TIMES NEWS NETWORK [ THURSDAY, FEBRUARY 10, 2005 11:27:01 PM ]
NEW DELHI: India is likely to get Foreign Direct Investment (FDI) of $15 billion in 2004-05, but even that is an under-estimation of what the actual figure would be if it alters its traditional method of calculating FDI inflows.
India considers only equity capital as FDI. Since 2000-01, however, the FDI statistics have also included re-invested earnings. China in fact includes imported equipment in its FDI calculations, whereas India includes these in its trade data.
There have been people in the government who have for some time argued for a change to an FDI accounting system that is more in sync with the rest of the world. The issue was extensively discussed and debated when Rakesh Mohan was deputy governor of the RBI.
Now Mohan, as part of Chidambaram's dream team, is pushing for this change, especially in the context of India-China comparisons being made at every global forum.
Industry agrees that such a change is desirable. "We need to compare apples with apples. There is no harm if we calculate our FDI inflows the same way as China does," says Amit Mitra, secretary general, Ficci. "With regard to the definition of FDI, we welcome the move to make it more contemporary," says Ajay Khanna, CEO, India Brand Equity Foundation and DDG, CII.
World Bank reports have estimated that almost 50% of China's foreign investment could be domestic cash. Economists say China uses ‘round-tripping', — funds going from mainland China, say, to Hong Kong or Macao to return as foreign investment to take advantage of tax incentives.
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