Arcelor Mittal and Posco giants have called it quits in India owing to weak market conditions and licensing issues.
Red carpets are supposed to welcome folks and not show them the way out. But that’s not how the story panned out for India, last week. Barely 48 hours after the Indian government rolled out the red carpet to foreign investors by raising FDI limits in 13 sectors, giants Posco and Arcelor-Mittal called it quits in India, shelving projects worth almost Rs.80,000 crore.
The projects are among the biggest foreign investment proposals in India. Incidentally, both companies have cited similar reasons for pulling out: weak market conditions but more importantly, problems in securing land and mining licenses in the country.
Foreign direct investment slid by about 21 per cent to $36.9 billion last fiscal year compared to $46.6 billion in 2011-12.
The outflow was almost twice the amount that went out in October 2008 when the US financial meltdown hit India.
What’s compounding India’s problems is that while foreign companies are queuing out of India, Indian companies are keener to invest in faster growing global destinations. A pointer to that lies in the fact that India’s outbound FDI flows exceeded incoming FDI flows for the first time in 2010-11. (See figure)
Worryingly, FIIs pulled out a record Rs.44,162 crore ($7.5 billion) from Indian capital markets in June, as the rupee depreciated. The outflow was almost twice the amount that went out in October 2008 when the US financial meltdown hit India. The outflow included of about Rs.33,135 crore (USD 5.7 billion) from the debt securities and another Rs.11,027 crore (USD 1.85 billion) from equities, according to SEBI.
Even as analysts are talking about the diminishing lure of BRICS, there is talk of a new term, MINT: Mexico, Indonesia, Nigeria and Turkey was coined. India seems to be losing