Being a major non-debt financial source, Foreign Direct Investment (FDI) plays an integral role in a country’s development. The Narendra Modi government’s favorable policy regimes and robust business approaches along with a highly skilled workforce in an open, well regulated, inclusive society have always ensured that foreign capital keeps flowing to the country.
The United Nations Conference on Trade & Development (UNCTAD) has declared India’s national investment promotion and facilitation agency, Invest India, as the winner of the 2020 United Nations Investment Promotion Award. The award is a testimony to India’s social resilience and the country’s commitment to 4D’s: Democracy, Demography, Demand & Deregulation.
4D effect: Crossed $500 bn milestone in 2020
Government policies since 2014 have been applauded highly for understanding the global landscape well in advance and make necessary structural changes in the economy. Their efforts have been reflecting in the World Bank “Doing Business Rankings” time and again, last year India improved by 14 ranks and jumped to 63rd position among 190 countries. India has improved its ranking by 79 positions in the five-years (2014-19).
Amidst the ongoing pandemic, breaking all rules of the game, India made history by successfully crossing the $500 bn milestones in FDI equity inflows. India received $261 bn between the period from 2015 to 2020, which means more than half the FDI of the past 2 decades has occurred during the period 2015-2020.
In 2020, there were 325 announced greenfield FDI projects in India, compared to 345, 73, & 67 projects in China, Vietnam, and Malaysia, respectively. India received 154 projects are from the USA whereas China, Vietnam & Malaysia received 86, 12 & 15 projects, respectively.
If we analyse country-wise, since 2014, the highest FDI inflow has been from Mauritius. However, in the year 2019-2020, the FDI from both Singapore and the USA have witnessed a whopping 179% & 167% increase in comparison to the year 2014.
Being one of the top 5 consumer markets in the world, India is an attractive destination for foreign investors. The average ticket size of FDI inflows to India for the year 2020 is $48.26 mn. This means India is as favourable and investor-friendly to a small and emerging player as towards market leaders.
Sectoral Composition of FDI Inflows
The sectors receiving the highest FDI are services (finance, banking, and insurance), computer software and hardware, telecommunications, and trading, respectively. They received the highest FDI with a share of 17%, 12%, 7% and 6% respectively. Other sectors catching up fast are the construction and automobile industry with 5% share each in terms of FDI inflows.
Way ahead: Powering AtmaNirbhar through Innovations
Over the years, FDI inflows have raised the competitive level in the country thereby raising the standards of research and development (R&D) requirements. Programs like Digital India, AatmaNirbhar Bharat Innovate Challenge, Make in India, Atal Innovation Challenges have rationalized and expedited the investment processes in the country. These challenges could reinvigorate depleted ecosystems and obsolete technologies. It will eventually help India create an army of grass root technological innovators.
The government, along with the national investment promotion agency, Invest India, are bringing transformations and helping India continue its journey in the right trajectory towards remaining the world’s most attractive destinations for foreign investment.
