Manufacturing, power beat services as top FDI destination

As against the situation five years back, when the services sector cornered the bulk of the FDI inflows into the country, the manufacturing sector is clearly emerging as the new favourite for overseas investors, according to an RBI study on FDI inflows.

While this is largely on account of service sectors such as business and financial services losing out on inflows over the last few years, key manufacturing sectors and segments such as 'electricity and power generation' have been seeing renewed investor interest, resulting in the share of manufacturing with respect to total FDI inflows seeing a sharp spike.

From a sectoral perspective, the share of services with respect to total FDI inflows has come down from almost 57 per cent in 2006-07 to about 30 per cent in 2010-11.

On the other hand, the shares of manufacturing and 'others' —largely comprising 'electricity and power generation' sectors —has increased over the same period to over 32 per cent, up from less than 18 per cent.

In the past, FDI into India largely flowed into services sector — which had an average share of 41 per cent in the past five years — followed by manufacturing (around 23 per cent), mainly routed through Mauritius (with an average share of 43 per cent in the past five years) followed by Singapore (around 11 per cent).

In fact, sectoral information on the recent trends in FDI flows to India show that the moderation in gross equity FDI flows during 2010-11 has been mainly driven by sectors such as 'construction, real estate and mining' and services such as 'business and financial services'.

According to the Economic Survey 2011-12, the share of services in India's GDP has steadily increased from 33.5 per cent in 1950-51 to 55.1 per cent in 2010-11 and to 56.3 per cent in 2011-12. If construction is included, the share goes up to 64.4 per cent in 2011-12.

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