Foreign Direct Investment (FDI) in India’s services sector has declined by 54 percent to 2.18 billion during April-February FY14 as compared to $4.74 billion in the same period of previous fiscal. Foreign investments declined during FY14 as global investors remained worries over the prevailing political uncertainty in the country like formation of new government as sectors such as banking need necessary reforms.
Indian services sector, which includes banking, insurance, outsourcing, R&D, courier and technology testing, represent around 60% share in the country’s GDP. Overall foreign inflows into the country declined to $20.76 billion during the first 11 months of FY14 from $20.89 billion recorded in the corresponding period of FY13. Other sectors that received highest inflows during the first eleven months of FY14 include automobiles ($1.28 billion), pharmaceuticals ($1.27 billion) and construction development ($1.05 million). Country wise, maximum FDI during the reported period was received form Mauritius with $4.48 billion followed by Singapore ($3.91 billion), UK ($3.21 billion) and Netherlands ($2.20 billion).
FDI is considered crucial for India, which requires around $1 trillion in the 12th five year plan (2012-2017) to overhaul its infrastructure sector such as ports, airports and highways to boost growth. Meanwhile, in order to attract maximum FDI into the country, the government has been liberalizing the foreign investment policy. The government has relaxed FDI norms in around 12 sectors which include telecom, tea, pension and petroleum and natural gas among others. Despite the government various efforts to increase FDI, foreign investment during April-February FY14 has declined, reflecting the need to take more measures to improve the business environment in the country.