The Hindu Business Line : FDI in retail: Panel to study impact on rural economy

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New Delhi Feb 7 With the Government cautioned on the possible impact of foreign direct investment (FDI) in retail on vulnerable sections of society, the Commerce and Industry Ministry has decided to set up an expert committee to examine the sectors into which FDI is flowing and the impact on the rural economy. The exercise is meant to ensure equitable distribution of FDI and to bridge the rural-urban divide, the Minister for Commerce and Industry, Mr Kamal Nath, said at the meeting of the parliamentary consultative committee on commerce and industry held here late on Tuesday.

The Minister also informed members that FDI equity inflows during the current year (April-November 2006) was $7.2 billion — the highest ever since the commencement of economic liberalisation in 1991.

Emphasising that the high inflows as well as the new credit rating reflected growing investor confidence in India, the Minister said FDI inflows by the end of this fiscal would touch $12 billion. This translates into an unprecedented 120 per cent growth over the previous year, he pointed out.

Mr Nath also informed the members that monthly inflows during 2006 crossed the $1-billion mark on three occasions — July, October and November.

India has also emerged as the most attractive FDI destination in Asia with an 18 per cent rate of return on equity investments, according to a study by JP Morgan. Simultaneously, in the AT Kearney's FDI Confidence Index, India's rank as an FDI destination has improved from 15th in 2003 to second in 2006, with the services sector at the top in attracting FDI in April-November 2006, the Minister said.

He also referred to the higher credit rating assigned to India by Standard and Poor's recently and said that the raising of India's rating to investment grade — both at institutional and FDI levels — should lead to even greater inflows into India.

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FDI in retail: Panel to study impact on rural economy