India’s net FDI hits all-time high in FY21

India's net foreign direct investment (FDI) reached a new high of $43.366 billion in the year ended March 2021, surpassing the previous high of $43.013 billion set in the previous fiscal year.

FDI saw a major boost from stake sales by Reliance Industries (RIL) group firms, which raised about $35 billion during the fiscal year, despite the fact that it was a Covid-hit year, reports the Indian Express.

According to data released by the Reserve Bank of India (RBI), direct investment into India totaled $54.665 billion in FY21, while FDI into India totaled $11.299 billion, resulting in a net FDI of $43.336 billion.

The selling of stakes by RIL group companies to Facebook, Google, and a host of other global investors boosted FDI flows significantly in India.

During the year, the group raised more than $35 billion by selling stakes in Jio Platforms and Reliance Retail, accounting for more than 64% of total FDI earned by India.

Beside the FDI, even the foreign portfolio investments jumped significantly. In the year ended March 2021, the FPI inflows into debt and equities amounted to $36.18 billion. It was only second to net FPI flows of $45.6 billion received in fiscal 2014-15. FPI inflows into equities, however, hit a new high of $37 billion during the year.

The strong inflow of FDI and foreign portfolio investor (FPI) money ensured that the forex reserves jumped significantly. In the financial year ended March 2021, the foreign exchange — or forex — reserves jumped by over $100 billion and amounted to $576.8 billion as on week-ended April 2, 2021.

Four states — Maharashtra, Gujarat, Karnataka and NCT of Delhi — accounted for nearly 90 per cent of the FDI inflows received during the year, with Maharashtra receiving nearly over 46.67 per cent of the flows, followed by Gujarat at 24.38 per cent, according to government data for first nine months of the previous financial year.

Flows have been driven both by pockets of growth in the Indian economy as well as record amount of liquidity being injected by global central banks, which is chasing promising assets across the world.

IT, pharma, telecom and digital economy sectors attracted most of the flows.

Industry executives expect the trend to continue despite the raging Covid-19, as FDI investors typically have a multi-year view on their investments.

Production-linked incentive scheme offered by the government for several sunrise sectors, potential growth in digital economy segments, as well as privatisation plans of the Central government are being seen as the pull factors for foreign investors.

Apart from FDI, FPI flows have also surged into the economy, compared to sharp outflows seen in immediate months after the Covid-19 hit the economy last March.

"FY 2020-21 was a bullish year for stock markets, supported by stimulus measures, surplus liquidity and record FPI flows. FY 2020-21 witnessed a record FPI inflow of USD 36.2 billion, the highest in a decade after 2014-15," according to the Ministry of Finance's Monthly Economic Report for April.