Economic resurgence: FDI equity inflows jump 168% in Q1

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August 29, 2021 4:00 AM

Gross inflows surge 90%, aided by base effect

The robust FDI inflows take place at a time when domestic private investments have remained elusive in recent years.The robust FDI inflows take place at a time when domestic private investments have remained elusive in recent years. Investments remain critical to the country’s economic resurgence, as private consumption has been badly bruised by income losses in the aftermath of the pandemic.

Foreign direct investment (FDI) in equity in India jumped 168% year-on-year in the June quarter and gross FDI inflows surged by 90%, aided by a conducive base, showed the official data released on Saturday. However, the inflows were still higher than the level witnessed in the June quarter of FY20 (pre-pandemic), despite the onslaught of the second Covid wave this year and consequent curbs in certain key states such as Maharashtra and Delhi.

Gross FDI inflows — which include FDI in equity, reinvested earnings, equity capital of unincorporated bodies and other capital — rose to $22.53 billion in the first quarter from $11.84 billion a year earlier. Similarly, FDI equity inflows jumped to $17.57 billion from $6.56 billion.

The sharp growth in the first three months of this fiscal followed a moderation in the March quarter, although the full-year inflows still hit a record in FY21, beating the Covid blues. FDI equity inflows rose 19% in FY21 to $59.6 billion, while gross inflows rose 10% to an all-time-high of $81.7 billion in FY21.

Interestingly, while inflows in FY21 were greatly boosted by the digital sector (a sizable chunk was drawn by Reliance Jio alone), the automobiles sector attracted the highest FDI (27%) in the June quarter of this fiscal. This was followed by inflows into computer software and hardware (17%) and the services sector (11%).

The robust FDI inflows take place at a time when domestic private investments have remained elusive in recent years. Investments remain critical to the country’s economic resurgence, as private consumption has been badly bruised by income losses in the aftermath of the pandemic.

Karnataka was the top FDI recipient in the June quarter, with a 48% share, followed by Maharashtra (23%) and Delhi (11%). Karnataka accounted for 88% of the auto sector FDI.

“Measures taken by the Government on the fronts of FDI policy reforms, investment facilitation and ease of doing business have resulted in increased FDI inflows into the country,” the ministry of commerce and industry said in a statement.

According to a report by Unctad in January, India and China were two major “outliers” in a gloomy year for FDI, as global inflows plunged 42% on year in the calendar year 2020 to $859 billion, the lowest level since the 1990s.

While India witnessed a 13% year-on-year rise, the highest among key nations, in FDI inflows in 2020, China’s rose 4%, the Unctad report said. Of course, in absolute term, China remained way ahead, with an inflow of as much as $163 billion in 2020, while India’s stood at $57 billion.

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