FDI into India for 2018/19 dips after record year

Indian FDI inflows fell for the first time in six years to $44.37bn in the 2018/19 fiscal year from a record high of $44.85bn in 2017/18, as a spike in investment into the services sectors was not enough to counter a sharp decline of inflows into the telecommunications and pharmaceutical sectors, according to data released by the Department for Promotion of Industry and Internal Trade.

FDI into the telecommunications and pharmaceutical sectors amounted to $2.67bn and $266m, respectively, in the 2018/19 fiscal year, down by a respective 57.1% and 73.7% from the previous year. At the same, FDI into the services sector, which captures the highest amount of FDI, grew to $9.16bn, up by 36.5% from a year earlier.

Singapore has replaced Mauritius as the main source country of FDI into India. Inflows from the south-east Asian city state have risen by 33.2% to $16.23bn in 2018/19 from $12.18bn in the previous fiscal year.

Four out of India’s five largest FDI recipient cities – Mumbai, Bangalore, Chennai and Ahmedabad – have registered a combined annual decline of 18.3% in the past fiscal year, which runs from April to March. New Delhi is the only city in this top five to increase FDI inflows this fiscal year. Overall, nine of the 17 listed cities have seen FDI inflows decline compared with the previous year.

Aside from the adverse impact of lower FDI on the balance of payments, and the consequent pressure on the rupee, the slight decline in inflows comes just as India is seeking funds to improve infrastructure across the country and prime minister Narendra Modi enters a second mandate after his landslide victory in the recent elections.