This is what is to blame for falling FDI inflows in India

The foreign direct investment (FDI) equity inflows in India have grown at their lowest level in the past two years despite various measures undertaken by the government, according to CARE Ratings in its latest report. It was $43.478 billion in FY17 and $44.857 billion in FY18.

FDI equity inflows in India have grown at their lowest level in the past two years despite various measures undertaken by the government. Image source: PTI

The foreign direct investment (FDI) equity inflows in India have grown at their lowest level in the past two years despite various measures undertaken by the government, according to CARE Ratings in its latest report. It was $43.478 billion in FY17 and $44.857 billion in FY18.

“FDI equity inflow has been lowest due to developments in global markets such as an increase in the US interest rates, growth in the advanced economies and lack of pick up in domestic investments which has led to disinterest among the foreign investors to invest in India,’’ Rucha Ranadive, associate economist at CARE told DNA Money.

However, CARE has estimated FDI inflows in equity to be stable at around $45 to $50 billion in FY19, she added.

Although Maharashtra maintained its topmost position, the FDI inflows to the state have declined by minus 32% to $13.4 billion in FY18 compared with $19.7 billion in FY17. On similar lines, the inflows to Andhra Pradesh declined by 43% while that of Gujarat has fallen by 38% in FY18.

However, Karnataka witnessed a substantial increase in inflow to $8.6 billion in FY18 from $2.1 billion in FY17, a growth by more than 300%.

CARE, however, argued that in order to achieve higher economic growth, increased foreign investment is imperative. The revival in the domestic investment along with further improvement in the ease of doing business will boost the foreign investment, it said. The services sector will continue to attract higher FDI inflows led by investments in the sunrise industries especially e-commerce.

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FICCI’s Maharashtra state executive member Dinesh Joshi said that the government has done a lot for the economy. However, these initiatives need to be communicated clearly to the right stakeholders. ‘’It should not sound political but rather should reinforce the faith of the end investors to make sure that India is the right investment destination. The fact that India has inched ahead of France shows the commitment of the government towards development and job creation,’’ he noted.

Indian Merchants Chamber president Raj Nair observed that FDI can double in the four years if the government addresses the issues relating to ease of winding up of sick business, challenges in getting construction permits and registration of property and delays encountered in enforcing contracts.

Source: DNA

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