India is expected to see net FDI inflows of $35 billion this financial year, which may fall short of the figure for 2015-16, says a Citigroup report.
According to the global financial services major, FDI inflows are inching up, but the pace of increase this fiscal might as well come up short in comparison to 2015-16.
The upside potential will be substantial in the medium term, the report said, adding that gross FDI flows of $8.9 billion in June-July partially allays fears of a slowing trend in April-May.
Even after the surge in June-July, the gross FDI inflow so far this fiscal is 5 per cent lower than same period last year and the net tally is down 29 per cent, the report said.
“Given recent trends in FDI inflows, it is unlikely that a similar growth rate in inflows can be attained for 2016-17, but we remain hopeful that the improved trend in June-July will push net FDI inflows close to our forecast of $35 billion for 2016-17 ($36 billion in 2015-16),” Citigroup said.
The report noted that FDI surge to India might have been buoyed by improved sentiment towards emerging markets in a post-Brexit world which incidentally is also reflected in stronger portfolio flows of around $3.5 billion and rupee appreciation of 1 per cent in June-July.
“India has received only 2.2 per cent share of global FDI inflows during 2011-15. This indicates the upside potential of FDI inflows as the cyclical recovery strengthens and structural bottlenecks are addressed over the medium term,” Citigroup said in a research note.