India received a Foreign Direct Investment (FDI) inflow of USD 84.8 billion in 2021-22, highest-ever annual FDI inflow said Minister of State for Commerce and Industry, Som Prakash in a reply to a parliamentary question at the ongoing winter session of the parliament. Earlier this month, RBI Governor Shaktikanta Das during his address on the Bi-monthly Monetary Policy Statement informed, that the Net Foreign Direct Investment (FDI) stands at USD 22.7 billion during the period of April-October 2022 from USD 21.3 billion in the equivalent period of last year.
India has taken various steps in attracting FDIs from around the world and has implemented various policies so that the country can stay lucrative as well as a preferred destination for investment opportunities. Further, MoS Som Prakash highlighted that the country has witnessed soaring FDI inflows from USD 45.1 billion in 2014-15 to USD 84.8 billion in 2021-22.
FDI acts as one of the vital catalysts needed for the economic growth of a country. In simpler terms, FDI is an investment, invested by a firm or individual in one country into business interests residing in another country. It enables a foreign investor to fulfill its business interests while not being a citizen of that particular country. However, there’s been many instances where people have disapproved of the method of FDI because it might lead to losing autonomy over one’s organization, but the economic growth which is the by-product of FDI cannot be sidelined.
According to the information provided by the Ministry of Commerce & Industry, the highest share of FDI in the country is received by computer software & hardware and automobile industry, both these sectors collectively cross more than 50% of FDI inflow in the year 2021-22. The states of Karnataka, Delhi, and Maharashtra are among the top recipients of FDI in India.
Routes of FDI in India
In India, foreign investments are governed under the provisions of the Foreign Exchange Management Act (FEMA) 1999.
Automatic Route- This route is the most widely used route by foreign entities to invest in India. Under this, the foreign entity is not required to have prior approval from the government or the RBI. However, the government allows up to 100% FDI in non-critical sectors, thus not requiring security clearance from the Ministry of Home Affairs (MHA).
Government Route- There are some specific sectors in which the foreign entity needs to have prior approval from the Indian government, along with the Ministry of Finance and Foreign Investment Promotion Board (FIPB).
Government schemes & initiatives to boost FDI
The central government, as well as state governments, has undertaken various schemes to boost FDI and make the country an attractive destination for FDI. Further, the country is also easing restrictions on various sectors like defence, insurance sector, and telecommunications. The government’s flagship initiative ‘Make in India’ which aims at facilitating investment, fostering innovation, and attaining modern infrastructure has achieved considerable progress since its commencement.
The government’s recent initiatives such as PM Gati Shakti and single window clearance have further helped in the process of minimizing red tapism while increasing the flow of FDIs in the country. Moreover, India’s Space Activities Bill, currently under consideration, is going to be a dedicated legislation in the field of space in India and further will clearly define the scope of FDI in the country’s space sector.