The uptick in FDI equity inflows is more impressive on the quarter-on-quarter basis – up over 50 % from $10.8 billion in Q4FY19. The total FDI inflows, including reinvested earnings as well as other capital, on the other hand, have shot up 26 % to $21.3 billion in the June quarter of FY20. However, according to the government factsheet, these are provisional figures, subject to reconciliation with the RBI.
The top three sectors that received maximum foreign funds are telecom, the services sector – including the BFSI vertical, non-financial/business activities, outsourcing, R&D and courier services, among others – and computer software and hardware. While the telecom sector attracted FDI equity investments to the tune of $4.2 billion in Q1FY20, the other two sectors bagged $2.7 billion and $2.2 billion, respectively.
However, on a cumulative basis, the last fiscal saw the services sector top the rankings, attracting over $9 billion of foreign investments, 250 % more than the telecom sector, which stood in the third spot.
Singapore, which overtook Mauritius as the top source of foreign equity inflows in FY19, continued to maintain its top rank in the quarter under review. The Island city-county share in the total investment pie was nearly 33 % in the first quarter, or $5.3 billion. Mauritius came in second at $4.6 billion followed by the US and the Netherlands.
For the first time in six years, FDI inflows decreased in 2018-19, dropping by 1% to $44.37 billion. That prompted the Modi government to announce a fresh round of FDI reforms, amid the deceleration in India’s GDP growth rate. Last month, the Union Cabinet permitted 100% foreign investment in coal mining and contract production along with easing supply standards for single-brand distributors and approving 26% overseas investment in digital media. Previously, in its first term, the government had liberalized FDI norms in sectors such as defense, medical devices, construction development, retail, and civil aviation.
So which cities have bagged the lion’s share of the FDI funds? In Q1FY20, the National Capital Region attracted around $5 billion, followed by Karnataka ($3 billion) and Gujarat ($2.6 billion). Maharashtra came in the fourth rank with $1.5 billion of FDI equity inflows.
Writer: Sakshi Gupta