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FDI inflows into India decreased

Facts for Prelims (FFP)

 Context: Foreign Direct Investment (FDI) inflows into India fell 3.5% to $44 billion in FY24 due to reduced investments in services, telecom, and pharma sectors.

However, January-March FY24 saw a 33.4% rise to $12.38 billion. Total Foreign Direct Investment (FDI), including reinvested earnings, declined marginally to $70.95 billion from $71.35 billion in FY23. Notably, Maharashtra (which received the highest FDI) and Gujarat saw increased inflows, while Karnataka and several other states experienced declines.

In FY 2023-24, Singapore was the top source of FDI inflows into India, followed by Mauritius and the USA. From 2000-2024, the top five countries for FDI were Mauritius, Singapore, the USA, the Netherlands, and Japan. The leading sectors for FDI in FY 2023-24 were Computer Software & Hardware, Services, and Construction. Over the 2000-2024 period, the top sectors were Services, Computer Software & Hardware, Trading, Telecommunications, and the Automobile Industry.

 

About FDI 

  1. Definition: Investment by a company or individual in one country into business interests in another country.
  2. Policy: Formulated by the Department for Promotion of Industry and Internal Trade (DPIIT).
  3. Routes:
  4. Automatic Route: No government approval is required.
  5. Government Route: Approval required.
  6. Inclusions: Foreign Currency Convertible Bonds, Foreign Institutional Investment (with conditions), and Global Depository Receipts.
  7. Prohibitions: Lottery Business, Gambling and Betting, Chit Funds, Nidhi Company, Trading in Transferable Development Rights, etc.

 

Significance of FDI

  1. Stimulates economic growth.
  2. Promotes development in backward areas.
  3. Ensures exchange rate stability.

Source: ET