Communication, trade, financial services catch foreign investors’ fancy; attract over USD 20 bln FDI

New Delhi : India’s digital drive, riding on communication, IT and financial services has caught fancy of foreign investors, as reflected in over USD 20 billion Foreign Direct Investment (FDI) flowing in these sectors alone in the fiscal, 2017-18, claims an ASSOCHAM analysis.
With emergence of aggressive online market dominated by some of the strong home-grown entrepreneurs and overseas giants like Amazon and Walmart along with global private equity and venture funds, the entire pack of communication services, retail and wholesale trade, financial and computer services has emerged as one of the sought after areas of interest for foreign investors, as suggested by the RBI data.
Against USD 5.87 billion in 2016-17, the FDI flows into the communications services alone amounted to USD 8.80 billion in the fiscal 2017-18. Likewise, the FDI inflows catapulted from USD 2.77 billion to USD 4.47 billion in the retail and wholesale trade in these years. The
financial services saw the inflows jump from USD 3.73 billion to USD 4.07 billion and computer services from USD 1.93 billion to USD 3.17 billion.
“The fact that these sectors have accounted for more than 50 per cent of the total FDI of USD 37.36 billion in 2017-18 reflects the kind of global interest being generated into the new areas of economy, including online marketplace, financial technologies or Fintechs. With a fast pace of financialisation of the Indian economy, investment in the technology driven trade in goods and services would only increase, both from the overseas and domestic services. Besides, a lot more new entrepreneurship is coming up in the new economy which is set to encompass more areas of traditional sectors,” said ASSOCHAM.
Despite slow growth in the real estate sectors, the FDI interest in the reality activities showed a marked improvement. The inflows into the real estate sector saw an almost four-fold increase from USD 105 million to USD 405 million. The other areas of increased interest to foreign investors included general business services (USD 3 billion inflows in 2017-18 from USD 2.68 billion), electricity including distribution and transmission (USD 1.87 billion from USD 1.72 billion).
“With several key indicators like corporate earnings, uptick in top line and consumer demand showing a marked improvement on the back of good and well–spread Monsoon, the investment sentiment is expected to gain momentum in the next few quarters and would further improve in the FY 2019-20,” the ASSOCHAM pointed out. Some of the macro issues like the crude oil prices and volatility in the foreign exchange market are also expected to play out without causing much problem to the Indian economy, which has built enough resilience and is armed with robust foreign exchange reserves of about USD 400 billion to absorb such head winds. The domestic push would be far greater, going forward, while a robust US economy, a major destination for the Indian exports, along with other key markets in Europe and Asia would keep up the momentum.

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