New Delhi: Foreign direct investment in the country's service sector declined by 27 percent to USD 2.59 billion (Rs 11.885 crore) during April-November of the current fiscal, according to industry ministry's latest data.
The financial and non-financial services sector had attracted FDI worth USD 3.43 billion (Rs 16,566 crore) during April-November 2009-10.
According to experts, the global economic recovery is not strong, which is impacting foreign investments in India.
"FDI is showing weakness now. Global economic recovery is still fragile," Crisil's Principal Economist D K Joshi said.
He, however, said that "India still remains a preferred destination for FDI and that is evident from the strong foreign institutional investors (FII) inflows we are seeing".
The concern is only short-term in nature, the future holds bright, Joshi added.
Overseas funds infused a whopping USD 4.78 billion in November taking the total to USD 38.5 billion in 11 months of 2010. It is a record inflow in a single calender year.
On the other hand, overall FDI inflows dropped by 27 percent to USD 14 billion during the first eight months of this fiscal, against USD 19.32 billion in the year ago period.
The services sector, despite the 24 percent dip in FDI, topped the chart in attracting maximum investment.
Telecommunications segment, including radio paging and cellular mobile, was the second best sector that attracted USD 1.09 billion, followed by housing and real estate (USD 999 Million), power (USD 984 million), computer software and hardware (574 million) and automobile sector (USD 533 million) during the period, the data said.
During the period, the highest FDI of USD 5.15 billion came from Mauritius followed by Singapore (USD 1.36 billion), the US (USD 926 million), Japan (USD 917 million) and the Netherlands (USD 802 million).
The government is making sustained efforts, including involving stakeholders in policy formation, to make the investment regime more attractive and investor friendly.
The government is considering to liberalise FDI regime in sectors like defence and multi-brand retail.