FDI in service sector on rise despite Make in India push: Report

New Delhi, Dec 29 (KNN) Despite the Indian government’s efforts to attract more investments in the manufacturing sector through “Make in India" campaign, the FDI inflow is still tilted in favour of the services sector, a report by India Ratings and Research (Ind-Ra) pointed out.

The report released by the rating firm on Wednesday showed that the foreign direct investment (FDI) into the country’s services sector increased to USD 153.01 billion during April 2014 to March 2022 from USD 80.51 billion during April 2000 to March 2014.

On the other hand, the FDI in manufacturing increased to USD 94.32 billion from USD 77.11 billion during the same period.

The primary reason for this could be that doing business in the services sector is less complicated than doing business in the manufacturing sector in India. This could also be the reason for the majority of the FDI coming in the manufacturing sector is not a greenfield investment, Ind-Ra highlighted.

The computer software and hardware sector is one of the industries that has done well where the FDI increased to USD72.7 billion during April 2014 to March 2022 from just USD12.8 billion during April 2000 to March 2014," it said.

Ind-Ra analysis noted that despite a significant surge in the FDI inflows over the years, the nature of FDI inflows in terms of countries from where they are originating and the states/sectors where they are being invested remains fairly skewed.

Among the emerging market economies, India has done reasonably well in attracting FDIs. Only China has been consistently ahead of India.

“While within services, FDI predominantly flowed into trading, telecommunications, banking/insurance, IT/business outsourcing and hotels/tourism, within manufacturing it remained concentrated in segments such as auto, chemicals, drugs and pharmaceuticals, metallurgical and food processing," the report showed.

The top states that were successful in attracting the maximum foreign direct investments were Maharashtra, Karnataka, Gujarat and Delhi. They together accounted for 83.0 per cent of the FDI between October 2019 and March 2022.  (KNN Bureau)