Foreign direct investment (FDI) in services sector declined about 22 per cent year-on-year to USD 738 million during April-June period of the ongoing fiscal.
The services sector, which includes banking, insurance, outsourcing, R&D, courier and technology testing, had received FDI worth USD 945 million during April-June 2013, Department of Industrial Policy and Promotion data showed.
According to an official, the government is taking steps in order to boost FDI inflows in the sector. The government has decided to raise FDI limit to 49 per cent in the insurance sector from the current level of 26 per cent.
The services sector contributes over 60 per cent to India's GDP. In 2012-13, foreign investment in services fell to USD 4.83 billion from USD 5.21 billion in 2011-12.
The other sectors which received lower foreign investment during the first quarter of this financial year include automobile, chemicals and pharmaceuticals.
Foreign investments are considered crucial for India, which needs around USD 1 trillion in the next five years to overhaul its infrastructure sector such as ports, airports and highways to boost growth.
Decline in foreign investments could affect the country's balance of payments (BoP) situation and also impact the rupee.
However, overall FDI during April-June jumped by 34 per cent to USD 7.23 billion.