FDI in services declines 21% to $2.06 billion in Apr-Sept

Foreign direct investment (FDI) in the country’s services sector declined by 21 per cent to $2.06 billion (Rs 9,506 crore) in the first half of the current financial year, according to the commerce and industry ministry’s data.

The financial and non-financial services sector had attracted $2.62 billion (Rs 12,782 crore) in FDI during April-September last year.

“Global economic situation is still down, the recovery will take time... So, given this situation, there is a short-term pullback in FDI inflows,” Crisil Principal Economist D K Joshi said.

He, however, added: “India still remains a preferred destination for foreign investment and that is evident from the strong foreign institutional investors (FII) inflows we are seeing. There will be a bounceback.”

Overseas funds infused a whopping $4.78 billion in November, taking the total to $38.5 billion in 11 months of 2010. It is a record inflow in a single calender year.

On the other hand, overall FDI inflows dropped by 28 per cent to $11 billion during April-September 2010-11, against $15.27 billion in the period a year ago.

The services sector, despite the 21.4 per cent dip in FDI, topped the chart in attracting maximum investment.

The telecommunications segment, including radio paging and cellular mobile, was the second-best sector attracting $1.05 billion, followed by metallurgical industries ($909 million), power ($729 million) and housing and real estate ($640 million) during the period, the data said.

During the period, the highest FDI, of $3.84 billion, came from Mauritius, followed by Singapore ($1.13 billion), the US ($724 million), Japan ($563 million) and the Netherlands ($498 million).

The government is making sustained efforts, including involving stakeholders in policy formation, to make the investment regime more attractive and investor-friendly.

The government is considering to liberalise FDI regime in sectors like defence and multi-brand retail.