India’s total FDI inflows into equity, which had shot up by 23% in the first quarter, lost pace subsequently and dropped 7% between April and December 2018.
The government has sharply revised down foreign direct investment (FDI) inflows into the chemicals sector other than fertiliser, which had surprisingly emerged as the biggest puller of such investments in the first three quarters of this fiscal, beating larger segments like services, telecommunications and trading, and raising eye-brows.
So FDI (in equity) inflows into chemicals have been trimmed to just $1.82 billion for the April-December 2018 period from as much as $6.06 billion, showed the latest data released by the department for promotion of industry and internal trade. Interestingly, the chemicals sector had attracted just $1.31 billion in the entire FY18 and $1.61 billion in the first two quarters of this fiscal.
However, overall FDI inflows have been kept the same, as reported earlier — at $33.49 billion in the first three quarters of this fiscal, down 7% from a year before. Consequently, inflows into financial and other services have been revised up to $6.59 billion from $5.92 billion; those into computer software and hardware have been raised to $5 billion from $4.75 billion and in trading from $2.34 billion to $3.04 billion and automobiles from $1.81 billion to $2.08 billion. Even inflows of FDI from various nations have been retained.
India’s total FDI inflows into equity, which had shot up by 23% in the first quarter, lost pace subsequently and dropped 7% between April and December 2018. The inflows are poised to record a fall in FY19 — the first such annual decline during the current NDA regime — unless the last quarter records a massive rebound.
The latest revisions will add to the discomfiture of analysts, some of whom view the FDI data with as much scepticism as the GDP data. Already, a study by KS Chalapati Rao and Biswajit Dhar has pointed out some inconsistencies in the FDI data. For instance, in October 2007, Keyman Financial Services issued Rs 75 crore of shares to a foreign investor; eight years later, this was reported as inflows of Rs 7,500 crore in India’s FDI statistics.
Simialrly, Serene Senior Living was reported as having received $2.3 billion from the US in FY16, while its filings don’t reflect these inflows, don’t talk of projects in India and its paid-up capital was just Rs 1.5 crore in FY16.
Though the official narrative is that the rising FDI is a sign that Make-in-India has got a leg-up because of friendly investment policies, the authors have said “a good portion of the increased (FDI) inflows during 2016-17 may be attributed to reporting of older cases (including duplicate reporting), a case of past omissions bolstering current inflows”.
Also, while FDI inflows have been rising in absolute numbers, it is more meaningful to juxtapose this with the size of the economy.
As a proportion of GDP, while FDI peaked at 3.5% of GDP in FY08, FY18 inflows were a smaller 2.4%, lower than even 2.6% in FY17.