Despite Covid-19, lockdowns, foreign investors pumped $39 billion in India in H1 FY21

Even as the coronavirus ravaged the Indian economy, foreign investors pumped $39 billion into the country in H1 FY21, a near 15% year-on-year rise in investments, a CARE Ratings report showed.

Between April 2000 and September 2021, foreign direct investments or FDI inflows amounted to $722 billion in total while FDI equity inflows crossed the $500-billion-mark

In the first half of the 2020-21 fiscal year, equity inflows amounted to $30 billion, the highest compared to the same period in the past five years.

"Despite headwinds amidst the pandemic, the FDI inflows remained robust in India supported by liquidity surplus in the global market and confidence amongst the investors. Going ahead, ease in investments led by various measures undertaken by the government is expected to further propel inflows in India," the report said.

Sectorally, the highest inflows in foreign direct investments came from the computer software and hardware sectors (59%), followed by the service and telecommunication sectors which logged inflows contributing to 17% and 16% of the total FDI. On account of the pandemic and work from home orders issued by corporates, the tech sector benefitted from the move to digital mediums, logging a four-time year-on-year growth in FDI inflows worth $15.5 billion.

The report also cited anti-China sentiments as one of the main factors contributing to larger inflows as countries across the world look for alternative suppliers.

About 29 per cent of the FDI came through the Mauritius route followed by Singapore (21 per cent), the US, the Netherlands, Japan (each 7 per cent), and the UK (6 per cent).

"While we have improved significantly across many of these areas over the last decade, and especially over the last 5 years, there is still a long way to go for us to be able to compete with countries like China and other markets like Vietnam, Thailand, and Malaysia," Rajat Wahi, Partner, Deloitte India, told PTI.

However, Gunjan Shah, Partner, Private Equity, Merger & Acquisitions & General Corporate, Shardul Amarchand Mangaldas told the news agency, "I would not attribute this (crossing $500-billion mark) to increased investor confidence in the Indian market. There is a lot of liquidity around the world right now and the real test would be to see if a higher proportion of that is being deployed in India.”

Maharashtra, Delhi, Karnataka, and Gujarat accounted for more than 85% of the total FDI equity inflows, with Gujarat topping the list with equity investments worth $16 billion.

(With agency inputs)