The government expects inward FDI inflows reach $26 billion in the fiscal year ending in March 2008, with the bulk of FDI expected in sectors like auto, auto components, semi-conductor, electronic hardware, information technology and business process outsourcing.

Ajay Dua, industry secretary, told reporters that the current year's target had been stepped up to $26 billion in foreign investments and $4 billion in retained earnings of foreign firms.

According to estimates, India needs $1.5 trillion in investments, with at least half coming in from overseas to scale up manufacturing capacities, improve infrastructure and boost agricultural productivity in the next five years to sustain 8-10 per cent GDP growth.

Infrastructure investments in power, roads, ports and aviation facilities is expected to require $320 billion till 2012. Total investment in infrastructure projects is still below 4 percent of GDP, and India had to double the figure to sustain high growth, Dua said.

As a proportion of gross domestic product, FDI inflows are under 2.5 per cent now According to commerce minister Kamal Nath FDI inflows in 2006 were close to $16 billion, up from $5.5 billion in 2005-06.