Foreign direct investment in the services sector dipped 9 per cent to $1.08 billion during April-August this fiscal.
The services sector, which includes banking, insurance, outsourcing, R&D, courier and technology testing, had received FDI worth $1.19 billion during the first five months of the previous fiscal, 2013-14, according to the data by Department of Industrial Policy and Promotion.
The services sector contributes over 60 per cent to India’s GDP. In 2013-14, foreign investment in the sector fell to $2.2 billion from $4.83 billion in 2012-13.
Due to decline in important sectors like services, overall foreign inflows have dipped about 10 per cent in August.
The other sectors, which have recorded decline in foreign investment during the first five months of this financial year, include construction, pharmaceuticals, automobile and metallurgical industries.
Foreign investments are considered crucial for India, which needs around $1 trillion over five years (2012-17) to overhaul its infrastructure sector such as ports, airports and highways to boost growth.
Decline in foreign investments could put pressure on the country’s balance of payments and may also impact the value of the rupee.
On October 22, the Indian rupee had closed at 61.27 against the US dollar.
The government is taking steps to boost inflows into the services sector and has decided to raise the FDI limit to 49 per cent in the insurance sector from the current level of 26 per cent.