India's FDI inflows fell 3% to $44 bn in FY24; manufacturing down 18%

FDI inflows into India's manufacturing sector in FY24 are among the lowest in five years, according to provisional data in the RBI annual report

According to the latest data released by the government, foreign direct investment (FDI) equity inflows in India decreased by 3.49 per cent in FY24 to $44.42 billion. Reduced investments in sectors such as services, computer hardware and software, telecom, auto, and pharma, are being attributed as the primary reasons for the slump. 

In FY23, FDI equity inflow was recorded at $46.03 billion. This is the second consecutive year of FDI decline as equity inflows had declined by 22 per cent in FY23 compared to FY22.

In FY22, India received a record high of $84.83 billion in FDI inflows.

The FDI inflows into the manufacturing sector in FY24 are one of the lowest in the past five years, according to the provisional FDI data published in the RBI annual report.

The manufacturing sectors received $9.3 billion FDI in FY24, which was 17.7 per cent less than the $11.3 billion inflows in FY23. In FY22, the manufacturing sector received $16.3 billion in FDI.

Computer services received $4.9 billion during the financial year 2023-24, down from $5.6 billion in FY23. The decline in financial services was more significant, with FDI inflows dropping by 35 per cent to $4.4 billion.

Retail and trade experienced a 22.7 per cent decrease in FY24, amounting to $4.1 billion. FDI inflows in communication services fell by 17.8 per cent in FY24. Conversely, FDI in electricity transmission and generation surged by two-thirds, rising from $3.3 billion in FY23 to $5.5 billion in FY24.

The total FDI, which includes equity inflows, reinvested earnings, and other capital, saw a slight decrease of 1 per cent to $70.95 billion in FY24, down from $71.35 billion in FY23, as reported by the Department for Promotion of Industry and Internal Trade (DPIIT).

However, during January-March FY24, inflows rose by 33.4 per cent to $12.38 billion compared to $9.28 billion in the same period the previous year (Jan-March FY23).

During the last fiscal year, FDI equity inflows from major countries such as Mauritius, Singapore, the US, the UK, UAE, Cayman Islands, Germany, and Cyprus declined. Conversely, inflows from the Netherlands and Japan increased.

Singapore remained the largest source of FDI into India, contributing $11.8 billion in FY24, though this was $5.4 billion less than the previous year.

FDI inflows from Mauritius increased by 31 per cent in FY24, reaching $8 billion. Following the new tax treaty with Mauritius effective April 1, 2017, which reduced tax benefits, investors shifted to Singapore to channel FDIs into India.

The US and the Netherlands were also major contributors, with $5 billion and $4.9 billion, respectively. FDI inflows from Japan increased from $1.8 billion in FY23 to $3.2 billion in FY24. The UAE contributed $2.9 billion in FY24, down from $3.4 billion in FY23.

(With inputs from PTI)