Services sector top recipient despite 23% drop

Karnataka registered the biggest increase in Foreign Direct Investment (FDI) last year, as inflows from overseas jumped 300% in the 12 months ended March 2018. Tamil Nadu too saw a rebound reversing a slowdown in the preceding period, while Gujarat, Maharashtra and Andhra Pradesh all saw a drop in FDI inflows, data from the Reserve Bank of India (RBI) presented in Parliament show.

While Karnataka received $8.58 billion in 2017/18, a sharp increase from the $2.13 billion in the previous fiscal, Tamil Nadu netted $3.47 billion, a 56% increase from the $2.22 billion in the prior period, as the State appeared to buck concerns about the investment climate. Investment had halved in 2016/17 from the previous 12 months ($4.53 billion) in an election year that also saw some political uncertainty in the wake of then Chief Minister J. Jayalalithaa’s hospitalisation and demise.

The data from the Chennai Regional Office of the RBI, covers Tamil Nadu and Puducherry.

Other major states Maharashtra, Gujarat and Andhra Pradesh saw a dip in FDI inflows, according to Minister of State for Commerce and Industry C.R. Chaudhary, in a written reply to the Lok Sabha on Monday.

Data from the Mumbai office of RBI, which covers Maharashtra, Dadra and Nagar Haveli, Daman and Diu, show inflows dropped to $13.4 billion in 2017/18 from $19.7 billion. FDI inflows into Gujarat fell almost 38% to $2.09 billion in 2017-18, from $3.37 billion.

Andhra Pradesh saw FDI inflows drop 43% to $1.25 billion in 2017/18.

Biswajit Dhar, Professor at Centre for Economic Studies and Planning in the School of Social Sciences at Jawaharlal Nehru University, pointed out that there was no way to assess whether the inflows were helping a State in its development efforts.

“When you look at the breakdown of FDI, it has a lot of components to it – firstly, you have long term inflows and then you have short term inflows like private equity,” he pointed out.

Overall, sector-wise investment data show that computer software and hardware gained from a 68% jump in FDI last year to $6.15 billion.

Interestingly, the services sector which comprises finance, banking, insurance and outsourcing among others, remained the top recipient of FDI despite seeing a 23% decline in inflows at $6.71 billion.