Foreign direct investments (FDI) experienced a notable surge of 47.8%, reaching US$ 16.17 billion for the period of April to June 2024. This uptick is attributed to a combination of factors including potential Federal Reserve rate cuts, moderate growth expectations in the US, and favourable economic conditions in India. Investment preferences have evolved over the past decade, with sectors like power, construction, healthcare, chemicals, and non-conventional energy becoming more appealing, according to Deloitte India’s Economist, Ms. Rumki Majumdar.
She predicts that strong FDI trends will persist, influenced by anticipated US election results, possible Fed rate adjustments, and India’s robust economic performance. IndusLaw’s Partner, Mr. Aakash Dasgupta, highlighted that while FDI inflows have significantly improved compared to the same period last year, the previous quarter’s FDI levels were unusually low. Current inflows are approaching pre-last year’s figures, indicating a positive correction. Contributing factors include growing deployment pressures on foreign institutional investors, strong performance in Indian capital markets, and favourable changes in FDI policy, such as the introduction of a 100% automatic route investment in the space sector. Despite the need to watch the impact of upcoming US elections on FDI flows, the general outlook remains optimistic. Government data shows that overseas inflows reached US$ 5.85 billion in May and US$ 5.41 billion in June, up from US$ 2.67 billion and US$ 3.16 billion in the same months of the previous year. Although FDI inflows in April slightly decreased to US$ 4.91 billion from US$ 5.1 billion in April 2023, total FDI, including equity inflows, reinvested earnings, and other capital, grew by 28% to US$ 22.49 billion for the first quarter of the fiscal year, up from US$ 17.56 billion in April-June 2023. Significant increases in FDI equity inflows were noted from Mauritius, Singapore, the US, the Netherlands, the UAE, the Cayman Islands, and Cyprus.
