Foreigners bet on tech space

New Delhi: India’s digital drive, riding on communication, IT and financial services has caught the fancy of foreign investors, as reflected in over $20 billion foreign direct investment (FDI) flowing in these sectors in the fiscal, 2017-18, said an Assocham study on Sunday.

Quoting the RBI data, the Assocham study said that with the emergence of aggressive online market dominated by some of the strong home-grown entrepreneurs and overseas giants like Amazon and Walmart along with global private equity and venture funds, the entire pack of communication services, retail and wholesale, financial and computer services has emerged as one of the sought after areas of interest for foreign investors.

“The fact that these sectors have accounted for more than 50 per cent of the total FDI of $37.36 billion in 2017-18 reflects the kind of global interest being generated into the new areas of economy, including online marketplace, financial technologies or fintechs,” the Assocham study said.

In financial year 2017-18, the RBI data said communication services received $8.8 billion of foreign direct investment, followed by $7 billion in manufacturing, $4.4 billion in retail and wholesale trade, $4 billion in financial services, $3.16 billion in computer services, $3 billion in business services, $1.8 billion in electricity, $1.3 billion in construction, $1.2 billion in transport.

With a fast pace of financialisation of the Indian economy, the study noted that investment in the technology-driven trade in goods and services would only increase, both from the overseas and domestic services.

“Besides, a lot more new entrepreneurship is coming up in the new economy which is set to encompass more areas of traditional sectors,” said Assocham.

Despite a slow growth in the real estate sectors, the industry body said that the FDI interest in the reality activities showed a marked improvement.

“The inflows into the real estate sector saw an almost four-fold increase from $105 million to $405 million,” said Assocham.

The hospitality which is one of the major employment generator in the country has received a paltry sum of foreign investment. According to RBI data, restaurants and hotels space has received $452 million.

Another important area for the country —  education and R&D — attracted negligible investment from foreign entities despite these sectors  were liberalised years ago. Meanwhile, trading is the only major sector that attracted zero investment.