FDI in services sector up 85.5 pc in Apr-Dec

With the government taking steps to improve ease of doing business and attract foreign investment, FDI inflows into the services sector grew by 85.5 per cent to USD 4.25 billion in April-December period.

The sector, which includes banking, insurance, outsourcing, R&D, courier and technology testing, had received foreign direct investment (FDI) worth USD 2.29 billion during April-December 2014, according to the Department of Industrial Policy and Promotion (DIPP).

The services sector contributes over 60 per cent to Indian GDP. FDI in the sector accounts for 17 per cent of the country’s total foreign investment inflows.

The other sectors where inflows have recorded growth are: computer software and hardware (USD 5.3 billion), trading (USD 2.71 billion), automobile (USD 1.78 billion) and chemicals (USD 1.19 billion).

In step with growth in FDI in important sectors like services, overall foreign inflows in the country rose by 37 per cent to USD 39.32 billion during the first nine months of 2015-16. The amount was USD 28.78 billion in the year-ago period.

An official said with the government further liberalising foreign investment policies for the services sector in the Budget, more inflows would come.

Finance Minister Arun Jaitley has proposed significant liberalisation of FDI norms in a host of sectors including insurance, pension, ARCs and stock exchanges.

In the insurance and pension sectors, foreign investment will be allowed through automatic route for up to 49 per cent subject to the guidelines on Indian management and control, to be verified by the regulators.

Earlier, foreign investment up to 26 per cent was allowed through automatic route.

Foreign investment is considered crucial for India, which needs around USD 1 trillion for overhauling its infrastructure sector such as ports, airports and highways to boost growth.

A strong inflow of foreign investments will help improve the country’s balance of payments situation and strengthen the rupee value against other global currencies, especially the US dollar.