India sees 23% surge in FDI Inflows

India is attracting record level of foreign investments supported by the market size, investment reforms, and economic growth rates. The Indian economy stands as the right mix of openness and opportunity for the foreign investors.

According to India’s Department of Industrial Policy and Promotion releases, India witnessed a 23 per cent growth in foreign direct investment (FDI) at $12.75 billion during the April-June quarter of 2018-19. The foreign fund inflows in April-June 2017-18 stood at $10.4 billion.

FDI in India is expected to grow notably following the implementation of initiatives, such as Goods and Services Tax (GST) related reforms, enactment and implementation of the Insolvency and Bankruptcy Code (IBC), demonetisation, and other ease of doing business reforms rolled out recently by the central government. These reforms have boosted India’s image as a preferred destination for foreign investment, with many sectors being fully available to foreign investors for making investments without any restrictions.

The sectors which witnessed the maximum inflow of FDI included services, trading, telecommunications, computer software and hardware and power, that comprise around 33 per cent of all inflows.

Among the countries, Singapore emerged as the largest source of foreign investment during April-June 2018-19 with $6.52 billion. Mauritius, Japan, the Netherlands, United Kingdom and United States made up the other sources of investment.

A growth in FDI inflows augurs well for the Indian economy especially in light of the widening Current Account Deficit (CAD) caused due to a surge in crude oil prices. According to a report by SBI Research, the CAD could touch 2.8 per cent of the Gross Domestic Product (GDP) for the fiscal year 2018-19.

An uptick in FDI inflows helps the country bridge the growing CAD deficit and the growth seen in the last quarter is especially heartening considering the 3 per cent growth in inflows witnessed last fiscal year. A decreased inflow of foreign investment has negative implications for Balance of Payments (BOP) and the value of rupee, therefore, the figures for the last quarter should bring cheer to the economic policymakers.

Latin Manharlal Group