The Department for Promotion of Industry and Internal Trade (DPIIT) recently revealed data showing that the total Foreign Direct Investment (FDI) in India has seen a significant increase of 18%, reaching $73.46 billion during the 2019-20 financial year. This information is worthy of attention, and we will delve deeper into the details and impact of this substantial upswing.
Substantial Growth in FDI
In a span of only six years, from 2013-14 to 2019-20, the total FDI has doubled in value. To put things in perspective, during the financial year 2013-14, the total FDI was valued at merely $36 billion. This considerable increase showcases the accelerated pace of investment growth, underlining the ascent of India as an attractive investment destination on the global stage.
Role of Foreign Institutional Investors
During the financial year of 2019-20, Foreign Institutional Investors (FII) contributed a modest sum of $247 million. Even though it might seem small in comparison with the total FDI, these investments do make a significant contribution towards economic dynamism by introducing foreign capital and encouraging competition in the national markets.
Leading Sectors for Foreign Investments
The sectors that have drawn the most foreign inflows during the year include services, computer software and hardware, telecommunications, trading, and automobiles. The ability of these sectors to attract such significant foreign investments alludes to their potential growth trajectories and increasing relevance in the globalized world.
Singapore: The Major Contributor
Singapore has emerged as the largest source of equity FDI, contributing inflows worth $14.67 billion. This highlights the strong economic ties between the two nations and proves the effectiveness of the government’s ‘Make in India’ program in attracting foreign investment.
Understanding FDI
Foreign Direct Investments (FDI) is an investment made by a firm or an individual from one country into business interests located in another country. It typically occurs when an investor starts foreign business operations or acquires foreign business assets, including establishing ownership or controlling interest in a foreign company. This form of investment sets itself apart from Foreign Portfolio Investment (FPI), where the foreign entity merely buys equity shares of a company without gaining any control over the business.
Routes for FDI in India
In India, there are two routes through which the country receives FDIs. The first method is the ‘Automatic route,’ where the foreign entity does not require prior approval from the government or the RBI. The other route is the ‘Government route’, where the foreign entity needs to get the government’s approval before making any investments. The Foreign Investment Facilitation Portal (FIFP), administered by DPIIT, facilitates the single window clearance of applications coming through the approval route.
