FDI Inflows – Knockdown effect of global financial meltdown

The latest data released by the Department of Industrial Promotion & Policy indicate that during the fiscal 2008-09, India received a total FDI of US$ 27.31 billion. Though, the figure was far less than the original target of US$ 35 billion fixed by the Commerce ministry, it certainly crossed the revised target (fixed after India felt the impact of the global financial meltdown) of US$ 25 billion. During 2007-08, the country received US$ 24.58 billion.

During the first six months of the fiscal 2008-09, the country received a total FDI of US$ 17.21 billion indicating a monthly average inflow of US$2.87 billion. Had this trend continued in the second half, the total FDI inflows during the year 2008-09 would have certainly reached the original target figure of US$ 35 billion. However, the knockdown effect of the financial meltdown seen across the developed countries dried up the inflows during the second half of 2008-09. Between October 2008 and March 2009, the country received US$ 10.10 billion FDI. Except January 2009, FDI inflows in the remaining five months were below US$ 2.0 billion.

April 2008 - March 2009

Services sector (including financial & non-financial), the traditional leader in terms of FDI inflows, saw its share in total FDI inflows dipping from 27 per cent in 2007-08 to 22 per cent in 2008-09. However, with total inflows of US$ 6.1 billion it remained the leading sector.

The Services sector was followed by Housing & Real Estate, Telecommunications, Construction and Computer Software & Hardware sectors. These five sectors together accounted for around 55 per cent of the total FDI inflows the country saw during 2008-09.

Except the Services sector, the remaining four sectors registered increases in FDI inflows when compared with their previous year’s levels. While the Services sector registered a fall of 7.5 per cent on Y-o-Y basis, the Telecommunications sector witnessed a 102 per cent growth.

Sources of FDI inflows indicate the continued dominance of Mauritius. Nearly two-fifth of the total FDI inflows (US$ 11.2 billion) the country received during 2008-09 was from this tiny country. Mauritius was followed by Singapore (US$ 3.45 billion) and USA (US$ 1.80 billion) as the other two leading sources of FDI.
Together these three countries accounted for around 60 per cent of the total FDI inflows India received during 2008-09.

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