Foreign Direct Investment (FDI) has increased by only 3% to $61.69 billion in the financial year 2017-2018. With this, FDI’s growth rate has reached a record five-year low since PM Modi came to power in 2014.

According to the latest reports on FDI by Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce and Industry, 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 36% in 2012-13.

Foreign Direct Investment At a Record High

The drop in growth rate comes after FY 2017-2018 recorded over $61.69 billion in FDI, the highest ever in all fiscal years. FDI inflows stood at USD 60 billion (USD 40 Billion under  RBI’s Automatic Route) in the previous fiscal. The figure includes equity inflows, reinvested earnings and other capital. Moreover, according to Moneycontrol, DIPP Secretary Ramesh Abhishek said that during the four years of the Modi government, foreign inflows jumped to USD 222.75 billion from USD 152 billion in the previous four-year period.

According to experts quoted in various media reports, to attract more foreign investments, it is essential to revive domestic investments and further ease of doing business in India. Reportedly, 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. Moreover, he added, “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”.

According to a United Nations Conference on Trade and Development (UNCTAD) report, as well, foreign direct investment in India decreased to USD 40 billion in 2017 from USD 44 billion in 2016 fiscal. Whereas, outflows from India, which is the primary source of the FDI in South Asia, more than doubled to USD 11 billion, stated the report.

UNCTAD Secretary-General Mukhisa Kituyi has said, “Downward pressure on the FDI and slowdown in global value chains are a major concern for policymakers worldwide, and especially in developing countries”.

Who remains the top investors?

According to DIPP data, Mauritius continues to remain the top source of FDI to India followed by Singapore. During April-December 2017, India received $13.3 billion FDI from Mauritius while from Singapore it was at $9.2 billion. Following both, the countries were Netherlands ($2.8 billion), the US ($2.1 billion) and Japan ($1.61 billion).

The main sectors that received maximum foreign inflows in the last fiscal include the Services sector (USD 6.7 billion), computer software and hardware (USD 6.15 billion), telecommunications (USD 6.21 billion), trading (USD 4.34 billion), construction (USD 2.73 billion), automobile (USD 2 billion) and power (USD 1.62 billion) . On the contrary, leather, sugar and coal production received some of the lowest FDI inflows.

FDI is when a firm or an individual in one nation, make investments in businesses in another country. It is one of the essential engines that determine economic growth in a country.