FOREIGN DIRECT INVESTMENT - ECONOMY
News: FDI flows unlikely to rebound before 2024-25
What is in the news?
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Recently, Nomura said
that the net foreign direct investment (FDI) flows into India, which declined
25.6% in 2022-23 to $28.7 billion, are likely to remain steady this year as
well and may only rebound from 2024-25 onwards.
Key takeaways from the news:
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The decline in FDI flows
last year, from $38.6bn in 2021-22 and $43.5bn in the year before that, was
more likely due to global push factors such as tighter monetary policies in
developed markets.
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While
domestic pull factors like supply chain relocations were yet to materially lift
investment flows.
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Although sectoral flows
for the full year are yet to be released, Nomura reckoned the fall in inflows
was led by the services sector, with the largest component IT-related FDI
likely slowing due to lower investments in start-ups while inflows in autos,
construction and broader services fell too.
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As per data available
till December 2022, trading, pharma, energy and chemicals sectors saw a rise in
investments.
Foreign Direct Investment:
Definition:
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Foreign direct investment
(FDI) is a type of cross-border investment in which an investor from one
country establishes a lasting interest in an enterprise in another country.
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FDI can take various
forms, such as acquiring shares, establishing a subsidiary or a joint venture,
or providing loans or technology transfers.
Trend of FDI inflow:
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According to the Department for Promotion of Industry and
Internal Trade (DPIIT), India’s cumulative FDI inflow stood at USD 871.01
billion between April 2000-June 2022.
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According to the World Investment Report 2022, India has
ranked 7th among the top 20 host economies for 2021.
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India received the
highest-ever FDI inflows of USD 84.8
billion including USD 7.1 billion FDI equity inflows in the services sector
in FY22.