FDI inflows drop ahead of general election

The foreign direct investment (FDI) flows have seen a substantial drop and may record a full year decline for the first time since the Narendra Modi-led NDA took office in 2014.

This is in stark contrast to the initial years of the current government which could be indicative of the fact that foreign investors are being wary of the upcoming general elections in May combined with the government’s protectionist policies toward E-commerce.

The FDI dropped to US$33​​.5 billion, down 7 per cent in the nine months ended December 2018 as against US$36 billion in the corresponding period last year. The top source for FDI was Singapore with US$13 billion, followed by Mauritius, Japan and Britain at US$6 billion, US$2.2 billion and US$1.1 billion, respectively.

The FDI inflows have been on a downtrend since recording a rise of 35 per cent in the fiscal year ended March, 2016. The fiscal year ended March 2018 recorded FDI growth of only 3 per cent.

Investment inflows are expected to remain sluggish over the next few months as investors wait to see the outcome of the general election.