Foreign direct investments in India - statistics & facts
While India is one of the fastest-growing economies in the world, it has also emerged as one of the top destinations for foreign direct investments. A large consumer base, growing disposable incomes, and expanding digital infrastructure are some of the key drivers in the evolving global preference for investing in India. Indeed, foreign direct investments are an essential driver of a country’s economy since they boost the job market, technical knowledge base and provide non-debt financial resources.
FDI regulatory framework
Over the years, successive governments in India have understood the potential of overseas investments and liberalized FDI policies. There are two routes to making foreign direct investment in India. The automatic route allows investments without the need to obtain any approval or license from the government. Some of these sectors are air transport, healthcare, IT and BPM, manufacturing, and financial services. The sectors that require prior approval of the government fall under the government approval route and include banking and the public sector, food products retail trading, print media, satellite, and others. The amount of investment depends on the sector, however, over the years, the government has allowed 100 percent FDI in various sectors. There are currently nine sectors in which FDI is prohibited, including lottery, gambling, chit funds, real estate business, and cigarettes.
The gross foreign direct investment inflows to India were valued at nearly 71 billion U.S. dollars in the financial year 2023. The computer hardware and software sector constituted the largest part of the total inflows. However, this was a decline in total FDI inflows in India as compared to 2022, the year that witnessed the highest-ever FDI inflow of 83.5 billion U.S. dollars. The Russia-Ukraine war and global economic uncertainties are considered some of the reasons for this fall. This decline mirrored a broader global phenomenon amid investor uncertainty and the declining profitability of multinational corporations.
The Economic Survey for 2023, however, expected a rebound in FDI due to various programs and initiatives such as Production-linked incentives, PM Gatishakti, and export promotion through SEZs among others. The union Government’s Jan Vishwas Bill introduced in December 2022 in the Indian parliament amends 42 laws to decriminalize ‘minor’ offenses and is touted to reduce the compliance burden on individuals and businesses and ensure ease of doing business. A large number of FDI proposals are in the pipeline which as per experts suggests growth in the financial year 2024.
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