FDI rose 23% in Covid-hit FY21; highest from Singapore

The tiny island nation of Singapore maintained its status as the country from where the highest Foreign Direct Investment (FDI) in India originated in FY21, data from the recently-released Reserve Bank annual report shows. With $15.908 billion worth of investments flowing in from the country with an area slightly bigger than Mumbai, Singapore accounted for more than 30% of the total FDI of $52.54 billion last year.

25% from US
In comparison, the inflow from the US was $13.204 billion, or 25.13% of the total FDI.

Total FDI into India rose from $42.629 billion in FY20 to $52.545 billion last year – a rise of 23.26%.

FDI & jobs
FDI is extremely important for the economy since it is directly related with employment of Indians. Unlike portfolio investments, FDI creates permanent physical assets such as factory, plant and machinery that cannot be taken out from the country.

Because of its permanent nature, FDI also represents deeper trust of the investor in the economy where the funds flow in.

Significantly, FDI from Singapore and the US both rose in FY21 in comparison to FY20.

9 out of 17
Out of the 17 countries named in the list, inflows from 9 countries — Singapore, the US, UAE, Saudi Arabia, Germany, Spain, Luxembourg, Taiwan and Switzerland – rose in FY over FY20.

The biggest rise in investment was from Saudi Arabia that rose from $0.089 billion in FY20 to $2.815 billion last year.

Investments from the US, too, rose from $3.401 billion in FY20 to $13.204 billion in FY21.

Computer services
Broken down into sectors, computer services registered a more than 500% rise in FDI – from $4.104 billion in FY20 to 23.05 billion in FY21. It accounted for almost 44% of the entire FDI that came into the country last year.

Incidentally, information technology was the only sector apart from pharmaceuticals that registered growth in sales in all the four quarters of Covid-hit in FY21.

Out of 15 sectors, investment in only four sectors went up last year. These were IT, transport, education and R&D and miscellaneous services.

9 down
Investments went down in retail-wholesale trade, manufacturing, financial services, communication services and business services, construction, electricity, real estate, restaurant and hotels, mining.

Consistent with the trend in the pandemic, FDI in hotels and restaurants suffered a steep decline from $2.546 billion in FY20 to $0.278 billion last year.

Hospitality worst-hit
Incidentally, the hospitality sector was the only sector to suffer a negative growth rate in all the quarters of FY21, RBI said in another report earlier this month.

Manufacturing, too, lost big ground over a five-year horizon. While $11.972 billion flowed into this sector in FY17, when the total FDI stood at $36.317 billion, it attracted a mere $4.491 billion in FY21 – a drop of 62.48%.