India is fast regaining its lost status as a foreign direct investment (FDI) hotspot, and the booming e-commerce and new economy companies may have got a lot to do with this turnaround.
According to a London-based business daily Financial Times (FT) report, India has outstripped China and the US as the most favoured FDI destination during the first six months of 2015.
FDI inflows into India during January-June stood at $31 billion, ahead of China’s $28 billion and the USA’s $27 billion, the FT said in a report under the headline “India grabs investment league pole position”.
The government doesn’t put out company-wise disaggregated sector-wise FDI inflow numbers. Available data, however, suggests that venture capital and private equity funds are pumping in billions of dollars into the fledgling e-commerce industry driven by an optimism of a fast-expanding mobile Internet universe, which may have swung the scales in India’s favour in the global FDI sweepstakes.
Services sector, which included industries such as business outsourcing, courier companies and financial services, was the top FDI recipient in 2014-15, attracting investment worth $3.25 billion, followed by telecom at $2.89. Trading, which could include some e-commerce marketplaces, came a close third with $2.76 billion, followed by automobiles at $2.57 billion and computer hardware and software companies at $2.2 billion.
During April-June this year, computer hardware and software companies, which include some technology firms offering e-commerce services, received $2.55-billion FDI, mirroring the clamour among overseas investors to invest in India’s booming online trading space.
“I have not examined the sectoral break-down in terms of FDI. The important thing is that we should focus on inflow of FDI,” chief economic adviser Arvind Subramanian told HT. “We need a FDI and we should not be obsessed with where it is coming from and which sectors it is going into.”
Analysts said the multiplier effects of the recent FDI inflow need to be seen, in additional job creation, before opening the bubbly.
“Programmes like Make in India, Digital India definitely have contributed in lifting the investor sentiment, but the idea of making India an accelerating economy will be when India starts attracting investments in manufacturing, which will create jobs more than the services of new-age sectors like e-commerce” said Akash Gupt, partner regulatory, PwC.