Narendra Modi’s now famous foreign trips touted by his cohorts as undertaken to boost India’s image and attract much sort after Foreign Direct Investment (FDI) has become a matter of closer scrutiny. Though for Modi, it seems that these trips are more for boosting his own image and for whom diplomacy is also conducted in the same way as he conducts his election campaign. These trips that are beamed live on most of the TV channels that is controlled by his close capitalist friends, fails to mention the real outcome achieved from the visit. The Prime Minister’s antics like taking selfies with the Indian diaspora or hugging the foreign head of states may enthuses his fans back home but what do they really translate into, is something debatable. It seems, sometimes that the visit is not of a PM but a person on vacation. The way the Indian diaspora is being pampered it would not be surprising when he will initiate a process of giving right to vote for them as well. It is a known truth that majority of these diaspora are BJP supporters and even have in the past showered the party with much needed foreign currency!
A closer scrutiny of the statements and reality on the state of FDI inflow and its relationship with Modi’s travel leads us to a diametrically opposite and puzzling picture. Last few months two senior cabinet ministers have made contradictory statements on the amount of FDI that the country has received. One statement said that FDI has increased by 49 percent while the other more to the tune of the present government way of functioning attributed an increase of 40 FDI from countries where the PM has visited.
According to the data compiled by the Department of Industrial Policy and Planning (DIPP) In 2014-15 the total FDI flow in India were estimated at $44.88 billion, a growth of 23 per cent over $36.39 billion in 2013-14. If one leaves the re-invested earnings and other capital from the total FDI flow, one gets what is described as FDI equity inflows. Now as per this measurement FDI equity inflows in 2014-15 was slightly higher at 27 per cent – up at $30.93 billion from $24.3 billion from 2013-14. So, how cum the data of 49 per cent rise in FDI was calculated is something mysterious for us. Probably it was also another election type statement emanating from the BJP arsenal. Even, when calculated in Rupees term the FDI growth is far from 49 per cent, FDI equity flows increased by 28 per cent from Rs 1,47,518 crore (Rs 1.47 trillion) in 2013-14 to Rs 1,89,107 crore (Rs 1.89 trillion) in 2014-15. Thus in reality the actual FDI flows increased in a range of 23 to 28 per cent, way below the 49 per cent mark.
Business Standard notes that, during the six-month period, foreign investment inflows showed a fluctuating trend. The highest foreign direct investment (FDI) received in January was $4.48 billion, compared to $2.18 billion in the same month a year ago. FDI inflows also grew in February to $3.28 billion compared to $2.01 billion. However, the month of March saw a dip and reached $2.11 billion against $3.53 billion in the same month a year ago.
The situation becomes murkier if one compares the statement with the data compiled by Reserve Bank of India (RBI), according to the RBI data, FDI flows were estimated at $34 billion in 2014-15, an increase of just 12 per cent over the previous year’s $30.7 billion.
Take any data that is available in public domain and the fact remains that nowhere during the aforementioned period was there an increase of 49 percent. Total FDI flows in the first three months of 2015-16 rose to $12.47 billion, up 12 per cent over $11.11 billion in the same period of 2014-15. Though in terms of FDI equity flows, the increase is higher $9.51 billion compared to $7.2 billion in the same period, which represents an increase of almost 32 per cent. The only data point that shows FDI growth closer to the 49 per cent range is the RBI number for the first quarter of 2015-16. At $11.5 billion, it represents a rise of 43 per cent over $8.03 billion in the first quarter of 2014-15. But then the claim was a 49 per cent increase in the last one year.
Now let us see how the statement about Modi’s visits garnering more FDI stands to the scrutiny when compared against the data made available by the same government and not any “secular” “leftist” type of people or organisation who are always against tarnishing the great achievements made by Modi and his government.
Till date Modi has visited 26 countries, out of which six are those who figure in the list of top 10 FDI investor and it is not for the first time, but these countries Mauritius, Singapore, Japan, the United States, Germany and France, have traditionally been the top ten countries accounting for FDI in India. Out of these Mauritius being the top one is not due to real economics but a means to circumvent tax and gain other benefits due to the prevailing relations with that country. But this is a matter of separate analysis. FDI flows from Mauritius grew by 85 per cent and those from the US and France increased by 126 per cent and 108 per cent, respectively. But growth for Singapore, Japan and Germany were much lower at 12 per cent, 21 per cent and eight per cent, respectively.
According to the stats given by DIPP during January-June 2015 – the latest period for which data is available – FDI from the US, Germany, Japan and France stood at $0.97 billion, 0.27 billion, $1.12 billion and $0.2.
Madan Sabnavis, chief economist, CARE Ratings counters another much touted figure made by the government and published in a leading financial daily of India that claimed a figure of $31 billion. He says, “”The figure of $31 billion (as reported by Financial Times) looks unlikely as there has been no big-ticket investment this year in any of the significant sectors of manufacturing. Even in the sectors where the government has relaxed FDI norms such as defence, railways and insurance, nothing much happened. Manufacturing is yet to receive any substantial boost,”
The other 20 countries visited by Modi made an insignificant amount of FDI that is not expected to change, the readers might remember that in next 2 months countries like Mongolia, Bhutan, Fiji, Myanmar, Seychelles, Tajikistan, and Turkmenistan, where the Prime Minister had visited would not transform economically to such entities that can invest billions of dollars to upset the cart!
Another puzzling trend in FDI is that though Modi and his team has been telling us that FDI’s are happening in the sector that would boost employment and fuel growth but the data again is bewildering at least to us.! Though, what stand will Modi take on e-retail is still ambiguous but the FDI in trading (which would include e-commerce and retail) almost doubled to $2.7 billion in 2014-15. We all know how much job can this sector create and of what quality.
Now is this another ‘feel good’ factor or acche din factor we leave it to the discretion of our dear readers.
Data from DIPP, Business Standard and Rediff.com