US pips Mauritius as 2nd largest source of FDI in India in 2020-21

The US replaced Mauritius as the second-largest source of foreign direct investment into India during 2020-21 with inflows of USD 13.82 billion, according to government data.

Singapore remained the top source of foreign direct investment (FDI) into the country for the third consecutive fiscal at USD 17.41 billion.

During the last financial year, India attracted USD 5.64 billion in FDI from Mauritius, according to the data by the Department for Promotion of Industry and Internal Trade (DPIIT).

The island country was followed by UAE (USD 4.2 billion), Cayman Island (USD 2.79 billion), Netherlands (USD 2.78 billion), UK (USD 2.04 billion), Japan (USD 1.95 billion), Germany (USD 667 million), and Cyprus (USD 386 million).

Overall foreign direct investments into the country grew 19 percent to USD 59.64 billion during 2020-21 amid measures taken by the government for policy reforms, investment facilitation and ease of doing business.

Total FDI, including equity, re-invested earnings and capital, rose 10 per cent to the highest-ever USD 81.72 billion, as against USD 74.39 billion in 2019-20.

In 2020-21, the computer software and hardware sector attracted the highest inflows of USD 26.14 billion. It was followed by construction - infrastructure activities (USD 7.87 billion) and the services sector (USD 5 billion).

Commenting on the data, Mithun V Thanks, Partner - M&A, Private Equity and General Corporate at Shardul Amarchand Mangaldas & Co, said tax reasons aside, US-based entities have historically been bullish on the India story.

"This is expected to continue in the next few years, with the pandemic driven focus on increased tech adaptation and integration. "Silicon Valley will continue to weave many a-billion-dollar sized dreams, at the sheer size of the Indian market -- and added to the cash crunch at the domestic level -- should present agreeable valuations," he said.

He added that with the increased cash being introduced in the US economy, it is likely that a chunk of this will flow into India as well. "The prevailing polity of anti-China sentiments in India (and in the US) is likely to provide the continuing last-mile impetus," he said.