Aseries of steps taken by the government to promote ease of doing business and liberalization of foreign direct investment norms have helped India receive record FDI inflows so far this year, and implementation of measures like PM Gati Shakti, single-window clearance, and GIS-mapped land bank is expected to further push investments in 2022.
Notwithstanding the global slowdown and the COVID-19 pandemic, total foreign direct investments into India rose to a record $81.72 billion in 2020-21. During April-July this fiscal, FDI (foreign direct investment) into the country increased by 62 percent to $27.37 billion.
''Increasing FDI is a reflection of global trust in India's growth story. The world wants reliable partners. India is providing all those parameters of growth that the investors would like to see before investing.
"'Further steps like rolling out of PM Gati Shakti National Master Plan (NMP), single window clearance and GIS (Geographic Information System) mapped land bank would help in attracting further investments,'' Secretary in the Department for Promotion of Industry and Internal Trade (DPIIT) Anurag Jain told PTI.
The government is making all-around efforts to improve ease of doing business, he said, adding that the compliance burden has been reduced in more than 25,000 compliances over the last few years.
''Structural reforms and a series of measures to promote ease of doing business, startup programs, and liberalization of FDI policy are bringing in transformational changes in the industrial landscape. Efforts of the Centre to support the startup ecosystem have also created a buzz about India in the business and investment sector of the world,'' Jain said.
He added that so far 19 central government ministries/departments and 10 states have boarded the national single window system, which has been soft-launched as a single point of clearance for investor-related issues, as of now.
Similarly, the India Industrial Land Bank is GIS-enabled and has mapped over five lakh hectares of land, over 4,500 industrial parks, and shows vacant industrial plots available for investors, he added.
Among several areas, the government has relaxed FDI norms in coal mining, defense production, contract manufacturing, and single-brand retail trading.
Foreign direct investment equity inflows into India have touched USD 548 billion between April 2000 to June 2021, which is further strengthening the country's credentials as an investment destination.
About 28 percent of the FDI came through the Mauritius route. It was followed by Singapore (22 percent), the US (8 percent), the Netherlands, and Japan (each 7 percent), and the UK (6 percent). The other big investors have been from Germany, Cyprus, France, and the Cayman Islands.
Since 2015-16, total FDI inflows, which comprise equity inflows, reinvested earnings, and other capital, have been recording significant growth. In that fiscal, the country received FDI worth $55.55 billion, an increase of 35 percent over the previous year.
FDI stood at $60.22 billion, $60.97 billion, $62 billion, and $74.4 billion in 2016-17, 2017-18, 2018-19, and 2019-20, respectively.
The key sectors which attracted the maximum FDI include the services segment, computer software and hardware, telecommunications, trading, construction development, automobile, chemicals, and pharmaceuticals.
Although FDI is allowed through the automatic route in most of the sectors, in certain areas such as telecom, media, pharmaceuticals, and insurance, government approval is required for foreign investors.
Under this route, a foreign investor has to take prior approval of the respective ministry or department whereas, for the automatic route, an overseas investor is only required to inform the Reserve Bank of India (RBI) after an investment is made.
At present, FDI is prohibited in as many as nine sectors. They are lottery business, gambling and betting, chit funds, 'Nidhi' companies (a type of NBFC), real estate business, and manufacturing of cigars, cheroots, cigarillos, and cigarettes using tobacco.
The government had made prior approval mandatory for foreign investments from countries that share a land border with India to curb ''opportunistic takeovers'' of domestic firms following the COVID-19 pandemic, a move which was aimed at restricting FDI from China.
According to experts, the high growth story of FDI into the country would continue in 2022 as well.
S Anjani Kumar, Partner, Deloitte India, said international business leaders remain confident of India's short- and long-term prospects and are readying plans to make additional and first-time investments in the country.
''FDI is one of the key levers that will help achieve India's $5 trillion GDP goal. While foreign investment inflows into India have been consistently rising over the past five years, to achieve this GDP goal, a more proportionate contribution to the gross capital formation (new greenfield assets) and the increase in exports can be achieved through greater FDI in manufacturing,'' Kumar said.
According to a Deloitte survey 'India's FDI Opportunity', the country scored highly for its skilled workforce and prospects for economic growth, and it has the strongest positive perception in the US when compared to markets such as China, Brazil, Mexico, and Vietnam.
Nischal Arora, Partner - Regulatory, Nangia Andersen LLP, said, ''We expect the FDI to grow at a healthy growth rate of 10-15 percent on the backdrop of PLI (production linked incentive) schemes being introduced and operationalized during 2021-22 in over 12 manufacturing sectors requiring substantial capital investments which may be funded through, among another source, FDI''.
