Foreign direct investment (FDI) inflows into India witnessed a notable decline of 13% to USD 32.03 billion during the April-December 2023 period, according to recent government data. This downturn was primarily attributed to reduced investments in sectors such as computer hardware and software, telecom, auto, and pharma.
Quarter-wise Analysis
Although there was an 18% increase in FDI inflows during the October-December quarter of the current fiscal, rising to USD 11.6 billion compared to USD 9.83 billion in the same quarter of the previous year, the overall trend for the fiscal year remains downward.
Total FDI and Equity Inflows
The total FDI, encompassing equity inflows, reinvested earnings, and other capital, declined by approximately 7% to USD 51.5 billion during the April-December 2023 period compared to USD 55.27 billion in the corresponding period of the previous fiscal.
Country-wise Trends
Major countries contributing to FDI equity inflows, such as Singapore, the US, the UK, Cyprus, and the UAE, witnessed a decrease during the nine-month period. Notably, investments from the Cayman Islands and Cyprus experienced a significant decline, while inflows from Mauritius, the Netherlands, Japan, and Germany increased.
Sectoral and State-wise Analysis
FDI inflows contracted in sectors such as computer software and hardware, trading, services, telecommunication, automobile, pharma, and chemicals. However, sectors like construction (infrastructure), development, and power witnessed growth in inflows.
In terms of states, Maharashtra attracted the highest inflow of USD 12.1 billion, followed by Karnataka. Other states like Delhi, Tamil Nadu, West Bengal, Rajasthan, and Haryana experienced a dip in FDI inflows, while Gujarat, Telangana, and Jharkhand recorded positive growth.
Factors Impacting FDI
The decline in FDI inflows was attributed to global factors such as increasing interest rates and geopolitical tensions. These factors have contributed to a challenging investment climate, leading to a decrease in equity inflows into India, which dropped by 22% to USD 46 billion in the previous fiscal year.
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