FDI equity inflow rose 28% to $54.1 Bn in Apr-Dec of FY21

Inbound equity Foreign Direct Investments (FDI) grew by 28 percent to $ 54.1 billion in the April-January period of 2020-21, which sets the stage for the current fiscal recording one of the biggest jumps in foreign equity inflow since the Narendra Modi government came to power.

Releasing the figures for January, the Commerce and Industry Ministry on April 5 said the rise in FDI figures have been the result of  FDI policy reforms, investment facilitation and ease of doing business.

FDI into India had grown 30 percent in 2015-16, but it has had a mixed record in recent years. It rose 12.6 percent in 2019-20 after contracting 1.1 percent in the previous fiscal.

As of April-December of FY21, Singapore continued to claim the top source of equity FDI for India, with 30.28 percent of the total inflow. This was followed by the United States and the United Arab Emirates for the first ten months of the current financial year 2020-21.

However, in the month of January, Japan became the leading investor country. More than 29 percent of total inflows during January, came from the nation.

Uneven distribution

However, inbound investments have remained highly uneven in terms of their sectoral distribution. In the first 10 months of the financial year, there was more than a fourfold jump in investments in the computer software & hardware sectors despite the pandemic and the subsequent nationwide lockdown putting an almost two-month-long brake on manufacturing.

It has remained the top sector drawing in the most FDI, with more than 45 percent of total FDI flowing into the sector in the first 10-months of FY21. Industry insiders say most of the funds have flowed to hardware manufacturing owing to the government's production-linked incentive (PLI) scheme for mobile phones, components, IT hardware and electronics. Case in point, the PLI scheme for mobile phones was announced in April 2020, with July 31, 2020, being the final date of application. Despite this being the height of the coronavirus pandemic, the government got submissions from all major global companies.

Investment in construction (infrastructure) activities (13.37 percent) and the services sector (7.8 percent) made up the second and third-largest destination sectors for FDI, respectively.

Total FDI inflows, which includes equity FDI along with reinvested earnings reached $ 72.12 billion during April-January, 2021. "It is the highest ever for the first ten months of a financial year and 15 percent higher as compared to the first ten months of 2019-20 (US$ 62.72 billion)," the Commerce and Industry Ministry said.

The latest release of data for just the month of January is unusual since the data is usually brought out on a quarterly basis. The FDI data is collected by the Reserve Bank of India and sent to the Department for Promotion of Industry and Internal Trade who usually release it on a quarterly basis after compiling total investment inflows with help from data from its own databases as well.