New Delhi: Foreign direct investment (FDI) in India plunged for the third month in a row in June to $1.24 billion from $5.65 billion in the year-ago period, reflecting the impact of slowing global economy.
Experts have attributed the contraction in foreign inflows to global and domestic economic problems and asked the government to push big-ticket reforms to restore the confidence of global investors.
“The numbers are bad. Now the government should immediately take decisions on issues like allowing FDI in multi-brand retail and permitting foreign airlines to buy stake in domestic carriers. These measures would help in attracting more FDI,” Ficci secretary general Rajiv Kumar said.
The decline in FDI comes at a time when India’s economic growth slipped to nine-year low of 6.5 percent in 2011-12. The growth in the January-March quarter was merely 5.3 percent.
During April-June 2012, too, FDI in India declined by 67 per cent year-on-year to USD 4.42 billion, said a senior official in the Department of Industrial Policy and Promotion (DIPP).
Foreign inflows in April and May dipped to $1.85 billion and $1.32 billion compared to $3.12 billion and $4.66 billion, respectively, a year ago.
Contraction in FDI will keep the balance of payments under pressure and could also impact the rupee. If the prices of commodity and oil increases globally, a weaker domestic currency will add to inflationary pressures.
The sectors which received large FDI inflows in May include services ($1.07 billion), pharmaceuticals ($465 million), construction ($348 million) and power ($145 million).
In June 2012, India received the highest FDI from Mauritius ($1.43 billion) followed by the Netherlands ($543 million), the UK ($418 million), Singapore ($403 million) and Cyprus ($203 million), the official added.
The inflows had aggregated to $36.50 billion in 2011-12 against $19.42 billion in 2010-11 and $25.83 billion in 2009-10.