$ 1.74 billion during November 2009, a 60 per cent increase over the US$ 1.08 billion achieved in same month last year. The cumulative amount of FDI inflows from August 1991 to December 2009 stood at US$ 127.46 billion, according to the latest data released by the Department of Industrial Policy and Promotion (DIPP). India attracted FDI equity inflows of US$ 1.54 billion during December 2009. On a cumulative basis, FDI equity inflows of US$ 20.92 billion were recorded during April-December 2009.

The 2009 survey of the Japan Bank for International Cooperation conducted among Japanese investors continues to rank India as the second most promising country for overseas business operations, after China. According to the Minister of Commerce and Industry, Mr Anand Sharma, FDI equity inflows as a percentage of GDP has grown from 0.75 per cent in 2005-06 to nearly 2.49 per cent in 2008-09.

India's FDI inflows touched US$ 26.5 billion in the April-December period this fiscal. The country has attracted FDI worth US$ 23.82 billion in the January-October 2009 period and October 2009 alone witnessed a 56 per cent year-on-year jump in FDI with inflows of US$ 2.33 billion, according to the DIPP.

The services sector comprising financial and non-financial services attracted FDI worth US$ 3.54 billion during April-December 2009-10, while computer software and hardware sector garnered about US$ 595 million during the said period. The telecommunications sector attracted US$ 2.36 billion FDI during April-December 2009-10.

During the April- December period in 2009-10, Mauritius has led the investors into India with US$ 8.91 billion worth of FDI, followed by Singapore with US$ 1.7 billion and the US with US$ 1.58 billion, according to latest data released by DIPP.

The Indian retail market, which is the fifth largest retail destination globally, has been ranked the most attractive emerging market for investment in the retail sector by A T Kearney's annual Global Retail Development Index (GRDI), in 2009.

Investment Scenario

The total value of domestic mergers and acquisition (M&A) deals in January 2010 stood at US$ 2,167 million (32 deals), as compared to US$ 1,324 million (eight deals) and US$ 223 million (28 deals) during the corresponding months of 2009 and 2008, respectively.

In 2009, emerging markets grabbed a higher share of FDI—51.6 per cent—than developed countries did, according to a study on globalisation by Ernst & Young. This was mainly due to a steep fall in FDI into developed markets, almost 50 per cent lower than in 2008.