2024-08-21 07:29:30
While foreign direct investment (FDI) has fallen in the past two fiscals, total inflows rose by about 23% last quarter, which the government attributes to weak sentiment in developed markets. The latest data from the Reserve Bank of India’s bulletin showed inflows grew 37.6% in June, down from a 49% increase in May.
The Communiqué noted: “Manufacturing, financial services, communications services, computer services, and power and other energy sectors accounted for about 80% of total FDI inflows. The main source countries were Singapore, Mauritius, the Netherlands, the United States and Belgium, accounting for about 75% of inflows.”
A detailed analysis of the data shows that a large part of the growth came from equity investments in the country. These investments grew by 46% in the first quarter to $16.5 billion. Notably, about a quarter, or $4.2 billion, was spent on acquiring shares, which is 2.5 times the $1.6 billion in April-June 2023.
This change in trend has positive implications for policymakers who aim to position India as an attractive destination for overseas investors eager to diversify their production base outside of China to reduce risk in their portfolios. Globally, $635 billion of cross-border investments were announced in the first half of 2024, the fourth highest amount of such investments announced in the first half of the year since 2003. Renewable energy, semiconductors and communications sectors accounted for half of the announced investments.
In recent years, India has invested heavily in the electronics sector, including mobile phones and components. In addition, several multinational companies have invested in global capability centers in India. These centers employ Indian professionals not only to handle IT-related issues, but also to be responsible for risk management, oil exploration and global design offices.
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