Globally, FDI inflows contracted in the past three years.
For the first time in six years, foreign direct investment equity inflows dropped 1% year-on-year, to $44.4 billion, in FY19, which could put pressure on the country’s balance of payments. While the government had initiated several measures to boost FDI, lower inflows in FY19 were because of tax reforms in the US, increase in interest rates by some of the major global central banks, and anxiety over trade war between the US and China.
Globally, FDI inflows contracted in the past three years. In 2018, FDI inflows were $1301 billion—16% lower than the $1,554 billion in 2017. The US and China were the preferred destinations for investment by foreign investors and the US continued to receive the highest FDI inflows for the past four years. These two nations accounted for 36% of the total world FDI inflows last year.
In India, the top three sectors that received the highest equity inflows were services, computer hardware and software, and trading. These accounted for 45% of total equity inflows in FY19. Inflows in services sector grew 37% in FY19 to $9.2 billion. Equity inflows in the automobile sector witnessed a growth of 26%. In contrast, equity inflows contracted 5% in the telecom sector.
Maharashtra retained the top position in FDI inflows with 26% share, followed by Delhi (23%) and Karnataka (15%). In FY19, equity inflows in Andhra Pradesh, West Bengal, Punjab and Rajasthan more than doubled as compared with the previous year, whereas Tamil Nadu and Gujarat registered a decline in inflows as compared with the previous year.