Hardening interest rates, geo-political risks impacting FDI inflows: DPIIT Secy

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Hardening interest rates, geo-political risks impacting FDI inflows: DPIIT Secy

Wednesday, 31 May 2023 | PTI | New Delhi

Hardening interest rates globally and worsening geo-political situation have impacted the foreign direct investment (FDI) inflows into India in 2022-23, a top government official said on Tuesday.

Secretary of the Department for Promotion of Industry and Internal Trade (DPIIT) Rajesh Kumar Singh said that the department would analyse the reasons for the contraction in FDI in five important sectors like computer hardware and software; construction, education, automobiles and metallurgical industries.

“I cannot think of any other reason. It is not as if our FDI policies have become protectionist. On the contrary, we have kept it very very liberal ... The decline is combination of hardening of interest rates along with geo-political risks going up around the world. In general the appetite may be less,” Singh told PTI in an interview.

These five sectors had a share of USD 30 billion in India’s total FDI in 2021-22 and in the last fiscal year, overseas inflows have almost halved.

“Why exactly in those sectors (FDI) has come down is to be analysed. We will have to analyse,” he added.

FDI equity inflows into India declined by 22 per cent to USD 46 billion in 2022-23. The investments during the January-March 2023 quarter plunged by 40.55 per cent to USD 9.28 billion.

Though the computer software and hardware sector attracted the highest inflows of USD 9.4 billion during the last financial year, these inflows are down as compared to USD 14.5 billion in 2021-22.

Similarly, FDI in the automobile industry dipped significantly to USD 1.9 billion in 2022-23 as compared to about USD 7 billion in 2021-22.

However, the secretary added that the government is doing investment promotion on a large scale and the inflows would start recovering.

The secretary added that sectors which have received healthy inflows include information and broadcasting, agri machinery, railway-related components, medical appliances, defence industries and scientific instruments.

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