Equity inflows through the foreign direct investment (FDI) route declined 6% year-on-year to $10.8 billion in the October-December quarter, as global uncertainties persisted.
The data show that the recent years’ declining trend in FDI inflows and the rising levels of repatriation and disinvestment haven’t been arrested yet.
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Analysts point out that the relative stagnation in FDI has also much to do with domestic issues, even though global FDI flows have slowed after the frenzy seen in early-pandemic years.
The trend implies that more investor-friendly steps, including structural changes in the economy, may be needed to bolster FDI, especially in the country’s manufacturing sector.
India had set a target to achieve an annual FDI of $100 billion. FDI equity inflows in July-September had stood at $13.6 billion and in April-June at $16.1 billion. For April-December, the inflows were up 27% to $40.6 billion, according to data compiled by the Department for Promotion of Industry and Internal Trade (DPIIT).
In October-December, the services sector remained the biggest recipient of FDI at $1.5 billion during the quarter, followed by computer hardware at $1.3 billion and trading at $613 billion. Non-conventional energy is becoming a big magnet for investors, with FDI equity flows into the sector coming in at $1.3 billion.
The biggest sources of FDI during the quarter were Singapore at $4.4 billion, Mauritius at $1.6 billion, and the US at $1.1 billion.
The total FDI inflows in April-December — which include fresh equity, reinvested earnings and other capital — was at $62.4 billion against $51.5 billion in the same period of last fiscal.
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At around $71 billion, gross FDI in FY24 was less than the annual average of $77 billion during FY20-FY24. In both the ‘industry’ and ‘services’ sectors, the ratios between FDI and the gross domestic product (GDP) are hovering below the pre-pandemic levels.
Analysts also say that while the inflows have moderated, reinvestment of profits by existing investors is on the rise.
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