Global firms in India may run out of cash as FDI investors shy away; these sectors may hit worst

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April 9, 2020 3:10 PM

During the first 9 months of the last fiscal, the FDI inflows amounted to USD 36.8 billion, the highest annual FDI equity inflows in the same period in the past 16 years.

fdi, fdi inflow, fpi, global firms, coronavirus, covid 19, care ratingsThe possibility of a global recession in the current year has made the future ambiguous for sectors like IT and services.

Global firms operating in India may face another blow to their funding plans, with investors staying away. During the first 9 months of the last fiscal, the FDI inflows amounted to USD 36.8 billion, the highest annual FDI equity inflows in the same period in the past 16 years, according to a report by Care Ratings. However, the possibility of a global recession in the current year has made the future ambiguous for sectors like IT and services, which receive the maximum FDI. 

The services sector that includes financial, banking, insurance, non-financial / business, outsourcing, R&D, etc receive 18 per cent of the total FDI received in the country, according to the Department for Promotion of Industry and Internal Trade. The IT services and telecommunications sectors receive the second and third highest FDI. Automobiles, power, chemicals, and drugs & pharmaceuticals sectors also come in the top 10 highest recipients of the FDI. 

Also Read: Modi’s lockdown not the only one to blame for economic hit, other factors playing their part too

On the other hand, the Foreign Portfolio Investments (FPI) are also expected to remain uncertain in the short term and the direction of FPI flows would be contingent on how quickly economic adversities rose from coronavirus pandemic dissipate and economic revival takes place, said a report by Care Ratings. The condition of FPI into the Indian market has been worrisome in the past two fiscals as both the year saw a net outflow of investments. In only one month of March 2020, the net FPI outflow stood at a record high of Rs 1,18,203 crore. Meanwhile, the overall picture will get clearer only with the exit of the global pandemic and most of the countries have announced a lockdown, which are affecting the businesses and animal spirits worldwide.

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