FDI rises by 4% in first five months of FY14-DIPP

FDI in services sector dips 47.5% during April-August 2013

The foreign direct investment (FDI) in India during the first five months of FY14 increased 4% to US$8.46 billion from US$8.17 billion in April-August 2012. However, on monthly basis August 2013 recorded the lowest inflows of US$1.41 billion in FY14, according to the data of the Department of Industrial Policy and Promotion (DIPP).

In the calendar year 2013 (CY13) the inflows recorded fall of 0.2% till August 2013 to US$13.94 billion compared with the corresponding period of previous year.

Sector wise FDI inflows into the services sector declined by 47.5% to US$1.19 billion during the April-August 2013. The services sector, which includes banking, insurance, outsourcing, R&D, courier and technology testing, had received FDI worth US$2.28 billion in the same period last year.

The services sector contributes over 60 per cent to India's GDP. In 2012-13, foreign investment in the segment fell to US$ 4.83 billion from US$ 5.21 billion in 2011-12.

The government needs to take more steps in raising FDI. Meanwhile, the government is considering raising the FDI cap in the insurance sector to 49% from 26%.

The other sectors where foreign inflows dipped during the first five months of this fiscal as compared to the previous year include construction development (township and housing) (by 1.5%), power (32.7%) and metallurgical industries (61.2%).

Foreign investments are considered crucial for India, and decline in foreign investments could affect the country's balance of payments (BoP) situation and also impact the rupee.

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