India's foreign direct investment dropped in February to $1.4 billion, almost one-fourth of the inflows witnessed in the year-ago period, under the impact of the global credit crunch.
While the cumulative FDI inflows of $25.35 billion for April-February 2008-09 were higher than the $20.13 billion a year ago, the country has been witnessing a steep fall in foreign investments since October 2008, according to official figures.
In February 2008, the foreign investment was $5.67 billion.
Reviving the FDI inflows would be a key challenge for the new United Progressive Alliance government which is likely to come out with a much clearer policy, an industry chamber economist said.
Changes in the FDI policy announced in February have created a lot of confusion among both domestic and foreign investors.
As per the Press Note 2, 3 and 4, FDI can flow into sectors which are not allowed to foreign investments through a circuitous route.
According to a latest World Investment Report of the UNCTAD, the current financial crisis was to have a negative impact on FDI inflows in the short term.
Both FDI inflows and outflows from the US and European markets may slowdown, it said.