FDI declines 16 per cent in FY’23, first y-o-y contraction in decade

Gross foreign direct investment (FDI) flows, for the first time in a decade, declined on an annual basis in 2022-23 to USD 71 billion mainly due to a slowdown in the global economy, according to the RBI data.The annual decline works out to be 16.3 per cent in 2022-23 compared to inflows in 2021-22. The gross FDI inflows in 2021-22 were USD 81.97 billion, up 10 per cent over fiscal 2019-20. The previous year-on-year contraction in FDI was in 2012-13 when the inflows declined by 26 per cent 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 too declined by nearly 27 per cent to USD 28 billion in 2022-23 as compared with USD 38.6 billion a year ago, mainly due to moderation in gross foreign direct investment inflows and an increase in repatriation, it added.

Manufacturing, computer services and communication services recorded the highest decline in FDI inflows compared with the preceding year. The major contributors towards the fall in inflows during the same period were the US, Switzerland, and Mauritius. The bulletin quoted ‘fDi Intelligence’, to say India was the second largest recipient of FDI (USD 26.2 billion) in the semiconductor industry for the year 2022, second only to the US (USD 33.8 billion).

Massive investments in capital-intensive chip FDI projects are underway, in line with the Government of India’s efforts to develop the industry, the article said. It further said foreign portfolio investors (FPIs) turned net purchasers in domestic financial markets in April, primarily in the equity segment (USD 1.9 billion), which was supplemented by an inflow in the debt segment (USD 0.2 billion).