Top Indian Sectors That Attracted FDI In FY23
Computer software and hardware, and services dominated FDI equity inflows in FY23.
The top 10 Indian sectors receiving the most foreign direct investment inflows via equity saw a change in the pecking order after the pandemic.
Computer software and hardware, mostly comprising information technology, dominated FDI rankings in FY23, followed by the services sector, trading, and drugs and pharmaceuticals, according to Department for Promotion of Industry and Internal Trade data.
FDI inflows into equities fell to the lowest level in five years, to $46 billion in FY23. That's largely because investments in computer software and hardware and automobiles have fallen off their pandemic highs.
Winners
Computer Software And Hardware
The Indian computer sector mainly comprises information technology and software companies. The sector overtook services in FY21 as the pandemic-driven lockdowns froze economic activity to take the top spot and has retained its position ever since.
FDI into equity peaked at the height of the pandemic in FY21 at Rs 1.94 lakh crore but has tapered off. It stood at Rs 74,718 crore, a drop of 30.7% from FY22.
Services
Although services lost the top spot in FY21 as contact-intensive businesses took a massive hit, inflows have crossed pre-pandemic levels. The sector saw 31.4% year-on-year growth at Rs 69,852 crore in FY23, with a four-year CAGR of 5.95%.
Drugs And Pharma
Drugs and pharma moved up six places to the fourth spot since FY20, driven by the pandemic. Covid-19 gave it a boost with a CAGR of 46.2% from FY20 to FY23. Inflows stood at Rs 16,654 crore in FY23, a 57.8% jump over last year.
Chemicals
FDI inflows into chemicals, excluding fertilisers, rose the most at 103.6% in FY23 to Rs 14,662 crore. It reported a four-year CAGR of 18.3% through the pandemic. The sector moved up two spots to the sixth position last fiscal.
Losers
Telecom
Inflows into telecom fell during the pandemic, with the sector reporting a four-year annualised decline of 35.2%. FDI collapsed by 90.6% year-on-year in FY21.
The sector has been recovering since, but inflows are still far from pre-pandemic levels. Telecom has dropped four places in the rankings since FY20.
Metals
Metals saw the biggest drop in inflows, with inflows contracting at an annualised rate of 41.4%. The majority of the drop came in FY23, when the inflows tumbled 90%. It has dropped three spots to the ninth position since FY20.