Gross foreign direct investment (FDI) inflows in India rose 15% year-on-year in the first ten months of this fiscal to a record $72.12 billion.
Gross inflows, which include FDI in equities, reinvested earnings, equity capital of unincorporated bodies and other capital, were boosted by an almost 46% surge, year on year, witnessed in the computer software and hardware segments. Analysts have pointed out that a sizable chunk of these was drawn by Reliance Jio alone. Construction activities (infrastructure) were the second-biggest drawer of FDI, with a 13.4% share in inflows, followed by services (7.8%).
FDI equity inflows grew 28% in the first ten months of FY21 to $54.18 billion. While Singapore remained the top FDI source for India with a 30.3% share in inflows, the US pipped Mauritius to emerge as India’s second-biggest FDI source (24.3% share). As FE had reported earlier, this was mainly due to Reliance Jio’s deals with a clutch of American investors, including Facebook and Google. The UAE was the third-largest source, with a 7.3% share in inflows up to January last fiscal.
However, in January alone, Japan accounted for the highest inflows, with a 29.9% share. Consultancy services led the pack of sectors to draw FDI in January, with a 21.8% share, followed by computer software and hardware (16%).
The FDI inflows take place at a time when domestic private investments have remained elusive in recent years. Investments remain critical to the country’s economic resurgence, as private consumption has been badly bruised by income losses in the aftermath of the pandemic.
According to a report by Unctad in January, India and China were two major “outliers” in a gloomy year for FDI, as global inflows plunged 42% on year in the calendar year 2020 to $859 billion, the lowest level since the 1990s.
While India witnessed a 13% year-on-year rise, the highest among key nations, in FDI inflows in 2020, China’s rose 4%. Of course, in absolute term, China remained way ahead, with an inflow of as much as $163 billion, while India’s stood at $57 billion.
The Unctad report had pointed out that the UK and Italy saw an over 100% crash each in FDI inflows in 2020, followed by Russia (96% drop), Germany (61%), Brazil (50%), the US (49%), Australia (46%) and France (39%).