Services sector FDI halves to $1.26 bn in Apr-Aug

Foreign direct investment (FDI) in the country's services sector almost halved to $1.26 billion (Rs 5,793 crore) in the first five months of the current fiscal, the latest industry ministry data revealed.

The sector that included financial and non-financial services, had attracted $2.48 billion (Rs 12,068 crore) FDI during April-August 2009-10.

Crisil's Principal Economist D K Joshi said: "Given the global situation, there is short term pullback in FDI inflows."

However, Joshi added that there will be a reversal of the trend in the next calendar year.

"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 bounce back," he added.

Overseas funds infused a whopping $6.11 billion in October, the highest amount brought in any single month by the FIIs since they were allowed for investment in local stocks.

The total inflows of FIIs so far in 2010 has crossed $24.48 billion-mark that is also a record investment came in a single calender year.

"India's services sector is good for investment," Joshi said.

The overall FDI inflows in the country dropped by 35 per cent to $8.88 billion in April-August 2010-11, against $13.76 billion in the year ago period.

The services sector, despite the 49.19 per cent dip in FDI, still topped the chart in attracting maximum foreign investments.

Telecommunications segment, including radio paging and cellular mobile, was the second best sector that attracted $1.05 billion, followed by power ($677 million), metallurgical industries ($613 million), computer software and hardware sector ($458 million) during the period, the data said.

During the period, the highest FDI of $2.92 billion came from Mauritius followed by Singapore ($1.08 billion), the US ($636 million), Japan ($515 million) and the Netherlands ($481 million).

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