Foreign direct investment (FDI) in India fell 24.5 per cent year-on-year (Y-o-Y) to $9.34 billion in the January-March quarter of 2024-25 but grew 13 per cent at $50 billion during the entire FY25, according to the government data released on Tuesday. FDI inflows during Q4FY24 stood at $12.38 billion. These were $44.42 billion in FY24.
During the October-December quarter of 2024-25 also, the inflows were contracted by 5.6 per cent Y-o-Y to $10.9 billion due to global economic uncertainties.
Total FDI, which includes equity inflows, reinvested earnings and other capital, grew by 14 per cent to $81.04 billion during the last financial year. It is the highest in the last three years. The same stood at $71.3 billion in 2023-24.
During 2024-25, Singapore emerged as the largest source of FDI with $14.94 billion inflows. It was followed by Mauritius ($8.34 billion), the US ($5.45 billion), the Netherlands ($4.62 billion), the UAE ($3.12 billion), Japan ($2.47 billion), Cyprus ($1.2 billion), UK ($795 million), Germany ($469 million), and Cayman Islands ($371 million).
However, the data showed that when compared to 2023-24, the inflows had declined from the Netherlands, Japan, the UK, and Germany.
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Singapore accounts for 30 per cent share, Mauritius (17 per cent) and the US (11 per cent).
Sectorally, inflows rose in services, trading, telecommunication, automobile, construction development, non-conventional energy and chemicals. However, it has contracted in computer software and hardware, construction (infrastructure activities), and pharmaceuticals.
FDI in services has increased to $9.34 billion during 2024-25 as against $6.64 billion in 2023-24. According to the data, FDI inflows in non-conventional energy stood at $4 billion as against $3.76 billion in 2023-24. The data also showed that Maharashtra received the highest inflow of $19.6 billion during the last financial year. It was followed by Karnataka ($6.61 billion), Delhi ($6 billion), Gujarat (about $5.7 billion), Tamil Nadu ($3.68 billion), Haryana ($3.14 billion), and Telangana ($2.99 billion).
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The rupee depreciated to 85.34 per dollar on Tuesday after logging gains on two previous sessions, a fall attributed to rise in dollar index and crude oil prices, said dealers. The selling of domestic equities also weighed on the local currency.
The domestic unit had ended the previous session at 85.09 per dollar.
The dollar index rose by 0.43 per cent to 99.36 on Tuesday. It measures the strength of the greenback against a basket of six major currencies.
“The rupee weakened, retreating from a two-day surge, as the dollar strengthened against major currencies. This dollar recovery was fuelled by a rebound in US bonds, which in turn was prompted by indications from Japan that it is considering a reduction in its bond issuance. This news encouraged investors to seek alternatives in dollar-denominated assets,” said Dilip Parmar, senior research analyst at HDFC Securities.
“In the near term, the spot USDINR pair is anticipated to rise incrementally due to month-end adjustments and demand from oil importers,” he added.
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The local currency has appreciated by 0.1 per cent against the dollar in the current financial year so far, whereas, in the current calendar year so far, it has witnessed 0.3 per cent appreciation.
“There was month end demand for dollar from oilers, and dollar was up,” said a dealer at a state-owned bank.
“There is resistance at 85.75 per dollar, and on the other end around 84.75 per dollar,” he added.
The upcoming IPOs of Scoda Tubes and Groww, along with broader fundraising activity of around $3.4 billion, are expected to boost foreign institutional investor (FII) inflows, keeping the rupee afloat, said dealers.
However, market participants also said that expectations of additional rate cut in the upcoming MPC meeting is weighing on short-term rupee sentiment. The downward trend in bond yields is further narrowing the yield differential, adding pressure on the local currency.
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