With government taking steps to improve the ease of doing business and attracting foreign investments, FDI inflows into the services sector grew by 44 per cent to $ 2.29 billion in the April-December period of the current fiscal.
The sector, which includes banking, insurance, outsourcing, R&D, courier and technology testing, had received foreign direct investment (FDI) worth $ 1.59 billion during April-December, 2013-14, according to the Department of Industrial Policy and Promotion (DIPP).
The government has announced a series of steps such as fixing timelines for approvals to improve ease of doing business in the country and to attract domestic and foreign investments.
In step with growth in FDI in important sector like services, overall foreign inflows in the country rose by 27 per cent to $ 21.04 billion during the first nine months of 2014-15. The amount was USD 16.56 billion in the year-ago period.
The services sector contributes over 60 per cent to India’s GDP. In 2012-13, foreign investment in services had fallen to $ 4.83 billion from $ 5.21 billion in 2011-12.
FDI in the sector accounts for 18 per cent of the country’s total foreign investment inflows.
The government is focusing on enhancing services exports.
It is organising a global services exhibition in April.
The other sectors where inflows have recorded growth are: telecom ($ 2.67 billion), automobile ($ 1.58 billion) and power ($ 576 million).
Government has raised the FDI cap in insurance sector to 49 per cent from 26 per cent. The policy was also relaxed in other sectors such as defence, railways and medical devices.
Foreign investments are considered crucial for India, which needs around $ 1 trillion over five years to 2017 for overhauling its infrastructure sector such as ports, airports and highways to boost growth.
A strong inflow of foreign investments will help improve the country’s balance of payments situation and strengthen the rupee value against other global currencies, especially the US dollar.