FDI in services sector drops 33.5% due to global credit crunch

NEW DELHI: Foreign direct investment in the services sector dropped by 33.5 per cent to $4.39 billion during 2009-10, mainly on account of the global credit squeeze.

However, the services sector, which includes financial and non-financial services, attracted the maximum foreign inflows out of all the sectors, according to the latest data of the Department of Industrial Policy and Promotion (DIPP).

In 2008-09, the country received $6.61 billion FDI in the services sector.

“The main reason for the decline in FDI in the services sector in 2009-10 was the global credit squeeze. The financial services sector was the worst hit,” CRISIL Principal Economist D K Joshi said.

Joshi added that if the eurozone crisis persists, it would impact the foreign inflows in the current fiscal also.

The UK, the Netherlands, Germany and France are the major investors in India.

FDI in computers and the hardware segment also slipped to $919 million from $1.67 billion in 2008-09.

The services sector attracted 21 per cent of the total foreign direct investment (FDI) inflows in April-March, 2009-10.

It was followed by construction activities, housing and real estate and telecommunications, which attracted $2.86 billion, $2.84 billion and $2.55 billion investments respectively during the previous financial year.

The highest FDI of $10.37 billion came from the Mauritius, followed by Singapore and the US. However, the contribution from Mauritius was less than in 2008-09, when the country received $11.2 billion FDI.

Overall, FDI during the fiscal declined to $25.88 billion from $27.33 billion in 2008-09.

Meanwhile, to attract more inflows into the country, the government is in the process of revamping FDI in sectors like defence, agriculture, multi-brand retail and real estate.

Source