FDI investment still more in service sector than manufacturing sector: Ind-Ra report

Tags: Reports Economy/Finance

According to a research report published on 28 December 2022 by the India Ratings & Research (Ind-Ra) the Foreign Direct Investment (FDI) in India was still limited to few sectors and maximum investment was still in the service sectors. 

According to Ind-Ra despite the government’s effort to attract more investments in the manufacturing sector through “Make in India" campaign, the FDI inflow is still tilted in favour of the services sector," 

Ind-Ra believes this could be because doing business in the services sector is less complicated than doing business in the manufacturing sector in India. This could also be the reason for the majority of the FDI coming in the manufacturing sector is not a Greenfield investment.

Main points of the report 

The share of the services sector and computer software & hardware in the FDI between April 2014 and March 2022 were as high as 41.3% and 19.6%, respectively, while manufacturing accounted for just 25.4%.

Between April 2000 and March 2014, the share of the services sector and computer software & hardware in such inflows were 37% and 5.9%, respectively, and that of manufacturing was as much as 35.4%.

Of the total FDI inflow of $146.7 billion during October 2019 and March 2022, just four states attracted 83.0% of the FDI with Maharashtra accounting for 27.5%, Karnataka 23.9%, Gujarat 19.1% and Delhi 12.4%.

According to the report three distinct FDI corridors have emerged in India. They are the Delhi National Capital Region (NCR) in the North, Maharashtra-Gujarat in the west and Karnataka-Tamil Nadu-Andhra Pradesh-Telangana in the South.

Among the emerging market economies, India has done reasonably well in attracting FDIs. Only China has been consistently ahead of India.

According to the World investment Report 2022 of United Nations Conference on Trade and Development (UNCTAD), India is ranked 7 FDI destinations globally.

India Rating and Research (Ind-Ra)

India Ratings and Research (Ind-Ra) is a subsidiary of the global rating company Fitch. It is a credit rating agency headquartered in Mumbai. Ind-Ra is recognised by the Securities and Exchange Board of India and Reserve Bank of India.

Chairman, Managing Director and Chief Executive Officer: Rohit Karan Sawhney