Odisha’s tryst with the diminishing flow of Foreign Direct Investment (FDI) continues. The hope of Odisha going for good FDI sweep in 2015-16, following participation in high profile investment shows, was belied as Odisha could see mere US $6mn FDI inflow in 2015-16 - which is a whopping 33 per cent down from 2014-15.
This sounds an alarm bell for the State when the country has seen a 29 per cent springtide in FDI inflow to the country in 2015-16 on ‘Make in India’ wave, and more so, when Odisha had received the highest FDI in the country in 2009. Odisha, which had also received US $88 million FDI inflow in 2013-14 and was ahead of Bihar and Jharkhand since 2009-10, has fallen behind them for the two consecutive years of 2014-15 and 2015-16.
This trickling down also assumes significance when insurgency-hit north-eastern States, including Assam, received US$ 10 mn FDI in 2015-16 clocking a 100 per cent rise over 2014-15. Odisha’s downturn in FDI destiny is all the way linked to cyclical slowdown in metallurgical sector - the State’s mainstay. Whereas, the current flavour of FDI in the country is new-age industries and service sectors, this is the reason why north-eastern States, where services and new age sector have got a fillip in recent years, zoomed past Odisha.
According to RBI data, services (financial and non-financial) bagged the highest FDI totalling to around US$ 7mn or 18 per cent of cumulative FDI equity inflows in 2015-16. Computer software and hardware followed it by netting around US $6mn equity inflows. Significantly, the FDI inflows to these two sectors have posted a high of 250 per cent and 500 per cent respective rise during the period 2013-2016.
Interestingly, it has been observed that FDI equity inflows got traction to those sectors that have a tremendous growth potential or employ high skilled labour force or have high demand or that which give higher returns to investors. Explaining it further, a senior RBI official here delineated the specific sectors that Odisha can bank upon to boost FDI inflow. “The State needs to diversify its services sector and has to establish more software technology parks, satellite towns, smart cities, hospitals, educational institutions and hotels etc,” he indicated and added that energy sector (renewable and non-renewable) holds high potential for FDI inflow to Odisha as it guarantees higher rate of return to investors.
Moreover, according to a RBI evaluation report, a progressive industrial policy laying emphasis on new-age industries like telecom, software/hardware, infra construction, drugs and pharma would necessitate a sound economic ecosystem and together with an easy business climate could act like a force multiplier to growth and further diversification of services sector in the State. The result: More equity investments via FDI to State, and it would also go a long way in generating more employment.