FDI in services sector rises by 20% in first six months of current fiscal

Foreign Direct Investment (FDI) in services sector, which includes banking, insurance, outsourcing, R&D, courier and technology testing, has surged by 20 percent to $1.46 billion(Rs 9,404 crore)  during April- September 2015 as compared to $1.22 billion in the same period last fiscal, as per latest data released by Department of Industrial Policy and Promotion (DIPP). The services sector contributes over 60% to the India’s Gross Domestic Product (GDP) and receives high foreign inflows.

The FDI inflows in services sector have been led by the steps taken by the government to improve ease of doing business and attract investments. The government has announced a series of steps like fixing timeliness for approvals to improve the ease of doing business in the country. In banking sector, the government has eased norms and permitted portfolio investors to buy up to 74 percent stake in local private banks with full fungibility. Earlier this year, the government hiked the FDI cap in insurance sector to 49 percent.

Besides, other sectors which have attracted healthy foreign inflows during the April- September period of the current fiscal include computer software and hardware with $3.05 billion, trading $2.3 billion and automobile $1.46 billion. Strong inflows in these sectors pushed the overall FDI into the country by 13 percent to $16.63 billion during April-September 2015. While sectors such as construction development, telecommunication and pharmaceuticals recorded low FDI during the same period.

Growth in foreign investments helps improve the country's balance of payments (BoP) situation and strengthens the rupee. In the next five years, India needs around $1 trillion FDI to overhaul its infrastructure sector such as ports, airports and highways, to boost growth.