Foreign Direct Investment (FDI) Witnesses 16% Decline In FY23, First Annual Contraction In A Decade

Gross foreign direct investment (FDI) flows witnessed a notable decline in the fiscal year 2022-23, amounting to USD 71 billion, marking the first annual decrease in a decade.

The decline can be attributed primarily to the global economic slowdown, as reported by the RBI. In comparison to the previous fiscal year of 2021-22, the annual decline amounted to 16.3 percent.

The gross FDI inflows in 2021-22 stood at USD 81.97 billion, reflecting a 10 percent increase compared to the fiscal year 2019-20.

The previous year-on-year fall in FDI was in 2012-13, when inflows fell by 26% to USD 34.298 billion.

"Gross inward FDI flows stood at USD 71 billion in 2022-23, registering a decline of 16.3 per cent on a y-o-y basis," as per an article published in the RBI's latest monthly bulletin.

Net FDI also fell by roughly 27% to USD 28 billion in 2022-23, from USD 38.6 billion the previous year, owing to a slowdown in gross foreign direct investment inflows and an increase in repatriation, it noted.

When compared to the previous year, manufacturing, computer services, and communication services witnessed the highest fall in FDI inflows.

The main contributors to the drop in inflows during the same period were the United States, Switzerland, and Mauritius.

According to the bulletin, India is the second largest beneficiary of FDI (USD 26.2 billion) in the semiconductor industry for the year 2022, trailing only the United States (USD 33.8 billion).

Massive investments in capital-intensive chip FDI projects are ongoing, in keeping with the Government of India's plans to promote the industry, according to the report.

It also stated that foreign portfolio investors (FPIs) became net purchases in domestic financial markets in April, largely in the stock segment (USD 1.9 billion), with a 0.2 billion inflow in the debt segment.