Steep FDI drop jolts India into course correction mode

New Delhi: The government is examining India’s foreign direct investment policy to look for new areas that can be opened to overseas investors and sectors that face hurdles despite being on the automatic route.“We have started a review and have asked all stakeholders to check for areas that can be opened up and if the automatic route is actually being used in existing sectors,” said an official aware of the development.The exercise comes after FDI equity inflows into India fell in 2018-19, for the first time in six years, with a steep decline in telecom, pharmaceuticals and power.FDI equity inflows into India declined 1% to $44.4 billion in 2018-19 from a record $44.8 billion in the previous year, data released by the Department for Promotion of Industry and Internal Trade on Tuesday showed.Foreign investments fell 56% to $2.7 billion in telecommunications and 74% to $266 million in pharmaceuticals. In the power sector, FDI shrank 32% to $1.1billion. The declines came even though foreign investors can own up to 100% stake in telecom and pharma companies.In telecom services, 100% FDI is allowed, with up to 49% permitted automatically. In pharmaceuticals, 100% FDI is allowed under the automatic route in greenfield projects and up to 74% in existing businesses.“We want stakeholders to tell us what problems they face and if any of the regulators are creating issues,” the official added.Another official said the decline in inflows was marginal and should not be an issue of concern, although the department is analysing the reasons for the fall.As per the official data, Singapore replaced Mauritius as the top source of foreign investment. FDI inflows from Singapore came in at $16.2 billion, double the amount of $8.1billion from Mauritius.Sectors that recorded a growth in FDI were services ($9.15 billion), computer software and hardware ($6.41billion), trading ($4.46 billion) and automobiles ($2.62 billion).Foreign inflows previously declined in 2012-13, when investments contracted 36% to $22.42 billion from $35.12 billion in 2011-12.

from Economic Times http://bit.ly/2VW9NrL