Foreign direct investment (FDI) in India’s services sector, which contribute over 50 per cent in the country’s economic growth, declined by 22.5 per cent to $3.4 billion in 2010-11, according to the industry ministry’s latest data.
The services sector (financial and non-financial services) had attracted FDI worth $4.39 billion during 2009-10.
According to experts, global financial problems, particularly in the European markets are making players cautious of undertaking overseas investments.
Mauritius, Singapore, the US, UK, Netherlands, Japan, Germany and the UAE, among other countries, are the major investors in India.
“The decline is mainly because of global financial problems. There was a world wide downfall,” global consultancy firm KPMG Executive Director Mr Krishan Malhotra said.
However, Mr Malhotra said that now the situation is improving globally and hopefully India will attract more FDI in 2011-12.
The services sector, despite the 22.5 per cent dip in FDI, topped the chart in attracting maximum investment.
Telecommunications segment, including radio paging and cellular mobile, was the second best sector attracting investments at $1.66 billion, followed by automobile ($1.33 billion), power ($1.25 billion), housing and real estate ($1.12 billion) and metallurgical industries ($1.10 billion) during the period.
Country-wise, the highest FDI of $6.98 billion came from Mauritius, followed by Singapore ($1.70 billion), Japan ($1.56 billion), Netherlands ($1.21 billion) and the US ($1.17 billion).
Overall FDI inflows into the country dropped by 25 per cent to $19.4 billion during 20100-11 against $25.8 billion in the year ago period.
The government is taking steps like allowing FDI in Limited Liability Partnership (LLP) firms to attract more and more foreign inflows into the country.
The government is also considering to liberalise FDI policy in multi-brand retail sector. An Inter-ministerial Group headed by Chief Economic Advisor Mr Kaushik Basu yesterday has suggested that foreign investments in the multi-brand retail should be allowed at the earliest.