In a big disappointment to the government that despite its several policy decisions in the past few months to attract foreign investments to promote India as a favorable investment destination, the foreign direct investment (FDI) inflows for the fiscal 2012-13 recorded a decline of 38% to $22.42 billion compared to the $35.12 billion inflow in the previous year. In March, the country had attracted $1.52 billion FDI, taking the total to $22.42 billion in the entire financial year.
Sectors which received large FDI inflows during 2012-13 include services ($4.83 billion), hotel and tourism ($3.25 billion), metallurgical ($1.46 billion), construction ($1.33 billion), automobiles ($1.53 billion) and Pharmaceuticals ($1.12 billion). On country wise, Mauritius remained at the top spot with maximum FDI of $9.49 billion, followed by UK ($7.87 billion), Singapore ($5.25 billion), Japan ($2.97 billion) and United States ($1.11 billion).
Foreign investment is considered crucial for economic development of a country and India would require 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, the decline in foreign investments could put pressure on the country’s balance of payments and may also impact the value of the rupee. Indian rupee has declined by 12 paise to end at 11-month low of 56.50 against the US dollar on May 31.
In the past few months, the government has taken several policy decisions to attract foreign investments including allowing FDI in multi-brand retail and civil aviation sectors and seeking legislative approval for increasing FDI cap in insurance and pension sectors.
