FDI in services rises 20% in first half of FY16

New Delhi: With the government taking steps to improve ease of doing business and attract investments, FDI inflows into the services sector grew by about 20 percent to US $1.46 billion (Rs 9,404 crore) in the first six months of the current fiscal.

The services sector, which includes banking, insurance, outsourcing, R&D, courier and technology testing, had received foreign direct investment (FDI) worth US $1.22 billion (Rs 7,366 crore) in the same period last fiscal, according to the Department of Industrial Policy and Promotion (DIPP) data.

According to experts, measures announced by the government are helping these sectors attract more investments.

"The latest reforms in areas like banking and insurance have resulted in the higher FDI inflows," said Krishan Malhotra, head of tax and an expert on FDI with corporate law firm Shardul Amarchand and Mangaldas.

Earlier this year, the government hiked the FDI cap in insurance sector to 49 percent.

In banking sector also, the government has eased the norms and permitted portfolio investors to buy up to 74 percent stake in local private banks with full fungibility.

Other sectors which have attracted healthy foreign inflows during the first half of this fiscal include computer software and hardware (US $3.05 billion), trading (US $2.3 billion) and automobile (US $1.46 billion).

Strong inflows in these sectors propelled the overall FDI into the country by 13 percent to US $16.63 billion during April-September 2015.

The government has announced a series of steps like fixing timeliness for approvals to improve the ease of doing business in the country.

The services sector contributes about 60 percent to India's GDP and receives high foreign inflows.

Foreign investments are considered crucial for India, which needs around US $1 trillion in the next five years to overhaul its infrastructure sector such as ports, airports and highways, to boost growth.

Growth in foreign investments helps improve the country's balance of payments (BoP) situation and strengthens the rupee.