Amid robust consumption demand, the Reserve Bank of India (RBI) in its latest annual report has said that India remains a preferred destination for foreign direct investment (FDI). The apex bank highlighted that FDI inflows to India increased mainly due to higher flows into the various sectors such as communication services, retail and wholesale trade, financial services and computer services.
The report also showed that in terms of sources, FDI inflows were concentrated mostly in Mauritius and Singapore that accounted for about 61% of total equity investments, despite the phased implementation of an amended double taxation avoidance agreement with these countries effective from April 2017 to prevent evasion of taxes on income and capital gains.
As per the analysis report, manufacturing activity is gathering momentum on the back of new business, both domestic and export orders, rising capacity utilization and drawdown of inventories. In the services sector, the impulses of growth are broadening and expansion in employment conditions is generating anticipations of improvement in demand conditions. Besides, aggregate domestic demand is also being supported by steadily strengthening investment with a renewal of the capex cycle underway and a strong pick-up in exports in Q1.