The recent spate of scandals like2G scam in telecom and Commonwealth Games (CWG) has not only tarnished the ‘brand India’ image but also impacted the FDI flow in the country, saysIT & Communications Minister Kapil Sibal.
“…we have got only USD 25 billion FDI this year. It’s a fall of fairly substantial percentage but I think it is a temporary phase,” he said.
According to a UN report, India slipped to 14th spot in the list of countries that attracted the highest foreign direct investment last year, with inflows declining by about USD 10 billion to USD 25 billion.
The ongoing 2G controversy has raised anxiety in the mind of foreign investors who are looking to investment in the emerging markets like India.
However, Sibal is confident that, “it is a temporary phase for a simple reason that the market in India is perhaps the most attractive market anywhere in the world.”
“It (uncertainty due to 2G scam) has slowed down foreign equity coming into India. All that has certainly happened and I think we ourselves are responsible for that,” Sibal added.
These uncertainties have raised many doubts in the minds of foreign investors to adopt wait and watch policy before the air becomes clear in the country, he said.
“Many operators have talked to me and many operators who are at the receiving end have said that they are here for the long-term because they know the ultimate potential lies in India and perhaps nowhere else because of the enormous expansion of the market. So, I’m not worried on that account,” Sibal added.
Many new operators are facing cash crunch in order to meet their day-to-day expenses and roll-out their services as well and no Indian bank is ready to lend them the money due to uncertain environment.
The ‘World Investment Report 2011’ released by UNCTAD has said that India attracted FDI worth USD 25 billion last year, much lower than the inflows of USD 36 billion seen in 2009. Economic Times