According to research released by rating agency India Ratings and Research (Ind-Ra), foreign direct investment (FDI) into the country’s services sector climbed to US $153.01 billion between April 2014 and March 2022 from US $80.51 billion between April 2000 and March 2014.
FDI in manufacturing climbed to US $94.32 billion for the same time period from US $77.11 billion.
“This suggests that despite the government’s effort to attract more investments in the manufacturing sector through “Make in India” campaign, the FDI inflow is still tilted in favour of the services sector,” Ind-Ra said.
According to Ind-Ra research, FDI inflows have increased significantly over the years, but their origination nations and the states and industries in which they are invested have remained fairly uneven.
India made up barely 0.71 percent of all FDI in the world in 2001. Prior to declining to 2.83 percent in 2021, a challenging year brought on by the Covid epidemic, it had progressively risen to 6.65 percent in 2020. India has done pretty well in attracting FDIs when compared to other emerging market nations. India has only continuously been ahead of China.
India is one of the top 10 (ranked 7) foreign direct investment (FDI) destinations worldwide, according to UNCTAD’s World Investment Report 2022.
According to Ind-Ra, the manufacturing sector (excluding computer hardware) received the second-highest amount of foreign direct investment (FDI) between April 2000 and March 2014, as well as between April 2014 and March 2022.
“While within services, FDI predominantly flowed into trading, telecommunications, banking/insurance, IT/business outsourcing, and hotels/tourism, within manufacturing it remained concentrated in segments such as auto, chemicals, drugs, and pharmaceuticals, metallurgical and food processing,” the Fitch group company said.
Higher FDI inflows into the services sector, according to Ind-Ra, may be a result of the ease with which doing business in the services sector in India is compared to doing business in the manufacturing sector.
“This could also be the reason for the majority of the FDI coming in the manufacturing sector is not a greenfield investment. However, computer software and hardware have done well where the FDI increased to US $72.7 billion from April 2014 to March 2022 from just US $12.8 billion from April 2000 to March 2014. This sector has seen further traction after the rollout of the PLI (production-linked incentive) scheme with major global brands such as Apple, Samsung, Flextronics, and Nokia announcing big investments in India,” Ind-Ra said.