February 21 2019
FDI growth hits 5-year low
02 July 2018

‘Improving domestic investment, ease of doing business key to foreign inflows’

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

Foreign inflows in the country grew by 8.67% in 2016-17, 29% in 2015-16, 27% in 2014-15, and 8% in 2013-14. However, FDI inflows recorded a negative growth of 38% in 2012-13.

‘Policy uncertainty’

According to experts, it is critical to revive domestic investments and further improve ease of doing business in the country to attract foreign investors.

Anil Talreja, partner, Deloitte India, said the low growth of FDI in the consumer and retail sectors could be mainly attributed to uncertainty and complexity of the FDI policy.

“While the government has taken substantial efforts in relaxing the regulations as well as removing ambiguities, global consumer and retail companies are still hesitant to take decisions to invest in India,” he said.

India has done ‘considerably’ well in terms of moving up the ranking for ease of doing business; however, it needed to reach a level that creates enthusiasm for overseas investors, he added.

Biswajit Dhar, professor at Jawaharlal Nehru University, said, “The status of the economy reflects the magnitude of the FDI in a country. In the past couple of years, we have seen a decline in the domestic investment rate and now, FDI is following suit.”

He said the Centre needed to take steps for reviving domestic investment to attract foreign investors.

An UNCTAD report, too, had recently stated that FDI in India decreased to $40 billion in 2017 from $44 billion in 2016. However, outflows from India, the main source of the FDI in South Asia, more than doubled to $11 billion, it added. UNCTAD Secretary-General Mukhisa Kituyi had said, “Downward pressure on FDI and slowdown in global value chains are a major concern for policymakers.“

Sectors that received maximum foreign inflows in the last fiscal include services ($6.7 billion), computer software and hardware ($6.15 billion), telecom ($6.21 billion), trading ($4.34 billion), construction ($2.73 billion) automobile ($2 billion) and power ($1.62 billion).



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