Foreign direct investment (FDI) in the services sector declined by about 61 per cent year-on-year to USD 1.8 billion during April-January.
The services sector, which includes banking, insurance, outsourcing, R&D, courier and technology testing, had received FDI worth USD 4.66 billion during April-January 2013, according to data from the Department of Industrial Policy and Promotion.
Industry experts say foreign investment may increase after the formation of the new government, which is expected in May.
Overall foreign inflows into the country have declined to USD 18.79 billion during the first 10 months of 2013-14 from USD 19.10 billion in April-January 2013.
The services sector accounts for over 60 per cent to India's GDP. In 2012-13, foreign investment in services fell to USD 4.83 billion from USD 5.21 billion in 2011-12.
FDI inflows have also declined in sectors including construction development and hotel and tourism.
Foreign investments are considered crucial for India, which needs about USD 1 trillion in the five years ending March 2017 to overhaul infrastructure such as ports, airports and highways and boost growth.
The decline in foreign investments could affect the country's balance of payments and the Indian rupee.