The repeated failures of FDI may hamper the economic growth and may work against India’s reputation from being an investor friendly country. This emerging economy is witnessing a deleterious “Quit-India” movement of foreign companies making slowdown in furtherinvestments. India is in need of FDI to overcome the huge account deficit equal to 4.8% of GDP in the last fiscal year. The recent regulation by Indian government allows 100% foreign ownership in telecommunication companies and easing in various overseas investment segments to attract long-term investments.
The strong discontent over the macroeconomic conditions, market and regulatory conditions and the rupee’s instability led the UK company 3i’s exit from the Indian infrastructure business. The whopping amount of $1.2 bn investment couldn’t gain a sound profit which made the company analyze running this business in India is very challenging which resulted in the shut down in May 2013 even though 3i were the world’s largest India- dedicated fund in the infrastructure industry.
L&T Finance Holdings signed the deal with Fidelity Investments US to buy Fidelity’s mutual fund business in India in March 2012. The Company had Rs 8,800 crore worth assets invested in India when they decided upon the closure. Based on their analysis the Indian mutual fund sector is unattractive and Fidelity was one of the earlier entrants to the Indian Mutual fund industry suffered loss ever since they started in 2004
Telecom Company Augere Wireless, UK won the Broadband Wireless Access (BWA) spectrum in 2011 October and they exited in May 2012 blaming it on regulatory uncertainty. The disdain was on the TRAI regulations on re-auction, high prices, lack of clear cut telecom policies and Supreme Court’s cancellation of licenses which led the cancelling the investment plans worth Rs 270 crores
China Light Power (CLP) and AES Power were the strongest foreign companies in the Indian power industry along with small players like E ON, and GDF Suez. Among these CLP shut down thermal plants and moving forward only with renewable energy programs. AES Power having presence in more than 20 countries couldn’t get a mileage , shut down the operations in November 2011 and it is to be noted that they invested in India in the year 1993. The environmental issues, scarcity of funds, fuel shortages, issues with local landowners and non the cooperation of the state electricity boards are the factors which made AES Power’s pack up and the same reasons are told by E ON and GDF Suez.
RBS with 31 branches and comprised total assets of 190 million British pounds as on September 30, 2012 were forced to shut down 23 of their branches in May 2013, Morgan Stanley sold their wealth management unit to Standard Chartered Bank in May 2013, whereas UBS AG Switzerland surrendered its banking license in June 2013………..All these exits were on the basis of regulatory uncertainty and unclear policies.
South Korean company Posco and Arsenal Mittal , a Luxembourg company left India in 2013 July after creating so much of confusion. Arsenal Mittal lost Rs 50,0000 crore in investment and Posco lost Rs 30,000 crores.
As per the official report India lost nearly Rs 1 lakh crore in investment and 21% fall in FDI to $36.9 billion in 2012-2013 fiscal year where as 2011-2012 fiscal year closed with $46.6 billion FDI. Meantime the FDI flow to China was $111.6 billion in 2012
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