FDI in computer software, hardware jumps 4-folds to $24.4 bn during Apr-Dec 2020

Foreign direct investments (FDI) in the computer software and hardware sector jumped nearly four-times to USD 24.4 billion during April-December 2020-21, according to the latest data of DPIIT.

While in the year-ago period the sector received USD 6.4 billion FDI, the entire 2019-20 saw overseas investment of USD 7.7 billion, the Department for Promotion of Industry and Internal Trade (DPIIT) data showed.

According to experts, the accelerated digitalisation and increased use of artificial intelligence due to the pandemic led work-from-home scenario have all resulted in a huge opportunity for the computer software and hardware sector.

"There has been extensive unlocking of value, and we have seen huge FDI into this sector," Arvind Sharma, Partner, Shardul Amarchand Mangaldas & Co said.

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Bimal Raj, Partner, Singhi Advisors, too said the sector witnessed an increase in FDI as there was a surge in the electronics and digital transformation globally and the Indian tech firms were ideally poised to capture that potential.

The other sectors which recorded significant growth in foreign inflows during the nine-month period of 2020-21 include construction (infrastructure) activities (USD 7.2 billion), and pharmaceuticals (USD 1.24 billion).

FDI in telecommunication dipped to USD 357 million from USD 4.3 billion during April-December 2019-20. Automobiles too witnessed a slowdown with USD 1.18 billion in April-December 2020-21 as against USD 2.5 billion in the same period of the previous fiscal.

Sharma said key sectors which have potential to attract more FDI include IT, telecom, pharma and electronics manufacturing.

"With the increased use of high-end technology during the COVID-19 pandemic, the focus of global investors has moved to the IT and telecom sectors. Besides, the government's continued emphasis on Make in India and its introduction of performance linked incentive schemes for various sectors will also result in accelerated growth and more FDI inflow," he said.

Furthe, during April-December 2020-21, India attracted maximum FDI from Singapore (USD 15.71 billion) followed by the US (USD 12.82 billion), the UAE (USD 3.91 billion), Mauritius (USD 3.47 billion), and Cayman Islands (USD 2.53 billion).

Overall FDI equity inflows into the country jumped 40% to USD 51.47 billion.