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April FDI Inflows Jump As Services, Autos Shine

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Foreign direct investment (FDI) flows into India bounced back in April, on an investment surge in services, construction and auto sectors, reversing a steep drop recorded in the previous fiscal year, the government said on Monday.

In April, the first month of the 2011-12 fiscal year, FDI into India rose an annual 43 per cent to $3.1 billion, with analysts expecting the year to show an improvement in such flows owing to previously announced big-ticket projects.

FDI inflows had fallen to $19.43 billion, down a quarter, in the last fiscal year that ended in March, as foreign investors shunned Asia's third-largest economy over policy paralysis from a series of corruption cases, regulatory hurdles and lack of reforms.

That decline has posed worries for the slowing Indian economy and for balancing its trade and current accounts, with Finance Minister Pranab Mukherjee last week saying that the government was in the process of pushing forward reforms, including easier FDI norms, to attract foreign investors.

Analysts say FDI inflows could improve this fiscal year on account of big-ticket investments such as the POSCO's proposed $12 billion steel plant and Reliance Industries' $7.2 billion deal with BP.

POSCO has been given clearances for the project in Orissa, though progress has been slow due to local protests. Media reports have said the home ministry has approved the Reliance-BP deal.

FDI flows may also get a boost if the government opens up the supermarket sector to greater foreign investment, as has been suggested by government officials.

The service sector, which saw investments rise an annual 21 percent to $658 million in April, was the top recipient of FDI inflows, the trade and industry ministry said in a statement.

FDI in the construction sector, including into roads, was up by 7 per cent to $311 million in April. The automobile sector attracted $266 million, up 5 per cent, while flows into the power sector also grew 5 per cent to $256 million.

For the January-April period, FDI flows were down by 9 per cent from a year earlier at $7.1 billion, the government said.