Foreign Direct Investment (FDI) and Portfolio Investment India

India's total foreign investment inflows stood at USD 3.1 billion in Jan'19.

Published monthly by RBI. Updated till January 2019 (published on March 14th, 2019)

Recent Data Trend

The net foreign direct investment which comprises of equity capital, reinvested capital and other capital showed a continued expansion and stood at USD 3.8 billion in Jan'19 as against USD 2.7 billion in the last month. Foreign Portfolio Investment (FPI), on the other hand, declined to USD -0.6 billion in Jan'19. The FPI outflows led to an overall decline in foreign investment inflows to USD 3.1 billion as against USD 3.8 billion last month.

Country-specific data suggests that Singapore was the largest source of FDI so far in FY19, contributing around 35% to total direct investment to India. It was followed by Mauritius (16%), the Netherlands (8%) and Japan (6%).

In FY19 from Apr-Jan, foreign portfolio investors remained net sellers of Indian equities. The Net FPI outflows stood at USD 11.9 billion during this period. Fluctuating global crude oil prices and unstable rupee continues to impact foreign portfolios investment in India. In addition, lack of policy certainty along with upcoming elections can also be attributed for the reduction in FPI inflows in Jan'19.

In the coming months, if FPI continues to decline it can have a bearing on the rupee. Along with this, The rising trend in FDI might be short-lived as there has been a decline in GDP forecast (by the Central Statistical Office) and a slowdown of growth in the industrial sector as seen in Jan'19.

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: April 12th, 2019

Foreign Investment-Quarterly

Foreign Investment-Annual

FDI inflows by Sector