FDI fell by 34% to $10.94bn in Q2

India, not Uttar Pradesh

In a noteworthy downturn, foreign direct investment (FDI) into India has taken a substantial hit, recording a stark 34% decline, with the figure plummeting to a sum of $10.94 billion during the initial quarter of the fiscal year 2023-24. This adverse development, as reported by government sources, can be primarily attributed to reduced investments in key sectors, including computer hardware and software, telecommunications, automobiles, and pharmaceuticals.

Comparatively, during the corresponding period of the preceding fiscal year, FDI inflows painted a markedly different picture, standing tall at $16.58 billion for the April-June 2022-23 quarter. The trend of diminishing investments persisted into the first quarter of 2023, where inflows experienced a significant contraction of 40.55%, dwindling to a meagre $9.28 billion.

Analysing the quarterly trajectory of foreign investments reveals a stark reality. During this fiscal year’s inaugural quarter, overseas investments plummeted sequentially, with April, May, and June witnessing declines to the tune of $5.1 billion, $2.67 billion, and $3.16 billion, respectively. A year prior, in the same three-month period, the figures stood noticeably higher at $6.46 billion, $6.15 billion, and $3.98 billion, emphasising the extent of the decline. These figures were derived from meticulous data analysis conducted by the Department for Promotion of Industry and Internal Trade (DPIIT).

The adverse shift in FDI inflows during this period extended beyond sectors and delved into specific countries. Key players in the FDI arena, such as Singapore, Mauritius, the United States, the United Kingdom, and the United Arab Emirates, all witnessed a dip in their equity inflows into India.

Notably, investments from the Cayman Islands and Cyprus took a substantial hit, dwindling to $75 million and $6 million, respectively, for the April-June 2023 period. This is a stark contrast to the previous year when investments from these territories stood at a substantially higher $450 million and $605 million. This notable decline raises questions and warrants a closer examination of the factors driving this change.

In a contrasting trajectory, FDI inflows bucked the overall trend, showcasing growth from the Netherlands, Japan, and Germany, adding a layer of complexity to the evolving FDI landscape in India.

The decline in FDI during this crucial period undoubtedly has wider implications for India’s economic outlook. As the government assesses the situation, stakeholders, particularly in the corporate world, will keenly watch for potential policy responses and strategies to reinvigorate foreign investments in the country’s economy.