India has attracted a total FDI inflow of US$ 72.12 billion from April to January 2021. It is the highest ever for the first ten months of a financial year and 15% higher as compared to the first ten months of 2019-20 which was 62. 72 billion.
The increase is due to the measures taken by the Government on the fronts of FDI policy reforms, investment facilitation, and ease of doing business. It has been the endeavor of the Government to put in place an enabling and investor-friendly FDI policy.
Since 1991, when the Government opened the economy’s gates and introduced LPG policies, India’s investment climate has vastly improved.
According to the data shared by the Government, Japan is the top source of FDI in India, with a share of 29.09% of the entire FDI equity inflow. This was followed by Singapore, with 25.46 %, and the U.S.A. with 12.06%.
Consultancy services emerged as the top sector in January 2021, accounting for 21.80% of total FDI equity inflow, led by Computer Software & Hardware (15.96 percent) and Service Sector (13.64 %).
Initiatives taken by Government
In the digital sector, the Government approved 26 percent FDI because of India’s favorable demographics, strong mobile and internet penetration, and large consumption, the sector has especially high return capabilities.
The government’s production-linked incentive scheme for mobile phones, components, IT hardware, and electronics is the plausible reason for this providing a great market opportunity to a foreign investor.
The Union Cabinet also approved amendments to the guidelines for providing Direct-to-Home (DTH) services in December 2020, allowing 100 percent FDI in the DTH broadcasting services industry.
What is FDI?
FDI is an investment made by a company or person in a foreign country in a foreign country’s business interests. It is a significant source of non-debt funding for economic development and a major driver of economic growth.
FDI occurs when a foreign entity acquires ownership or a controlling interest in a company’s shares in another country or develops a business there.
It also means gaining technology and creating jobs in a country where foreign investment is made.
In India, under the automatic route, 100 % FDI is allowed in manufacturing, oil and gas, greenfield airports, construction, railway infrastructure, and other areas. In other industries, FDI is permitted via the automatic route up to a certain threshold, such as 26% or 49%.
Defence, Broadcast, Print media, Aviation, and other industries are all subject to these conditions. There is also a list of industries where FDI is not allowed, such as the lottery, tobacco, and atomic energy.
Economic growth in the post-pandemic era, as well as India’s large population, will continue to attract market-seeking investments, making India the most favoured investment destination amongst international investors.