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FDI equity inflows to service sector grew by 15%: Economic Survey

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New Delhi: FDI equity inflows to the services sector grew by 15.0% during 2017-18 (April-October). It has been possible because the Union government has reformed the systems and structures a lot to ensure that India remains an increasingly attractive investment destination. These measures include the announcement of the National Intellectual Property Rights (IPR) policy, implementation of GST, reforms for ease of doing business, the Economic Survey has noted.

The survey points out that the scale of reforms can be gauged from the fact that 25 sectors including services activities and covering 100 areas of FDI policy have undergone reforms over the past one year. FDI policy provisions were radically overhauled across sectors such as construction development, broadcasting, retail trading, air transport, insurance and pension.

At present, more than 90% of FDI inflows are through the automatic route. After the successful implementation of the e-filing and online processing of FDI application by the Foreign Investment Promotion Board (FIPB), the government announced the phasing out of the FIPB in the Union Budget 2017-18.

On 10 January, the Cabinet approved the amendments in FDI policy allowing 100% FDI under the automatic route for single-brand retail trading. Foreign airlines also have been allowed to invest up to 49% in Air India, the survey adds.

The survey further states that, though there is ambiguity in the classification of FDI in services, it is the combined FDI share of the top 10 service sectors such as financial and non-financial services falling under the Department of Industrial Policy & Promotion (DIPP)’s service sector definition — as well as telecommunications, trading, computer hardware and software, construction, hotels and tourism, hospital and diagnostic centres, consultancy services, sea transport, and information and broadcasting that can be taken as the best estimate of services FDI.

However, these could include some non-service elements. The share of these services is 56.6% of the cumulative FDI equity inflows during the period April 2000-October 2017 and 65.8% of FDI equity inflows during 2017-18 (April-October).

If the shares of another five services or service related sectors like retail trading, agriculture services, education, book, printing and air transport are included, the total share of FDI equity inflows to the services sector would increase to 58.5% and 69.6% respectively for the above two periods.

In 2016-17, FDI equity inflows to the services sector (top 10 sectors including construction) had declined by 0.9% to US$ 26.4 billion, though the overall FDI equity inflows grew by 8.7%. However, during 2017-18 (April-October), the FDI equity inflows to the service sector grew by 15.0% as compared to 0.8% growth in total FDI equity inflows mainly due to higher FDI in two sectors: telecommunications and computer software and hardware.

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