FDI Equity inflows more than doubled in Q1 FY21

by mehekkaoberoi


  • Global FDI flows moderated significantly since the eruption of the global financial crisis in 2008, albeit with an uneven pattern across regions and countries.
  •  Though initially developing countries showed some resilience, the crisis eventually spread through the trade, financial and confidence channels and FDI flows declined in both the advanced and developing economies during 2009.
  • Subsequently, while FDI flows to advanced countries continued to decline, FDI flows to many of the Latin American and Asian countries witnessed strong rebound during 2010 on the back of improved corporate profitability and some improvement in M&A activities.
  • FDI flows to India also moderated during 2009 but unlike trends in other EMEs, flows continued to be sluggish during 2010 despite strong domestic growth ahead of global recovery. This raised concerns for policy makers in India against the backdrop of expansion in the current account deficit.
  •  When the global FDI flows to EMEs recovered during 2010-11, FDI flows to India remained sluggish despite relatively better domestic economic performance ahead of global recovery. This has raised questions especially in the backdrop of the widening of the current account deficit beyond the sustainable level of about 3 per cent.
  • The Government of India on April 1, 2011 to further liberalize the FDI policy to promote FDI inflows to India took a number of efforts to boost India’s image as a preferred investment destination and attract FDI inflows to India in the future.


  • Foreign Direct Investment (FDI) stocks measure the total level of direct investment at a given point in time, usually the end of a quarter or of a year. The outward FDI stock is the value of the resident investors’ equity in and net loans to enterprises in foreign economies. The inward FDI stock is the value of foreign investors’ equity in and net loans to enterprises resident in the reporting economy.
  •  FDI stocks are measured in USD and as a share of GDP. FDI creates stable and long-lasting links between economies.
  • Foreign Direct Investment (FDI) flows have grown rapidly in size and importance in recent decades. They are an important source of capital in emerging markets and make up a significant proportion of GDP in many countries around the world.
  • A  third of the inflows have been due to acquisition of shares through secondary transactions rather than investments by companies in plants, helping the country amass durable foreign exchange reserves in the process.

Сurrent  Sсenаriо:-

  • According to government statistics, FDI entering the country more than doubled to $17.57 billion in April-June this fiscal year from $6.56 billion the previous year.
  • In the first quarter of FY22, total FDI inflows increased to $22.53 billion, up from $11.84 billion the previous year. Inflows of equities, earnings reinvested, and other capital make up total FDI.
  • In the first three months of 2021-22, FDI equity inflows increased by 168 percent ($17.57 billion) over the same period the previous year ($6.56 billion).
  • The automobile industry attracted the most FDI, accounting for 27% of total FDI equity inflows, followed by computer software and hardware at 17% and services at 9%.


  • They provide a comprehensive summary of the impacts of such capital movements, ranging from increased technology spillovers to a decrease in the destination country’s stock market’s market value.
  • Increased foreign investment in a country’s stock markets shows that the markets are trending upward. The market may be showing symptoms of stress if foreign investment is declining. Keeping track of foreign investors might help you decide when it’s the right time to invest.
  • As the equity inflow increased, investors from outside India continued to pour money into India’s markets. 60 percent of overall foreign investment is made up of foreign direct investment (FDI) and venture capital (VC) investments.
  • In the first three months of 2021-22, FDI equity inflows increased by 168 percent. Karnataka was the leading beneficiary of FDI equity inflows in the quarter, accounting for 48 percent of total FDI equity inflows, followed by Maharashtra (23%), and Delhi (11%).
  • As a result of the preceding facts, it can be stated that foreign direct investment has surged, and the stock market is in a boom phase. As a result, stock prices will rise  in the near future.

Curated by-Meghna.Manoj

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