Foreign Direct Investment (FDI) in India

In addition to being a large non-debt financial resource for India's economic development, Foreign Direct Investment (FDI) is a key factor in economic growth. Foreign businesses invest in India to take advantage of the nation's unique investment advantages, such as tax reductions and relatively lower wages. Along with other advantages, this helps India advance its technological know-how and create jobs. Due to the government's benevolent policy environment, thriving business climate, increasing global competitiveness, and economic influence, these investments have been flowing into India.

FDI laws have lately been loosened in a number of industries, PSUs, oil refineries, communications, and defence, among other initiatives undertaken by the government. During 2020–21, India received record amounts of FDI. The overall amount of FDI inflows was US$ 81,973 million, an increase of 10% over the prior fiscal year. India moved up one spot to eighth place among the world's top FDI receivers in 2020, according to the World Investment Report 2022, from ninth place in 2019. The three industries that received the most FDI in FY22 were information and technology, communications, and automobile. Multinational corporations (MNCs) have explored strategic partnerships with leading local business groups with the aid of substantial deals in the technology and health sectors, driving an increase in cross-border M&A of 83% to US$ 27 billion.

Due to favourable government policies, India has recently become a desirable location for FDI. Major government programmes include:

1) The Indian government expanded FDI by expanding it to 74% via the automatic route and 100% via the government route in the defence sector.

2) FDI inflows are anticipated to increase in 2022 as a result of the implementation of policies such PM Gati Shakti, single window clearance, and GIS-mapped land banks.

3) The Foreign Exchange Management (non-debt instruments) Rules, 2019, were modified by the government in August 2021 to permit the 74% rise in FDI limit in the insurance sector.

ROAD AHEAD

India has recently emerged as a significant FDI worldwide hub. India was one of the top three international destinations for FDI, and nearly 80% of the global respondents planned to make investments there. Additionally, India has recently lowered company taxes dramatically and streamlined its labour rules. The nation has also loosened its FDI limitations, which have gone from 0.42 to 0.21 over the past 16 years. In terms of both short- and long-term possibilities, India has continued to be a desirable market for foreign investment. One of the FDI sectors with the most promise is low-skill manufacturing in India. India has also improved its government's effectiveness. Its improvements in public sector efficiency are mostly attributable to reasonably stable state finances (despite difficulties brought on by COVID) and a positive attitude among Indian business stakeholders toward the funding and subsidies provided by the government to private companies. By 2025, India might be able to draw in FDI worth US$120–160 billion annually thanks to all of these factors.