Image for representation purposes only. | Photo credit: V. Sudhershan
Foreign direct investment in the country is expected to rebound in the coming months due to India’s strong economic growth and measures to further improve India’s business environment, the Economic Survey said on Jan. 31.
The rise of global uncertainty following the Russian-Ukrainian conflict, FDI inflows into equities in the manufacturing sector in the first half of the current fiscal year (April-September) fell below their level corresponding to the first half of 2021-22, the document, which was tabled in parliament, said.
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Global monetary tightening has further restricted FDI inflows into equities, according to the survey.
“A rebound in FDI inflows is however expected as the Indian economy maintains its strong growth while global monetary tightening eventually wanes as inflationary pressures wane,” the survey said.
FDI inflows in equities to India contracted by 14% to $26.9 billion between April and September this fiscal year, according to data from the Department for Promotion of Industry and Internal Trade (DPIIT).
Total FDI inflows, which include equity inflows, reinvested earnings and other capital, decreased to $39 billion in the first six months of the current fiscal year from $42.86 billion the previous year.
The survey indicated that despite an overall decline in foreign investment in the first half of this fiscal year, inflows remained above pre-pandemic levels, due to structural reforms and measures taken by the government to improve the ease of doing business, making India one of the attractive FDI destinations in the world.
“The government has put in place an investor-friendly FDI policy under which FDI up to 100% is allowed automatically in most sectors,” he said, adding that India continued to open its sectors to global investors by raising investment limits and removing regulatory barriers. , infrastructure development and improvement of the business environment.
In the first half of this fiscal year, Singapore became the top investor. It was followed by Mauritius, the United Arab Emirates, the United States, the Netherlands and Japan.
The software and hardware sector attracted the largest inflows in the first six months of this fiscal year. Next come service, trading, chemical, automobile and construction (infrastructure) activities.
The country recorded its highest ever FDI inflows of $84.84 billion in 2021-2022.
A decline in foreign investment could put pressure on the country’s balance of payments and could also impact the value of the rupee.