Foreign Direct Investment (FDI) and Portfolio Investment India

India's total foreign investment inflows stood at an all time high of USD 12.3 billion in March 2019.

Published monthly by RBI. Updated till March 2019 (published on May 9th, 2019)

Recent Data Trend

India witnessed a surge in its total foreign investment inflows to USD 12.3 billion in March 2019, a highest since October 2010. The country attracted a strong flow of funds from foreign institutional investors in March 2019, who poured in USD 9.6 billion compared to USD 0.9 billion in the last month. This resulted in a two-year high net portfolio investment of USD 8.6 billion in March 2019, leading to a rise in total foreign investment in the country. The net foreign direct investment which comprises of equity capital, reinvested capital and other capital also climbed up to USD 3.7 billion in March as against USD 2.4 billion in the last month.

A rise in net FPI inflows is due to increased chances of Modi returning as a prime minister after elections, which has kept foreign investors bullish on India. India's retaliatory military strike on Pakistan in February 2019 increased the winning prospects of the ruling coalition government in the 2019 general elections. A dovish stance taken by RBI and Central Banks globally has also helped revive the sentiments towards the Indian market.

The return of foreign capital amidst slowing global demand and US-China trade war at the end of the FY19 is surely a good news for India. As it can put some pressure off the country's balance of payments and will also help in stabilizing Indian currency. While optimism about the political stability at the centre led to a strong inflow of funds by foreign investors, a spike in global crude oil prices due to supply cuts by OPEC may play the spoiler in coming months through increased import bills for India.

Brief Overview

Foreign Institutional Inflows (FIIs) imply investments registered in a country outside of the one in which it is investing. It constitutes Foreign Direct Investment(FDI), Equity inflows, Non-Residing Indian (NRI) Deposits, etc. However, FDI has been the most attractive form of capital inflow. By definition, FDI is an investment made by a company or individual in one country in business interests in another country, in the form of either establishing business operations or acquiring business assets in the other country, such as ownership or controlling interest in a foreign company. Portfolio investment, on the other hand, is a hands-off or passive investment of securities in a portfolio, and it is made with the expectation of earning a return. It is distinct with FDI which involves taking a sizable stake in a target company and possibly being associated with its day-to-day management. From a sectoral perspective, FDI has mostly flowed into the services sector, followed by the manufacturing sector. In India, foreign investment was mainly introduced in 1991 under the Foreign Exchange Management Act (FEMA). The two routes under which foreign investment can be made are the automatic route and the government route.

Historically, there has been a sea of change in India's approach towards foreign investment since the early 1990s. Pre-liberalisation, FDI through foreign collaboration was only allowed in specific sectors related to high technology. A major shift occurred post-1991 reforms, whereby, restrictions were gradually removed in low technology areas. Over the last decade, reform measures have steadily gained momentum, as is evident from the ever-increasing volumes of FDI inflows being received in India.

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Next Release Date:  June 7th, 2019

Foreign Investment-Quarterly

Foreign Investment-Annual

FDI inflows by Sector