The country was able to attract $1.46 billion in foreign direct investment in FY23 – the same level as FY13, but lower than what it has been annually in the past seven years barring FY19. The level of foreign investment in the country is nothing worth excitement while the FDI challenges continue to burden the already weak investment landscape.
The latest data released by the central bank shows that the FDI in FY23 was down by 25 percent year-on-year. FDI in June more than halved to $114 million from $271 million in the same month a year ago. Yearly data show key trends. Net FDI in FY23 has declined continuously over the last 4 years and was the weakest in FY23. What is worrisome is the fact that the consecutive decline over the last 4 years was also seen in FDI inflows with weakest FDI inflows in FY23 over the last 4 years. The FDI outflows have remained between $650 and $750 million except FY21 when outflows increased specifically from the telecom sector. Moreover, the FDI from China, which continues to be the largest investor in the country particularly in the power sector, has also come down over these years along with rise in FDI outflows.
The focus should be on streamlining the long-standing structural bottlenecks in the investment climate such as streamlining the FDI approval process. At the same time stability in the country’s economic and political scenario is critical for any resurgence of investment in the country. Poor economic and political climate have been additional factors in bogging down the business and investment in the country over the last one year. Yet another factor – rather sub-factor of the uncertainty in the country has been the holding back of profits and dividends of the MNCs to control dollar outflow, which has left scared away foreign investors tremendously as they see the existing foreign investors unable to repatriate their earnings to their home countries.
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