FDI to grow, government tries to reinstil investor confidence

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Dec. 1 – Foreign direct investment to India surged to US$2.56 billion in September this year, up 259 percent over the same month last year and industry experts, including Dezan Shira & Associates, are confident that investment will continue to flow in spite of the recent terrorist attacks.

The volume of investment that comes into India in the future will depend on how well the present government tackles peace and security within the country’s 29 states, rife communal tensions between the Hindu’s and Muslims, and security along India’s borders. It will also depend on how quick the government is in weeding out extremist forces and reassuring the domestic and foreign investors of Mumbai and India by instilling a feeling of security.

The present government resolved to tighten security along India’s land and sea borders. “Greater vigilance must be maintained to protect our cities and the mainland,” Foreign Minister Pranab Mukherjee told Bloomberg in New Delhi after an all-party meeting convened by the prime minister yesterday. “Security along our sea and land border will be further strengthened.” In addition, the government will establish four more hubs for the country’s elite National Security Guard commando force.

A demand for accountability from the public also forced Home Minister Shivraj Patil to resign over the weekend – Finance Minister P. Chidambaram to take his place. The Harvard-educated Chidambaram will need to act decisively and fast to restore confidence in his political party, which is up for national elections in 2009. Chidambaram, who as finance minister helped India withstand the financial crisis, will now be responsible for maintaining peace and stability within the country’s 29 states as well as security along its borders.

A pressing task for Chidambaram will also be to maintain harmony between Mumbai’s many religions. Communal tensions between Hindu’s – the majority religion – and Muslim’s – India’s largest minority religion – were stoked during the Mumbai riots in 1993 that killed thousands and have since increased the communal divide nationwide.