India FDI Up 77.6% in Services Sector, Unemployment Halved

Foreign investments in India’s services sector increased 77.6% to $7.55 billion in the first nine months of the current fiscal, helped by government steps to improve ease of doing business.

The sector, which includes banking, insurance, R&D, outsourcing, courier and technology testing, had received foreign direct investment worth $4.25 billion during the April-December period of last fiscal, 2015-16, according to the Department of Industrial Policy and Promotion, DNA reported.

The sector contributes over 60% to India’s GDP and accounts for 17% of total foreign investment inflows.

The other sectors where inflows have recorded growth during the nine month period of 2016-17 are: telecom ($5.54 billion), trading ($2 billion), computer software and hardware ($1.81 billion) and automobile ($1.45 billion).

In step FDI growth in important sectors like services, overall foreign inflows in the country increased 22% to $35.84 billion during April-December 2016-17.

The commerce and industry ministry is also considering relaxing FDI norms in certain sectors including retail to further boost inflows.

Foreign investment is considered crucial for India, which needs around $1 trillion 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 against other global currencies, especially the US dollar.

 Jobless Rate Plummets

Contrary to market perception, India’s unemployment rate halved from 9.5% in August 2016 to 4.8% in February this year. Among major states, a sharp decline was registered in Uttar Pradesh.

According to the SBI Ecoflash, during August 2016 to February 2017, unemployment rate in Uttar Pradesh registered the maximum decline from 17.1% to 2.9%, followed by Madhya Pradesh (10% to 2.7%), Jharkhand (9.5% to 3.1%), Odisha (10.2% to 2.9%) and Bihar (13% to 3.7%).

“We believe this decline is primarily due to the government’s efforts in providing new employment opportunities in rural areas,” said the report compiled by State Bank of India research team led by Group Chief Economic Advisor Soumya Kanti Ghosh.

Meanwhile, Prime Minister Narendra Modi’s government courted controversy this week, when it claimed the economy grew 7% in the October-December quarter and kept the forecast for FY 2016-17 unchanged at 7.1%, making India the fastest-growing among major economies.

To put it in perspective, the government’s estimate of 7% growth in the GDP in the last quarter includes a robust 8.3% growth in manufacturing output. The latter, in turn, is based on an assessment that both consumption and investment spending saw significant acceleration during this period–a claim that has left everyone puzzled.