India rapidly emerging as preferred destination for FDI

NEW DELHI: India is rapidly emerging as a preferred country for foreign investments as the steps taken by the government led by Prime Minister Narendra Modi during the last eight years have borne fruit as is evident from the ever-increasing volumes of FDI inflow setting new records.

The FDI inflow in India was at its highest ever at USD 81.97 billion in 2020-21. The information was given by the government during a parliament session. Among the global investors, the government said, these trends in India’s FDI are an endorsement of its status as a preferred investment destination, reported Saudi Gazette.

The government reviews the FDI policy on an ongoing basis and makes significant changes from time to time, to ensure that India remains an attractive and investor-friendly destination.

India’s FDI policy is liberal and transparent. Most of the sectors are open to FDI under the automatic route. To further liberalize and simplify FDI policy for providing ease of doing business and attract investments, reforms have been undertaken recently across sectors such as Coal Mining, Contract Manufacturing, Digital Media, Single Brand Retail Trading, Civil Aviation, Defense, Insurance and Telecom.

Minister of State in the Ministry of Commerce and Industry, Som Prakash, informed in a written reply in the Rajya Sabha (country’s Upper House in the Parliament) that the country’s FDI under the current government led by Prime Minister Narendra Modi is at its highest-ever inflow.

This came in a response to a question posed by CPI (M), Member of Parliament, John Brittas and Loktantrik Janata Dal MP M. V. Shreyams Kumar. These MPs from Kerala questioned the government on the steps it has taken to bring global business into the country.

MoS Prakash in a written statement said, “Various initiatives/schemes have been launched by the government for promoting growth and attracting investment in India.” He also highlighted that because of these initiatives India jumped to 63rd place in World Bank’s Ease of Doing Business [EODB] ranking as per World Bank’s Doing Business Report (DBR) 2020 from a rank of 142 in 2014.

The Minister also spoke of having started a comprehensive reform exercise in states and union territories to attract investors. He said that these reforms were started after consultations between the Department for Promotion of Industry and Internal Trade (DPIIT) with the state governments under Business Reforms Action Plan (BRAP).

It is noteworthy that under this plan all states and union territories are ranked on the basis of reforms implemented by them. There are certain designated parameters which are taken into consideration post which the ranking is done. “This exercise has helped in improving the business environment across states,” he said.

Speaking on other steps taken by the government to attract investors, Prakash listed an Empowered Group of Secretaries that had been constituted to fast-track investments in the country. He also stressed on the constitution of Project Development Cells (PDCs) to handhold investors and spur sectoral and economic growth.

A GIS-enabled India Industrial Land Bank has been launched to help investors identify their preferred location for investment. National Single Window System (NSWS) has also been soft launched in September 2021 to facilitate clearances for investors, he said.

According to data released by the DPIIT, India’s highest ever foreign direct investment (FDI) was up by 1.95 percent on year. In terms of top investor countries of FDI Equity inflow, ‘Singapore’ is at the apex with 27 per cent, followed by the US (18 per cent) and Mauritius (16 per cent) for the Fiscal Year 2021-22.

The top recipient sector of FDI Equity inflow during FY 2021-22 was Computer Software and Hardware. It emerged on top with around 25 per cent share followed by services sector (12 per cent) and automobile industry (12 per cent) respectively, as per the media portal.

Interestingly, despite the COVID-induced pandemic, the FDI inflow into the country in 2020-21 was USD 81.97 billion. Total FDI includes equity capital of unincorporated bodies, reinvest earnings and other capital.

Manufacturing sector is also seeing a boost with global investors seeing India as a preferred destination. In a major boost to the economy, FDI Equity inflow in the Manufacturing Sectors has increased by 76 per cent in FY 2021-22 (USD 21.34 billion) compared to previous FY 2020-21 (USD 12.09 billion).

The FDI inflow has increased by 23 per cent post-COVID (March 2020 to March 2022: USD 171.84 billion) in comparison to FDI inflow reported pre-COVID (February 2018 to February 2020: USD 141.10 billion) in India. Under the sector `Computer Software & Hardware’, the major recipient states of FDI Equity inflow are Karnataka (53 per cent), Delhi (17 per cent) and Maharashtra (17 percent) during FY 2021-22.

Karnataka is the top recipient state with 38 per cent share of the total FDI Equity inflow reported during the FY 2021-22 followed by Maharashtra (26 per cent) and Delhi (14 per cent). Majority of the equity inflow of Karnataka has been reported in the sectors ‘Computer Software & Hardware’ (35 per cent), automobile industry (20 per cent) and ‘Education’ (12 per cent) during the FY 2021-22.