However, a large number of FDI proposals are in the “pipeline”, which means such inflows are going to be higher in fiscal 2024 than this fiscal year, one of the officials said. Many of these proposals pertain to sectors that are covered under production-linked incentive (PLI) schemes, such as electronics, pharmaceuticals and renewables, the official said, adding that inflows into sectors offering PLI schemes continued to be good this fiscal year as well.
Total FDI inflows, which include equity inflows, reinvested earnings and other capital, fell 8.4% to $55.27 billion in the first three quarters of this fiscal year, according to official data.
Frequent hikes in interest rates in economies such as the US, the European Union, Singapore and Mauritius – which are major sources of India’s FDI inflows – have prompted many investors to deploy capital in their home countries to address potential liquidity shortage there. This has resulted in a general decline in global FDI inflows, said the official.
“The chip shortage, too, has affected our FDI inflows into critical sectors, including automobiles, computer hardware and software and some services segments,” the official said. The drop in inflows into these three segments was to the tune of $12.7 billion in the first three quarters of FY23, which was higher than the decline of regarding $6.4 billion in total FDI inflows. “This means other sectors have mostly made up for the shortfall in these sectors,” said a second official.
FDI (equity) inflows into the automobile sector plunged to $1.28 billion until end-December from $6.99 billion a year before. Inflows dropped to $8.07 billion from $14.46 billion in computer hardware and software, while in select services, including financial and some other business services, they eased to $6.56 billion from $7.13 billion.
