Global slowdown almost halves equity FDI inflows in April-July
The drop is far higher when net FDI is taken into account. It went into a free fall from $17.28 billion in April-July 2022 to $5.70 billion in April-July 2023, translating into a drop of 67%
The economic slowdown in economic activity in the world, especially in the developed markets, is evident not only in declining exports but also reducing equity foreign direct investment (FDI) into India. It dropped from $22.04 billion in April-July 2022 to $13.9 billion in April-July this year – a fall by almost 37%, the Business Standard has reported.
The drop is far higher when net FDI – inflow into India minus the FDI Indian companies make abroad – is taken into account. It went into a free fall from $17.28 billion in April-July 2022 to $5.70 billion in April-July 2023, translating into a drop of 67%.
FDI is the most desired form of foreign investment in any country since it directly translates into permanent asset creation, economic activity and employment generation. In many cases it also raises export competitiveness of the destination country.
Gross FDI into India went down from $29.6 billion during April-July 2022 to $22 billion a year later, data from Reserve Bank of India stated.
About two-thirds of the FDI equity that came into the country were in manufacturing, financial services, business services, computer services, electricity and other energy sectors.
The countries they mainly came in from included the US, Singapore, Japan, the Netherlands and Mauritius in the same period, said the report.
The RBI’s State of the Economy article published in the September 2023 bulletin also mentioned that repatriation/disinvestment by those who made direct investments in India climbed to $13.18 billion in four months of FY24 from $8.81 billion in April-July 2022. This translated to a 33.15% rise.
The report mentioned fall in global economic activity in Q3 of calendar 2023 and structural shifts in the global economy and rising uncertainty. The concern that global growth might slow in 2024 after out-performing expectations in 2023 so far, was also mentioned.
Inflation challenge can float around and might be difficult to mitigate and central banks might be forced to maintain disinflationary stances well into 2024. The central banks might also grapple with stubborn price pressures.