India recorded a year-on-year 15 per cent surge in investment inflows in the first half of fiscal year 2020-21 despite a subdued global economic and investment environment, partly due to sweeping “global anti-China sentiments as investors strategised to tap alternative supply chains”.
India’s economy, grappling with a technical recession between April and September, witnessed foreign direct investment (FDI) into the country surging to $39.9 billion, according to a report by Care Ratings.
Although the global economic and investment environment was not conducive on account of the coronavirus pandemic that brought economies to a near halt by the lockdown, “optimism on India’s growth story among foreign investors combined with ample liquidity in the global market has aided flows into India”, the report said.
“India might have also benefitted from the global anti-China sentiments as investors strategised to tap alternative supply chains,” said Dr Rucha Ranadive, Care Ratings economist and author of the report. In addition, performance linked incentives have gained traction under the Atmanirbhar Bharat initiative undertaken by the government to boost the manufacturing sector.
Analysts said during the six-month period the world was eyeing China with heightened scepticism with several global leaders blaming the country for the outbreak of Covid-19 pandemic. The period also coincided with India’s rolling out of a series of incentives and initiatives to cash in on any opportunities to portray itself as the alternative to its neighbour.
Nearly 60 per cent of this FDI came into India’s computer software and hardware sectors. “The sector has benefitted during the pandemic times on account of work from home policies and greater engagement in digital channels,” the report observed.
During April 2000-September 2020, cumulative FDI inflows amounted to $722 billion while FDI equity inflows aggregated $500 billion. In the first half of fiscal year 2021, equity inflows amounted to $30 billion, which was highest in the comparable periods in the past five years.
In terms of cumulative equity inflows from countries during April 2000-September 2020, top 10 countries accounted for nearly 86 per cent of total equity inflows. Mauritius dominated with a 29 per cent share followed by Singapore with 21 per cent and the United States with 7.38 per cent.
The report said the higher inflows in the first half can be ascribed to a surge in the computer software and hardware sector, which pipped the services sector and garnered the highest FDI inflows with $15.5 billion. The sector has benefitted during the pandemic times on account of work from home policies and greater engagement in digital channels.
In the nearly past two decades, the total FDI inflows in India have increased from $4 billion in fiscal year 2001 to $74 billion in fiscal year 2020, said the report.
Over the past couple of years, the Indian government has been undertaking various measures to attract the foreign investment in India.
“With such measures, in the World Bank’s Doing Business 2020 ranking, India moved up 14 places to get the 63rd rank among 190 nations, from the earlier 77th rank owing to latest reforms in the areas of starting a business, dealing with construction permits, trading across borders and resolving insolvency. India also figured among the top 10 performers on the list for the third time in a row,” Care Ratings said.