With the government taking series of steps to improve ease of doing business in India and attracting foreign investments, Foreign Direct Investment (FDI) inflows into the services sector rose by around 26% to $8.68 billion in fiscal year 2016- 17. According to data of the Department of Industrial Policy and Promotion (DIPP), the services sector, which includes banking, outsourcing, insurance, Research & Development (R&D), courier and technology testing, had FDI worth $6.89 billion in 2015-16.
With FDI growth in key sectors like services and telecom, the overall foreign investment inflows in the country too increased by 9% to $43.5 billion during the previous fiscal. Increasing foreign inflows in the services sector assumes significance as it contributes over 60% to India's GDP. To further boost investment in the services sector, the government is considering relaxation of policy in areas like single brand retail trading, multi-brand retail trading, print media and construction. The government is also focusing on enhancing services exports.
Foreign investments are considered crucial for India, which needs around $1 trillion in the next five years to overhaul its infrastructure sector such as ports, airports and highways to boost growth. Growth in foreign investments helps improve the country s balance of payments (BoP) situation and strengthen the rupee value against other global currencies, especially the US dollar.