FDI inflows In 2015

• India has received an all-time high annual foreign direct investment (FDI) in 2015. This surge is led by the inflows into the services sector rather than manufacturing or infrastructure.
• More than half of total FDI inflows in 2015 came into the services sector, comprising software, financial services, trading, hospital and tourism
• FDI into service sector in 2015 was 111 per cent higher than in 2014.
• Inflows to construction surged 188 per cent from $1527 million to $4,405 million. Insurance received $581 million against $236 million, a 146 per cent jump. FDI in Railways declined 67 per cent to $71 million from $213 million in the previous year. Air transport too saw lower inflows — $50 million against $73 million. For mining the fall was from $666 million to $547 million.
• Howevr, defence sector is yet to receive FDI.
• The inflows into the manufacturing sector were up 6% in 2015 after the 19% decline in 2014. FDI in infrastructure in 2015 was marginally lower than in 2014.
• Singapore emerged as the biggest FDI source, followed by Mauritius, US, Netherlands and Japan.
• The government has taken several steps to promote investments through a liberal FDI policy. It has relaxed norms in several sectors, including single brand retail, e-commerce and construction.

Analysis:

• There is less FDI in manufacturing or infrastructure, this means that ‘Make in India’ initiative has not yet materialised into FDI inflows.
• The impact of the FDI liberalisation measures in defence, railways and retail is not visible.
• On the positive side, it would mean that the world is finding India as an important alternative, when others aren’t doing well, thanks to the strong economic fundamentals of the country and its huge untapped potential.
• India should focus on the problems in taxation, repairing the critically damaged banking sector and ensuring ease of doing business by facilitating enabling factors (land, water, electricity, necessary clearances etc) to begin a business in India. While global slowdown is a blessing in disguise for India, to cash in on the opportunity, the country needs to fast track its reform agenda, besides improving the infrastructure sector.
   

By: Vishal