India records 26 pc jump in FDI flows in first quarter

MUMBAI — The gross foreign direct investment (FDI) flowing into the Indian economy has surged by 26.4 per cent to $22.5 billion during the April-June quarter of the current financial year compared to the same quarter of the previous year, according to the RBI’s latest monthly bulletin.

This has resulted in net FDI shooting up to $6.9 billion during the first quarter of 2024-25, compared to $4.7 billion in the same period of 2023-24, the report states.

Manufacturing, financial services, communication services, computer services, electricity and other energy sectors accounted for about 80 per cent of the gross FDI inflows.

The major source countries for the FDI include Singapore, Mauritius, the Netherlands, the US, and Belgium which account for as much as 75 per cent of the FDI, according to the RBI report.

Net FDI flow had dropped sharply to $9.8 billion in 2023-24 from $28 billion in the previous year. In FY22, net FDI flows into the country were $38.6 billion.

The report is upbeat on the performance of the country’s external sector.

 “There are signs of a revival of net exports as a lever of India’s growth as after the contraction in 2023- 24, outbound shipments from the country are undergoing an expansion in 2024-25 so far. Barring China, nine of the top 10 destinations accounting for about half of the total value of exports are recording growing demand,” according to the report

India’s export basket is also undergoing a shift towards electronics and engineering goods even as traditional products such as gems and jewellery, textiles, garments, leather products and marine products are losing competitiveness, the report points out.

The report also states that global capability centres are setting the next steps in this export drive, including in the evolution of business and knowledge process outsourcing.

The business services that support operations such as consulting, engineering, research and design are rapidly becoming India’s export powerhouse, surpassing software and information technology, the report adds.

RBI Governor Shaktikanta Das said earlier this month that India’s foreign exchange reserves reached a historical high of $675 billion as of August 2, 2024 as overall, India’s external sector remains resilient with key indicators continuing to improve.

 “We remain confident of meeting our external financing requirements comfortably,” Das said.

He also said that India’s current account deficit (CAD) moderated to 0.7 per cent of GDP in 2023-24 from 2.0 per cent of GDP in 2022-23 due to a lower trade deficit and robust services and remittances receipts. In Q1:2024-25, the merchandise trade deficit widened as imports grew faster than exports, he added.

The RBI chief further stated that buoyancy in services exports and strong remittance receipts are expected to keep CAD within a sustainable level in Q1:2024-25.