FDI in services sector dip by 30% in April-October 2010

FDI in services sector dip by 30% in April-October 2010

New Delhi: India’s foreign direct investment (FDI) inflows in services sector dipped by 30% to $2.16 billion (Rs9,933 crore) during April-October this fiscal, according to the industry ministry’s latest data.

The financial and non-financial services sector had attracted FDI worth $3.12 billion (Rs15,087 crore) during the same period last fiscal.

According to experts, the government should now look at opening sectors like banking and retail to attract more foreign inflows.

“This is not good news (that FDI is declining). Our services sector is attractive but due to lack of banking sector reforms and closure of retail sector for foreign investors, FDI is not taking up," economist and Ficci’s director general Rajiv Kumar said.

Kumar said the government should make the business environment more investor friendly to attract FDI.

However, India still remains a preferred destination for foreign investment and that is evident from the strong foreign institutional investors (FII) inflows.

Overseas funds infused a whopping $4.78 billion in November 2010 taking the total to $38.5 billion in 11-month of 2010. It is a record inflow in a single calender year.

On the other hand, overall FDI inflows dropped by 30% to $12.39 billion during April-October 2010-11, against $17.6 billion in the year-ago period.

The services sector, despite the 30% dip in FDI, topped the chart in attracting maximum investment.

Telecommunications segment, including radio paging and cellular mobile, was the second best sector that attracted $1.06 billion, followed by power ($729 million), construction ($718 million), housing and real estate ($716 million) and computer and software ($553 million), and during the period, the data said.

During the period, the highest FDI of $4.48 billion came from Mauritius followed by Singapore ($1.28 billion), the US ($908 million), the Netherlands ($768 million) and Japan ($586 million).

Mauritius accounts for 42% of the country’s total FDI during the period under review.

The government is making sustained efforts, including involving stakeholders in policy formation, to make the investment regime more attractive and investor friendly.

The government is considering to liberalise FDI regime in sectors like defence and multi-brand retail.