India remains preferred destination for FDI: RBI

India remains a preferred destination for foreign direct investment (FDI) as domestic consumption remains strong, according to RBI Annual Report.

With manufacturing sector gathering momentum, helped by both services and agriculture sectors, consumption demand remains robust in the country making it an attractive investment destination, it said.

India received USD 37.3 billion capital inflow in 2017-18 as compared to USD 36.3 billion in the previous fiscal. During the 2015-16, the country received USD 36.06 billion.

"There are country-specific factors that could distinguish the Indian experience going forward. In the real sector, a normal monsoon for the third consecutive year should lift agricultural output," it said.

Manufacturing activity is gathering momentum on the back of new business, both domestic and export orders, rising capacity utilisation and the drawdown of inventories, said the Reserve Bank of India report.

In the services sector, it said, the impulses of growth are broadening and expansion in employment conditions is generating anticipations of improvement in demand conditions.

"Early indicators suggest that consumption demand remains robust. Aggregate domestic demand is also being supported by steadily strengthening investment - with a renewal of the capex cycle underway- and a strong pick-up in exports in Q1. India remains a preferred destination for FDI," it said.

Giving details of FDI flow, the report said, the increase in foreign capital flow was mainly due to higher flows into the communication services, retail and wholesale trade, financial services and computer services.

"In terms of sources, FDI inflows were concentrated mostly in Mauritius and Singapore that accounted for about 61 per cent of total equity investments. This was despite the phased implementation of an amended double taxation avoidance agreement with these countries effective from April 2017 to prevent evasion of taxes on income and capital gains," it said.

With the ongoing policy reforms in sectors ranging from single-brand retail trading, civil aviation, real estate broking service and simplification of the legal and regulatory system, India moved into the top 100 countries in the World Bank’s Ease of Doing Business global rankings, it said.

According to the UNCTAD’s Investment Trends Monitor (2018), India was the 10th largest recipient of global FDI in 2017 and remained the topmost destination for greenfield capital investment – even ahead of China and the US, if reckoned on an approval basis (FDI market intelligence 2017).