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India needs to do more if FDI flows are to increase

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Given the Indian economy’s relative attractiveness vis a vis China in the last few years—lower wage costs and a strong technology sector—it should attract large FDI flows. The combined fresh inflows in FY16 and FY17 were a hefty $83.5 billion; in FY18 this was $44.9 billion—if reinvested earnings of FDI projects are added, the FY16-17 number rises to $115.8 billion and FY18 to $61 billion. However, the trend seems to have reversed because, at $33.5 billion in the nine months to December 2018, there has been a contraction of 7% year-on-year in terms of fresh equity flows.

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Although the government has eased the investment limits, sectors such as defence haven’t seen meaningful inflows. Foreign firms, it would appear, are satisfied with a 49% stake in a venture or a bigger one for bringing in state-of-the-art technology. By and large, it is the services space that continues to........

© The Financial Express