FDI flows into India grows at a slow 3% to $44.85 bn in 2017-18

Foreign direct investment (FDI) in India seems to be slowing with the inflows growth rate recording a five-year low of 3 per cent at $44.85 billion in 2017-18, according to latest data released by the Department of Industrial Policy and Promotion (DIPP).

Foreign inflows in the country grew 8.67 per cent in 2016-17, 29 per cent in 2015-16, 27 per cent in 2014-15, and 8 per cent in 2013-14. However, FDI inflows recorded a negative growth of 38 per cent in 2012-13.
Experts see a need to further improve the ease of doing business in India as it is critical to revive both domestic and foreign investments. They attribute the low growth of FDI, especially in the consumer and retail sectors, to uncertainty and complexity of the FDI policy.
An UNCTAD report, too, has recently stated that the foreign direct investment in India decreased to $40 billion in 2017 from $44 billion in 2016 fiscal.
However, outflows from India, the main source of the FDI in South Asia, more than doubled to $11 billion, the report stated.
UNCTAD Secretary-General Mukhisa Kituyi has said, “Downward pressure on the FDI and slowdown in global value chains are a major concern for policy makers worldwide, and especially in developing countries”.
The main sectors that received maximum foreign inflows in the last fiscal include services ($6.7 billion), computer software and hardware ($6.15 billion), telecommunications ($6.21 billion), trading ($4.34 billion), construction ($2.73 billion) automobile ($2 billion) and power ($1.62 billion)
Mauritius has emerged as the largest source of FDI in India with $15.94 billion in 2017-18 followed by Singapore ($12.18 billion), Netherlands ($2.8 billion), US ($2.1 billion) and Japan ($1.61 billion).
Further, the data showed that the FDI equity inflow of $44.8 billion in 2017-18 is the highest ever for any financial year.
FDI is important as India would require huge investments in the coming years to overhaul its infrastructure sector to boost growth. Decline in foreign inflows could put pressure on the country’s balance of payments and may also impact the value of the rupee.