India's FDI Inflow Reaches US$ 70.9 Billion in FY24, Boosted by Construction and Power Sectors

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India Sees Robust FDI Growth with US$ 70.9 Billion Inflow in FY24, Led by Construction and Power Sec

Team finance Saathi

06/Jun/2024

Key Points:

India recorded a total FDI of US$ 70.9 billion in FY24, with October 2023 seeing the highest monthly inflow of US$ 6 billion.
The construction and power sectors saw more than double the FDI inflow in 2023-24.
Mauritius and Singapore were the top contributors, with Maharashtra being the major beneficiary state.

India's economic landscape has been significantly bolstered by a consistent inflow of Foreign Direct Investment (FDI), with the total FDI reaching US$ 70.9 billion in the financial year 2023-24 (FY24). This robust inflow underscores the country's attractive investment environment and strategic economic policies.

Record Monthly and Quarterly Inflows

The highest FDI during this period was recorded in October 2023, amounting to US$ 6 billion, followed closely by January 2024 with US$ 5.9 billion. The FDI equity inflow for FY24 stood at US$ 44.4 billion. Notably, the equity inflows for the quarter from January 2024 to March 2024 amounted to US$ 12 billion, marking a 33% year-over-year (YoY) growth.

Sectoral Growth

Key sectors that saw substantial FDI inflows include construction (infrastructure activities), construction development, and the power sector. These sectors more than doubled their FDI inflow in 2023-24, reflecting targeted investments aimed at bolstering infrastructure and sustainable energy projects.

Cumulative Inflows

The cumulative FDI inflow into India up to March 2024 stood at an impressive US$ 990 billion, with the cumulative FDI equity inflow reaching US$ 678 billion from April 2000 to March 2024. These figures highlight the long-term confidence and interest of foreign investors in the Indian economy.

Top Contributing Countries

Mauritius emerged as the largest contributor to India's FDI inflow with 25%, followed closely by Singapore with 24%. Other significant contributors included the USA (10%), the Netherlands (7%), and Japan (6%). Since 2018-19, Singapore has been the leading contributor to India's FDI inflow. However, in 2017-18, the maximum FDI was attracted from Mauritius.

State-wise Distribution

Among Indian states, Maharashtra was the major beneficiary, receiving 30% of the total FDI inflows in FY24. This was followed by Karnataka with 22%, Gujarat with 17%, Delhi with 14%, and Tamil Nadu with 5%. These states have emerged as key destinations for foreign investments due to their favorable business environments and strategic initiatives.

Economic Impact

FDI plays a crucial role in driving economic growth in India. It serves as an important source of non-debt finance for the country's economic development, helping to create jobs, enhance infrastructure, and foster technological advancements. The steady increase in FDI is a testament to India's economic resilience and its ability to attract and sustain global investments.

Analysis of Sectoral Performance

Construction and Infrastructure

The construction sector, including infrastructure activities, has seen a significant increase in FDI, reflecting investor confidence in India's urban development and modernization plans. The government's focus on infrastructure projects such as smart cities, highways, and housing has created numerous opportunities for foreign investors.

Power Sector

The power sector's doubling of FDI inflows highlights the growing emphasis on renewable energy and sustainable power solutions. Investments in solar, wind, and other renewable energy projects have surged, aligning with global trends towards sustainable development.

Historical Context and Trends

India's journey in attracting FDI has been marked by consistent policy reforms aimed at creating a favorable investment climate. From liberalizing FDI policies to improving ease of doing business, the Indian government has undertaken several measures to make the country an attractive destination for foreign investors.

Future Prospects

Looking ahead, India's FDI inflow is expected to continue its upward trajectory. The ongoing economic reforms, coupled with strategic initiatives in key sectors, are likely to attract more global investments. Sectors such as technology, healthcare, and financial services are poised for substantial FDI growth, driven by innovation and increasing market demand.

Conclusion

The US$ 70.9 billion FDI inflow in FY24 underscores India's strong appeal as a global investment destination. The significant contributions from Mauritius and Singapore, along with the robust performance of the construction and power sectors, highlight the strategic importance of foreign investments in India's economic development. As India continues to evolve as a major economic powerhouse, the role of FDI will remain pivotal in shaping the country's growth trajectory and its integration into the global economy.

With sustained policy support and a proactive approach to fostering a business-friendly environment, India is well-positioned to attract even more foreign investments in the coming years, driving economic growth and development across various sectors.

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