Foreign Direct Investment in India
Foreign Direct Investment (FDI) in India has shown considerable growth over the last 2 decades. The cumulative amount of FDI inflows in India between Apr’00 – Mar’16 has been $ 424.16 Bn. However with the launch of ‘Make in India’ in Sept’14 and relaxation of FDI Policies, India has experienced one of the best FDI growth rates globally with increased number of projects. The total FDI inflow in 2015-16 stood out to be $55.46 Billion, 23% and 54% greater than the inflow in 2014-15 and 2013-14 respectively.
Mauritius and Singapore are the top investing countries in India accounting for 49% of FDI inflow during the period Apr’00 – Mar’16. The other top investors are U.K., Japan and U.S. A.
Post the launch of Make in India, Services Sector (Fin., Banking, Insurance, Non Fin/Business, Outsourcing, R&D, Courier, Tech. Testing and Analysis, Other) attracted the maximum 19.4% FDI between Oct’14 – May’16. This is followed by Computer Software & Hardware and the Trading Sector attracting 13% and 9% FDI inflow respectively.
With numerous reforms initiated by the Government towards ease of doing business, the FDI inflow across different sectors recorded huge positive growth. FDI in the top 3 sectors, Services, Computer Software & Hardware and Trading, have almost more than tripled in last 2 financial years. The impact of ‘Make in India’ on FDI is clearly visible in many sectors, such as Automobile, Chemicals and Tourism that allow 100% FDI under automatic route (foreign entities do no need prior approval of the Central Government or the Reserve Bank of India)
Note: Make in India currently focuses on 29 different sectors within the economy; 3 of which are Automobile, Chemicals, Hotel & Tourism (Note that Services, Computer and Trading sectors are part of this list).
With the launch of ‘Make in India’, India has achieved a significant jump in FDI inflow rankings as compared to the BRIC nations and some major developed/transitioning economies around the world. Among the BRICS economies, Brazil and Russia were in recession.
Note: Despite positive momentum in the FDI landscape, in 2016 India ranked 131 in Ease of Doing Business as compared to 134 in the previous year, indicating to the need of a more conducive environment for starting and operating of businesses.