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FDI inflows to rise next fiscal on e-commerce investment

Author: Debasis Mohapatra/Tuesday, March 27, 2018/Categories: Economy

FDI inflows to rise next fiscal on e-commerce investment

Mumbai: With rising foreign investors’ interest in the e-commerce sector, foreign direct investment (FDI) inflow into the country is likely to touch around $50 billion in the next financial year.

Apart from investment by PE and VC players in the Indian e-commerce sector, factors such as asset sale by Indian companies to foreign players will also drive overall FDI flows into the country.

Total FDI inflow is likely to be in the range of $40-44 billion in the current financial year 2017-18.

“We expect FDI inflows to rise to $45-50 billion in FY2019 from $40-44 billion in FY2018,” an ICRA report said.

“The size of FDI inflows in India would be determined by the pace of reforms, inflows from private equity and venture capital funds into e-commerce entities, and sales of assets to foreign entities,” it added.

E-commerce space has attracted a lot of interest from foreign investors including private equity and venture capital funds. While homegrown e-tailer, Flipkart had raised around $4 billion from a clutch of investors last year, Amazon has also seen its parent firm infusing more than $1 billion in the Indian operations.

Analysts are of the opinion that rapid growth rate and increasing competition among major players will continue to drive higher investment from foreign players in coming years.

Apart from e-commerce, sectors like telecommunication, IT and construction activities are also likely to attract FDI in the coming years.

According to the ICRA report, higher exports will help in bridging the current account deficit gap. Indian current account deficit is likely to touch around $46 billion in this fiscal year ending March 2018.

“Given other macroeconomic fundamentals, this level of current account deficit is unlikely to pose a major macroeconomic risk. However, the extent of capital flows would determine the sentiment towards the Indian Rupee and the level of foreign exchange reserves,” the report said.

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