Foreign direct investment (FDI) in India surged by 47.8% to $16.17 billion during April-June 2024.

Experts predict that this growth will likely continue, driven by factors such as a potential Federal Reserve rate cut, modest economic growth in the US, and India's favourable economic outlook.

In addition, experts noted that investment patterns have evolved over the past decade, with capital increasingly flowing into new and emerging sectors, Business Standard reports.

According to Rumki Majumdar, Economist at Deloitte India, investment destinations have shifted over the past eight years. Today, sectors such as power, construction, healthcare, chemicals, and non-conventional energy have become more appealing to investors.

“We foresee this trend of strong FDI to accelerate in the coming quarters. The anticipated US election results, a potential Fed rate cut, modest growth outlook in the US, and India's favourable economic outlook will likely attract global investors to India,” she stated.

Furthermore, Aakash Dasgupta, Partner at IndusLaw, noted that while FDI inflows showed a significant increase in the first quarter of 2023-24 compared to the same period in the previous financial year, it's important to consider that FDI in Q1 of FY23 was unusually low.

FDI inflows stood at $10.94 billion in April-June 2023-24. He explained that the current inflows are returning to levels seen in the years before the last year. As such, while the increase appears substantial in relative terms, it should be viewed as a correction to previous levels rather than an anomaly.

“Irrespective, it's a positive indication and can be attributed to various factors, including deployment pressures mounting on the dry powder that foreign institutional investors are sitting on, performance of Indian capital markets in various sectors and favourable amendments to the FDI policy, such as allowing 100% automatic route investment in the space sector,” Dasgupta said.

Moreover, government data revealed that overseas inflows increased to $5.85 billion in May and $5.41 billion in June, up from $2.67 billion and $3.16 billion in the same months last year, respectively.

In April, FDI inflows saw a slight decrease to $4.91 billion compared to $5.1 billion in April 2023. 

However, total FDI, encompassing equity inflows, reinvested earnings, and other capital, grew by 28% to $22.49 billion in the first quarter of this fiscal year, up from $17.56 billion during April-June 2023-24.

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