FDI inflows at record $83.6 bn in FY22 but y-o-y growth slows

Gross foreign direct investment (FDI) inflows in FY22 hit a record $83.6 billion, but the year-on-year rise slowed down to just 2% from 10% in the previous year, mainly due to an unfavourable base. Gross FDI includes FDI equity, reinvested earnings, equity capital of unincorporated bodies and other capital.

Importantly, FDI (equity) inflows into manufacturing surged 76% last fiscal to $21.3 billion, far exceeding the pace of the rise in overall FDI, despite the pandemic blues, showed the data released by the department for the promotion of industry and internal trade (DPIIT) on Friday.

Investments, both foreign and domestic, remain critical to India’ economic resurgence, as private consumption has maintained a roller-coaster ride in the aftermath of the pandemic.

The data showed, at $171.84 billion, gross FDI inflows jumped 23% in the aftermath of the pandemic (March 2020 to March 2022) in comparison to the inflows reported pre-Covid (February 2018 to February 2020).

Singapore remained the top FDI source with a share of 27%, followed by the US (18%) and Mauritius (16%) in FY22. The computer software and hardware segment has emerged as the top recipient of FDI equity inflows in FY22, with a 25% share, followed by the services sector (12%) and automobiles (12%).

Among states, Karnataka was the top recipient, with a 38% share of the total FDI equity inflow, in FY22, followed by Maharashtra (26%) and Delhi (14%).

The surge in FDI in manufacturing mirrors improving performance of the sector in gross value added (GVA). According to the second advance estimate, growth in manufacturing GVA is pegged at 10.5% in FY22, compared with -0.5% in the previous year and -2.9% in the pre-pandemic year of FY20. The purchasing managers’ index also suggests manufacturing activity gathered steam in the second half of FY22. The long-elusive private capex, too, has started to pick up, especially in sectors like metals, mining, chemicals and electronics, former CII president TV Narendran said recently.

Asked if the FDI regime will be liberalised further, DPIIT secretary Anurag Jain recently told FE that most sectors of the economy have already been opened up and nearly all inflows are allowed under the automatic route. “India’s FDI regime is one of the most liberalised in the world. There is no proposal under consideration now to open up any sector further, apart from what has been announced in the Budget,” Jain said.