In FY23, most FDI came from US, Mauritius and UK: RBI study

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The biggest economy on the planet was the largest source of foreign direct investment in India in the last financial year, scrutiny by the Reserve Bank has showed. The conclusion was preceded by a census of foreign assets and liabilities of firms with both inward and outward liabilities conducted by the central bank, The Economic Times has reported.

The countries to occupy the next positions on the totem pole in 2022-23 are Mauritius, the United Kingdom and Singapore. They together accounted for as much as 60% of the inward FDI in the last financial year.

In terms of market value, the FDI reached Rs 50 lakh crore in 2022-23.

Of all the types of foreign investment in a country, FDI is the most preferred by all governments in all countries. The reason is simple: they create income-generating assets such as factories, buildings, plant and machinery, create employment, boosts output of a country and even raises export capability in some cases. While investments in financial assets can be pulled out at any time, FDI is permanent in nature.

If overseas direct investment is considered Singapore, the United States, the UK and the Netherlands were among the top four destinations. They accounted for 60% of the Rs 9.1 lakh crore invested by Indian businesses abroad in the last financial year.

One of the findings by the RBI study showed that in 2022-23, the market value of inward foreign direct investment rose by 6.9% in rupee terms. One of the key drivers was the increase in FDI in unlisted companies. In terms of market value, however, the pace of outward investment by Indian companies was higher than the growth in FDI. As a consequence, the ratio of inward to outward investment stood at 5.5 times in March 2023 as compared to 6.1 times a year ago. The ratio of inward FDI to outbound FDI was 5.6 times two years ago.

Despite its shrinking presence in the country’s GDP compared to the services sector, the manufacturing domain kept attracting the largest share of FDI equity pie. This was evident in both the market value as well as at face value. In the services basket, ‘information & communication’ and ‘financial & insurance activities’ attracted the biggest share of the inward FDI.

The Reserve Bank released the provisional results of the 2022-23 round of the annual census on foreign liabilities and assets (FLA) that covered cross-border liabilities and assets of all companies, limited liability partnerships, alternative investment funds and partnership firms.