Concerned over withdrawal of megaprojects of ArcelorMittal and Posco envisaging foreign investment of $18 billion, a top DIPP official said it will "hit" investor sentiments and impact FDI flow.
The Department of Industrial Policy and Promotion (DIPP) deals with foreign direct investment related matters.
Last week, the world's largest steel maker ArcelorMittal, in the biggest foreign investment pullout, scrapped its $12 billion (Rs 50,000 crore) steel plant in Odisha. South Korean steel major Posco too pulled out of Rs 30,000-crore steel mill in Karnataka.
The projects were scrapped mainly due to inordinate delays, problems in acquiring land and securing raw material linkages, among others.
"These moves would hit the sentiments of foreign investors and that too during the time when the country needs more FDI," the official said.
Experts too has raised serious concern over the pullout of these projects.
"Any such withdrawal will dampen the spirit of foreign investors," Head of Tax and expert on FDI with corporate law firm Amarchand & Mangaldas Krishan Malhotra said.
FDI inflows in India has registered a decline of 38% to $22.42 billion in 2012-13 as compared to $35.12 billion in 2011-12.
India would require around $1 trillion in the next five years to overhaul its infrastructure sector such as ports, airports and highways to boost growth.
Decline in foreign investments could put pressure on the country's balance of payments and may also impact the value of the rupee.
Rupee declined by about 10% during the lat two months and has touched an all time high of 61.21 against the US dollar.