India needs to work hard to maintain the momentum in foreign direct investments, says Kotak Institutional Equities.

“Even as India’s FDI profile remains steady amid slowing global investment flows, some cracks have started to appear,” the report said, adding India will have to strive harder for sustained FDI flows to compensate for the lack of domestic capex appetite.

With continued progress on the reform front in terms of legal, regulatory, governance and labour market, India’s position in terms of foreign investment inflows should improve further over time, the Kotak report said. However, there are some areas of concern such as bleak global FDI prospects, patchy foreign money in PE/M&As and limited progress made in the quality of manufacturing-related flows.

According to the Kotak study, the country saw an increase in greenfield investment proposals, with its share in global greenfield investment announcements growing to 7.6 per cent in 2016 from 2.9 per cent in 2013.

The country received greenfield investment proposals worth $63 billion in 2016, outdoing the US and China for the second consecutive year.

Foreign funds come into a host country broadly through two routes — greenfield investments and mergers and acquisitions. Greenfield investments are more desirable as they show immediate positive impact on employment generation, productivity and technological improvements.

Regional disparity is a salient feature while assessing FDI inflows. Much of the regional shift has been due to the e-commerce/start-ups segment losing steam in CY16, thereby slowing flows to States such as Delhi, Karnataka and Tamil Nadu.

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