Foreign Direct Investment (FDI) and Portfolio Investment India

India's total foreign investment inflows stood at USD 2.5 billion in Nov'18.

Published monthly by RBI. Updated till November 2018 (published on December 10th, 2018)

Recent Data Trend

The net foreign inflows stood at USD 0.8 billion in Nov'18 compared to USD 0.9 billion in Nov'17. Foreign portfolio investment which comprises of equity capital, reinvested capital and other capital expanded to USD 1.7 billion in Nov'18. The total investment inflow showed an improvement after falling in the previous month and stood at USD 2.5 billion.

India is said to have received more foreign investment than its neighbor China for the first time in over 20 years. In 2018, India received USD 38 billion of inbound deals compared to China's USD 32 billion. Global investors have been interested in investing in India despite short-term uncertainties. India has mainly been attracting investments from countries like Mauritius, Singapore, Japan, U.K, Netherlands, US and Germany. The services sector received maximum FDI during 2018.

The worrying part has been in the foreign portfolio investments segment as the market lost its attractiveness among FPIs in 2018. Though Nov'18 has witnessed a reversal in the trend, the net portfolio investments stood at USD 1.7 billion compared to a negative USD 1.2 billion in Oct'18.

We believe, the latest inflow in foreign investments have been influenced by fall in crude prices, recovery in rupee against the dollar and improvement in liquidity situation. Expecting significant inflow from FPIs during the rest of the year will depend on the direction of crude prices, movement of rupee as well as the results from general elections next year. Despite the slight rise in foreign investment inflows as off Nov'18, covering the rising current account deficit which stands at 2.9% of GDP as of September 2018 will remain a challenge.

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: February 11th, 2019

Foreign Investment-Quarterly

Foreign Investment-Annual

FDI inflows by Sector