NEW DELHI: Foreign direct investment in India is expected to rebound in the months ahead on account of India’s high economic growth, and steps to further improve the business environment of India, the Economic Survey said on  Tuesday, January 31.

In the first half of the current fiscal year (April to September), FDI equity inflows in the manufacturing sector fell below their corresponding level in the first half of 2021–2022, the document, which was tabled in Parliament, said.  This decline was attributed to the rise in global uncertainty following the Russia–Ukraine conflict. 

Total FDI inflows, which include equity inflows, re-invested earnings and other capital, falledn to USD 39 billion during the first six months of the current fiscal year as against USD 42.86 billion in the year-ago period.

However, the study noted that "a comeback in FDI inflows is envisaged as the Indian economy retains its rapid growth and monetary tightening globally ultimately eases with the lowering of inflationary pressures."

During the months of April through September of this fiscal year, FDI equity inflows into India decreased by 14% to USD 26.9 billion, according to data from the Department for Promotion of Industry and Internal Trade (DPIIT).

Total FDI inflows, which comprise inflows of stock, reinvested earnings, and other capital, decreased to USD 39 billion during the first half of the current fiscal year from USD 42.86 billion in the corresponding time last year.

According to the report, structural changes and government initiatives to make doing business easier have kept inflows above pre-pandemic levels despite a general decline in FDI in the first half of this fiscal year, making India one of the most appealing FDI destinations in the world.
"The government has implemented an investor-friendly FDI policy under which FDI up to 100% is permitted through automatic route in most sectors," it added. India is also working to further open up its markets to foreign investors by increasing investment thresholds, lowering regulatory hurdles, building out its infrastructure, and enhancing the business climate.

Singapore surpassed all other investors in the first half of this fiscal year. Mauritius, the United Arab Emirates, the United States, the Netherlands, and Japan came after it.

During the first half of this fiscal year, the computer software and hardware sector drew the biggest inflows. Services, trading, chemicals, automobiles, and building (infrastructure) businesses came after that.

Inflows of foreign direct investment into the nation reached a record high of USD 84.84 billion in 2021–22. The country's balance of payments may be under pressure, and the value of the rupee could be affected by a drop in foreign investment.

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