Due to a sluggish global economy, inflows of foreign direct investment (FDI) into India decreased 16% to $71 billion (on a gross basis) for 2022–23, the first dip in 10 years.
According to the most recent information made available by the RBI in its monthly bulletin, direct inflows during the previous fiscal year were 27% lower at $41. 6 billion after accounting for repatriation and disinvestment by foreign investors.
The last financial year's majority was marked by the falling tendency. Importantly, India defied the pattern even in 2020, the year of the Covid-induced lockdown, when inflows soared as a result of significant investments made by tech behemoths in startups and Reliance Jio. But high inflation and weak demand in the US and Europe has dried up flows into startups, which were large recipients of surplus money floating globally. The drop in flows has, however, failed to dampen sentiments, with officials and economists maintaining that it would be reversed, and investors are likely to step up investments once the global uncertainty ends.
“The slowdown in FDI has been a global trend in 2022, so this doesn’t come as a surprise… But India, as the fastest-growing economy in G-20, is structurally well-positioned to attract healthy FDI flows over the medium term. The government should take advantage of the ongoing diversification of global supply chains and attract foreign investments into India’s manufacturing sector,” said DK Joshi, chief economist at ratings agency Crisil.