Equity inflows from abroad as Foreign Direct Investment (FDI) declined 6% on year in the October-December quarter of the current financial year to $ 10.8 billion, as global uncertainties persisted.
The data show recent years’ declining trend in FDI inflows and the rising levels of repatriation and disinvestment haven’t been arrested yet. 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.
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The trend implies that more investor-friendly steps including structural changes in the economy might be needed to bolster FDI, especially in the country’s manufacturing sector. India had set a target to achieve 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 the 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 $ 613 billion. Non-conventional energy is becoming a big magnet for investors. In the third quarter the FDI equity flows in the sector was $ 1.3 billion.
The biggest sources of FDI during the quarter was Singapore at $ 4.4 billion, Mauritius at $ 1.6 billion and the US at $ 1.1 billion.
Total FDI inflows in April-December – which includes fresh equity, reinvested earnings and other capital –was $ 62.4 billion as 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 “industry” and “services” sectors, the ratios between FDI and the gross domestic product (GDP) are hovering below pre-pandemic levels.
Analysts also cite that whole the inflows have moderated, reinvestment of profits by existing investors is on the rise.
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