Gross inflows had risen by approximately 23% in the previous quarter, despite a decline in foreign direct investment (FDI) over the last two financial years, which the government attributed to weak sentiments in developed markets. The latest data from the Reserve Bank of India’s Bulletin revealed a 37.6% rise in inflows in June, which was slower than the 49% growth seen in May.
“Manufacturing, financial services, communication services, computer services, and electricity and other energy sectors accounted for about 80% of the gross FDI inflows. With around 75% of the flows, the major source countries were Singapore, Mauritius, the Netherlands, the US, and Belgium,” the Bulletin stated.
A detailed breakdown of the data indicated that a significant portion of the increase was due to equity investments in the country. These investments rose by 46% during the first quarter to $16.5 billion. Notably, around a fourth, or $4.2 billion, was allocated for the acquisition of shares, which is 2.5 times higher than the $1.6 billion seen during April-June 2023.
This change in trend offers positive implications for policymakers aiming to position India as an attractive destination for overseas investors, who are keen to diversify their production bases beyond China to de-risk their portfolios. Globally, $635 billion in cross-border investment was announced during the first half of 2024, making it the fourth highest period for such announcements in the first half of a year since 2003. The renewables, semiconductors, and communications sectors accounted for half of the announcements.
In recent years, India has seen significant investments in the electronics space, including mobile phones and components. Additionally, multiple multinational corporations have invested in global capability centers in India. These centers employ Indian professionals to handle not only IT-related issues but also risk management, oil exploration, and designing offices worldwide.
(With ToI inputs)