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India’s net FDI hits new high in 2020-21

Dubai - FDI flow would see a bigger spike in the coming months following the government’s latest proposal to raise the FDI cap in insurance to 74 per cent.

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Net foreign direct investment (FDI) into India surged to a fresh high of $43.366 billion in the pandemic-ravaged fiscal year ended March 2021, underscoring the country’s growing appeal to global investors.

According to data released by the Reserve Bank of India (RBI), while the direct investment to Asia’s third largest economy in FY21 stood at $54.665 billion, FDI outflow reached $11.299 billion, resulting in a net FDI of $43.336 billion.

In 2020-21, the inward FDI flow witnessed a big thrust, crossing the previous high of $43.013 billion reached last 2019-2020, mostly driven by stake sale by Reliance Industries (RIL) group companies.

In the last fiscal, RIL, India’s largest conglomerate, raised around $35 billion --- thereby contributing to more than 64 per cent of the total FDI received by India during the year --- by selling stake sale of its group companies to global investors and sovereign wealth funds. RIL’s digital services firm Jio Platforms has raised FDI from state investment funds from the UAE and Saudi Arabia, including Mubadala Investment, Abu Dhabi Investment Authority, and Saudi Arabia's Public Investment Fund (PIF). Other overseas investors include Facebook, Google, L Catterton , KKR, Carlyle Group and SoftBank Group Corp.

Investment analysts said the FDI flow would see a bigger spike in the coming months following the government’s latest proposal to raise the FDI cap in insurance to 74 per cent, and also because FDI investors typically have a multi-year view on their investments.

India maintained the trend of FDI flow in April, the first month of the current fiscal. FDI inflow jumped by more than two-times year-on-year to $ 2.51 billion, while Indian investors had committed $1.21 billion worth of outward foreign direct investment (OFDI) in April 2020, RBI data shows.

Beside the FDI, the foreign portfolio investments jumped significantly. In the year ended March 2021, the FPI inflows into debt and equities amounted to $36.18 billion. It was only second to net FPI flows of $45.6 billion received in fiscal 2014-15. FPI inflows into equities, however, hit a new high of $37 billion during the year, RBI data shows.

The strong inflow of FDI and foreign portfolio investor (FPI) money ensured that the forex reserves jumped significantly. In the financial year ended March 2021, the foreign exchange — or forex — reserves jumped by over $100 billion and amounted to $576.8 billion as on week-ended April 2, 2021.

According to official data for first nine months of the previous financial year, four states — Maharashtra, Gujarat, Karnataka and NCT of Delhi — accounted for nearly 90 per cent of the FDI inflows received during the year, with Maharashtra receiving nearly over 46.67 per cent of the flows, followed by Gujarat at 24.38 per cent.

Analysts said FDI surge has been driven both by pockets of growth in the Indian economy as well as record amount of liquidity being injected by global central banks, which is chasing promising assets across the world.

IT, pharma, telecom and digital economy sectors attracted most of the flows.

—issacjohn@khaleejtimes.com

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