Friday, January 12, 2007: The just concluded 5th Pravasi Bharatiya Divas in New Delhi left the 1500 delegates attending the conclave optimistic about India’s efforts towards a developed economy. As Prime Minister Manmohan Singh pledged to pick out all the odds in overseas investments by Indians thereby boosting NRI investments in India which is serving as key driver for our economy, his senior team of ministers outlined the areas of participation for NRI investment.

The government is seeking NRI investments in India to strengthen the nation’s infrastructure, agriculture, research and development, education and energy. Targeting a capital investment of $1.5 trillion, the Finance Minister urged NRIs to canvass for funds overseas.

Significant contributions by NRI have brought India’s current foreign exchange reserves to $35 billion. The first NRI funds started flowing in 1970, and from a modest figure of $1 billion in 1980 to $12.4 billion in March 1990, they now stand at $23 billion. Of this, $8 - $9 billion (44%) is remitted from the US, followed by another 24% from the Gulf region. In view of the data showcased, we can safely pass on the credit of bringing improvements to NRI investments in India.

How does the NRI integrate his desire to partner India’s growth, while ensuring low-risks, easy exit terms, and a generous cash return? The individual investor is taking to the stock market and real estate, since this has proved to be most rewarding in the past.

Finance Ministry officials are sanguine about the bulk share that NRIs have of the total FDI of Rs.60, 000 crores since the last 3 years. These investments take the form of secondary stocks and shares, mutual funds, private equity and real estate, apart from direct investments in IT, real estate, telecom, electrical equipment and pharmaceuticals, shipping, manufacturing, logistics and tourism. NRI Equity Funds in operation optimize returns for NRIs by investing in blue-chip companies

A significant share of the investment is in tangible assets like real estate. NRIs with their deep pockets have always been the developer’s favourites, and NRI interest in property encourages quality construction to a great extent.

To get NRI investment in India into core areas like infrastructure, establishing Special Purpose Vehicles (SPV) can channelise efforts, but only in profitable ventures, rather than politically motivated enterprises. Infrastructure currently requires $150 billion to achieve some desired level, and states are being encouraged to strategise for NRI investment.

Funds apart, NRIs can make very constructive changes to their native country, As the Finance Minister P. Chidambaram rightly said at the 5th PBD, the NRI‘s intellectual wealth far exceeds his material wealth. When Prime Minister Manmohan Singh asked Mauritius based Biharis to make a “Mauritius out of Bihar”, he was serious in recognizing the invaluable inputs the NRI could make into consolidating the Indian economy.