Indeed, foreign direct investments are an important driver of a country’s economy since they boost the job market, technical knowledge base and provide non-debt financial resources. Over the years, successive governments in India have understood this potential from overseas investments and liberalized FDI policies. Furthermore, tax exemptions and automatic routes for foreign investors pose a lucrative offer for investing in the country. Consequently, FDI inflows into India have seen a significant increase over the last decade.
In financial year 2017, the foreign direct investment inflows for all sectors in the country was valued at around 43 billion U.S. dollars. The services sector constituted the largest part of the inflows, with an overall amount of close to 460 billion Indian rupees for fiscal year 2019. Computer software and hardware, and the trading sectors followed. Overall, the country saw the highest-ever FDI inflow between 2018 and 2019 at over 44 million U.S. dollars, of which Singapore has been one of the top investors. In 2019 alone, investments from Singapore amounted to over one trillion rupees followed by Mauritius at about 571 billion rupees, and the Netherlands at 270 billion rupees.
Evidently, India has been actively working towards reaching its goal of 100 billion U.S. dollars' worth of FDI inflows by 2020 through various policy and financial reforms in the investment processes. This seemed to be working in the country’s favor since the share of FDIs grew by over eight percent in 2017. In 2019, India was ranked among the top 20 host economies for FDI inflows. In fiscal year 2018, about 500 billion dollars of global FDI came from the developing Asian region, including India, aggregating to over one trillion dollars' worth of inflows.
Among overseas investments made by Indian companies, the oil and natural gas sector seemed to be faring well with several key offshore investments in almost 18 countries. In fact, in 2016, the United Kingdom announced that India had become the third largest source of FDIs for them in the preceding fiscal year, as investments from India increased by a whopping 65 percent.
In August 2019, India further opened its FDI policy by loosening the grip on sourcing requirements for various sectors. The government also allowed 100 percent FDI in previously tightly controlled sectors like commercial coal mining and contract manufacturing in a bid to diversify its supply chains. However, many analysts believe that these are desperate measures to stimulate India’s ailing economy and may not have long-term benefits to the country’s own businesses.