The Union Government has termed a 15 percent year-on-year fall in foreign direct investment (FDI) inflows to $43.17 billion during the April to December 2022 period as a "realistic reorganisation of the FDI bubble" due to shrinking of investments in startups, which had come up during the COVID-19 pandemic and had attracted investment in software.
Pointing to an 82 percent rise in overall FDI and 57 percent rise in FDI in manufacturing in the past eight years, in comparison to the preceding eight years, a government official told CNBC TV18 that 60 percent of the FDI inflow has been affected by global semiconductor concerns in computer hardware, construction, services, software and the auto industry.
A government official said that while an expansionary monetary policy before and during the pandemic affected global stock markets, major FDI source countries used funds for local investment in the last one year which squeezed off venture capital funding even as interest rates rose in the US, UK, Netherlands and Singapore.
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As per the government data, the top seven source nations of FDI in India are Singapore, Mauritius, US, Netherlands, Cayman Islands, Japan and UAE, respectively.
Referring to India's 7th rank in the UNCTAD World Investment Report (WIR) 2022 on analysis of global trends in FDI inflows, the government official pointed that the country has witnessed a 4 percent year-on-year rise in FDI during the 2022 calendar year.
While the government hopes for a rise in FDI inflows by the end of the current fiscal, it projects that many FDI proposals in pipeline may see frontloading on to the next fiscal. Pointing to a rise in FDI in sectors such as pharmaceuticals, food processing and medical appliances; the government official said that it is being hoped that the budgetary allocation of Rs 10 lakh crores for capex in construction will attract larger FDI.
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