InvestorQ : What explains the surge in foreign direct investments into India in the first half of 2020 fiscal year and do you think it can sustain?
diksha shah made post

What explains the surge in foreign direct investments into India in the first half of 2020 fiscal year and do you think it can sustain?

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1 month ago
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You are absolutely right that the foreign direct investment or FDI flows into India in the Apr-Aug period of 2020-21 hit a record high of $20 billion. This is despite a 60% contraction in Q1 ended June 2020, so most of the flows have come in the post June period.

Just consider the numbers. Cumulative FDI flows till the end of Aug stood at $35.73 billion with equity FDI being nearly 16% higher than the corresponding five months of the fiscal year 2019-20. That shows big growth on paper, but there is a deeper story to it.

The Commerce Ministry has gloated and patted itself on the back saying that this was a record five-month FDI flow into India. However, there is a catch to this argument which we cannot ignore and that needs to be kept in mind.

These FDI flows that the Commerce Ministry is talking about are flows that are largely dominated by FDI flows into Reliance group companies. Yes, we are referring to the huge FDI flows into Jio Platforms during the early part of this fiscal year.

This includes the $4.5 billion investment infusion by Google into Jio Platforms and the $8 billion infusion by Facebook into Reliance Industries telecom and digital venture. That puts the FDI flows in much better perspective, but the fact is that the money has come in.

To be fair, it is not just about Reliance, but there have been other stories too. In fact, experts have pointed out that this FDI flow number could have been actually been much higher had it not been for tensions on the China border. The cues are surely good.

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