FDI inflows rose 15% in H1FY20, services sector got the lion's share

Inbound foreign direct equity investments (FDI) rose 15 per cent in the April-September period of the current fiscal year (2019-20, or FY20), according to data released by the Department for Promotion of Industry and Internal Trade (DPIIT).

The figures, released on Tuesday, showed that in the first half of FY20, equity inflows amounted to $26.09 billion, up from the $22.66 billion received in the corresponding period of the previous year.

The services sector — encompassing financial, banking, insurance, outsourcing, among other industries — was the highest recipient of FDI at $4.4 billion. This was followed by the telecommunications sector, which garnered $4.3 billion, and the computer software and hardware at slightly more than $4 billion.

As of September, Singapore was the largest source of FDI for India in FY20, accounting for around $8 billion, followed by Mauritius with $6.3 billion, Netherlands ($2.3 billion), the United States ($2.1 billion) and Japan ($1.7 billion).

Singapore has long been the highest source of foreign funds to India, pumping in around $140 billion since 2000, constituting 32 per cent of all inbound FDI over this period. However, over the past year, inflows from Singapore have shot up as an increasing number of Indian firms are getting incorporated in the island nation’s jurisdiction. India revised its tax treaty with Mauritius and Singapore, which came into effect in FY20.

The National Capital Region was the most favoured choice of investors, receiving $7.1 billion worth of investments. This was followed by Karnataka with $4.6 billion. Maharashtra, the highest receiver of FDI in FY19, dropped to third place with $3.6 billion in FY20, till September.

The DPIIT compiles total investment inflows with the data from the Reserve Bank of India (RBI) as well as its own databases, and the data is published every quarter. In the first quarter (April-June) of the current fiscal, FDI inflows were higher by 33 per cent as compared to the corresponding period of FY19.

Inbound foreign direct equity investments declined for the first time in six years in FY19, in line with overall weak economic conditions. Investments reduced to $44.36 billion, down by 1 per cent from $44.85 billion last year. In the first full year (FY15) of the Narendra Modi government, annual inbound equity investments surged 22 per cent. The growth rate peaked at 35 per cent in FY16 and has fallen ever since.