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Gross inward foreign direct investment (FDI) in FY23 declined 16.3 per cent on a year-on-year basis to $71 billion from $84.8 billion in FY22, according to RBI.
Net FDI declined to $28 billion in 2022-23 as compared with $38.6 billion a year ago, mainly due to moderation in gross FDI inflows and an increase in repatriation, according to an article titled ‘State of the Economy’ in RBI’s latest monthly bulletin.
“Manufacturing, computer services and communication services recorded the highest decline in FDI inflows compared with the preceding year.
“The major contributors towards the fall in inflows during the same period were the US, Switzerland, and Mauritius,” the article, put together by RBI officials, said.
- Also read:FDI equity inflows may revive in 2023-24 as several proposals in the pipeline: DPIIT official
The officials noted that India was the second largest recipient of FDI ($26.2 billion) in the semiconductor industry in 2022, second only to the US ($33.8 billion). In sharp contrast, China received only $0.5 billion as FDI in the semiconductor industry.
Massive investments in capital-intensive chip FDI projects are underway, in line with the Government of India’s efforts to develop the industry, they added.
Foreign portfolio investors
Foreign portfolio investors (FPIs) turned net purchasers in domestic financial markets in April, primarily in the equity segment ($1.9 billion), which was supplemented by an inflow in the debt segment ($0.2 billion), the article said.
The authors underscored that financial services, capital goods, and oil, gas and consumable fuels saw the highest net portfolio investment during April 16- 30, 2023. In May (up to 15th), net purchases of FPIs were to the tune of $2.2 billion.
ECBs & NRI deposits
External commercial borrowing (ECB) registrations, which had picked up gradually during the first three quarters of 2022-23, moderated in Q4.
Amid rising global interest rates and greater uptick in domestic credit growth, ECB registrations fell by one-third to $26.6 billion during 2022-23, the authors said.
ECB inflows at $23.8 billion during 2022-23 were marginally higher than outflows.
“Other than an increase in on-lending/ sub-lending that displaced refinancing, ECBs raised during 2022-23 were clearly intended for financing modernisation, new and infra projects, import of capital goods and for local sourcing of capital goods,” as per the article.
The authors said that with tightening global financial conditions and concomitant rise in international reference benchmark rates, the overall cost of ECB loans rose steeply by 516 basis points (or 5.16 percentage points) between March 2022 and March 2023.
They observed that around 72 per cent of ECB agreement amounts were explicitly hedged or were rupee-denominated loans and loans from foreign parents.
Net accretions to non-resident deposits increased to $8 billion in 2022-23 from $3.2 billion a year ago, led by net inflows to Non-Resident Ordinary (NRO) and Foreign Currency Non-Resident [FCNR(B)] accounts, and Non-Resident (External) Rupee Accounts [NR(E)A].
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