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FDI inflows in service sector declines by 14% in April-November this fiscal

28 Jan 2013 Evaluate

Foreign direct investment (FDI) inflows into the services sector during the April-November period this fiscal has declined by about 14 per cent to $3.63 billion. The global economic crises are impacting the FDI inflows in the sector.

Decline in foreign investments could affect the country’s balance of payments (BoP) situation and also impact the rupee. According to Industry Ministry Data, the financial and non-financial services sector had attracted FDI worth $4.22 billion during the same period last year. The overall FDI inflows declined to $15.84 billion during the first eight months of the current financial year, from $27.92 billion in the year-ago period.

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. In 2011-12, foreign investment in the services sector, which contributes over 50 per cent to India’s GDP, rose to $5.21 billion from $3.29 billion in 2010-11. According to a ministry official “the government is making sustained efforts, including involving stakeholders in policy formation and to make the investment regime more attractive and investor friendly.”

The other sectors which have received FDI during April-November, 2012-13 include hotel and tourism ($ 3.13 billion), metallurgy ($1.26 billion), construction ($1.01 million) and automobile ($760 million). The government has already allowed FDI in multi-brand retail sector besides hiking the cap to 100 per cent in the single brand retailing.

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