Dip in services sector FDI not a major concern, say experts

Sai Nikesh | The Dollar Business

Foreign Direct Investments (FDI) in various sectors saw a negative trend in the first two months of the current fiscal year. In services sector, the inflow has declined 15% to $488 million during the first two months of the current fiscal, as compared to the figure of the same period of last year. “FDI in services sector has dipped, but it should not be a major cause of concern as overall FDI inflows in April-May 2015 period has touched $7.5bn, which is roughly 30% more than what we received last year during the same period,” Sanjay Budhia, Co-Chairman, CII National committee on International Trade Policy& Exports, told The Dollar Business. He said that the definition of services sector for FDI calculation is very narrow. It includes only financial, banking, insurance, non-financial / business, outsourcing, R&D, courier, technicaltesting analysis and excludes some very important sectors like telecommunications, construction and computer software. Both telecommunications and computer software have been doing reasonably well in terms of FDI inflow, he noted. “With booming e-commerce sector and increase in digital trade, we expect huge FDI inflow into telecommunications,” he said, adding that only about a quarter of Indian population use internet, leaving a large untapped market for foreign investors to exploit. According to the Department of Industrial Policy and Promotion (DIPP), services sector which includes banking, insurance, outsourcing, Research & Development (R&D), courier and technology testing, received FDI worth $574 million during April-May 2014. The sector had witnessed a rise in foreign investments in 2013-14 whenthe inflow rose to $3.25 billion from $ 2.22 billion a year ago. However, government’s steps like relaxing FDI norms in case of sectors like insurance and improving business environment in the country are expected to increase the foreign investments in the coming months.      

August 10, 2015 | 4:45pm IST.