FDI as a source of funding has shrunk to a trickle for the once lucrative telecom sector with foreign investment inflows plunging to USD 43 million in the April-September period of the current fiscal.
FDI in the telecom sector, which includes radio paging, cellular mobile, basic telephone services, attracted USD 1.9 billion in April-September 2011, according to the latest data of the Department of Industrial Policy and Promotion (DIPP).
Experts said that besides the global economic slowdown, which has impacted the inflows, the sector is facing a lot of problems domestically.
"The overall health of the telecommunications sector is very critical. Industry is shrinking in terms of margins and profitability and that is the main reason why foreign investors are shying away," GSM industry body COAI Director General Rajan S Mathews said.
Another industry expert said that the initial euphoria of the sector is now over and the government should now focus on boosting the manufacturing part.
The decline comes at a time when the economic growth has slipped further in the July-September quarter to 5.3 per cent, raising fears that the slowdown may pull down the annual growth rate to a decade low.
Overall, too, FDI in India declined by about 33 per cent to USD 12.84 billion in the first half of this fiscal, fromUSD 19.13 billion in the year-ago period.
Sectors that attracted sizeable FDI inflows during the first six months of this fiscal include services (USD 3.04 billion), metallurgical (USD 685 million), construction (USD 644 million) and automobile (USD 635 million).
For the April-September period, India received maximum FDI from Mauritius (USD 6.25 billion), Japan (USD 1.32 billion), Singapore (USD 1.12 billion) the Netherlands (USD 968 million) and the UK (USD 592 million).
The inflows had aggregated to USD 36.50 billion in 2011- 12, as against USD 19.42 billion in 2010-11 and USD 25.83 billion in 2009-10.
Decline in foreign investments puts pressure on the country's balance of payments (BoP) and could also impact the value of the rupee. PTI RR CS SA