In the first half of the fiscal year 2024-25, India witnessed a remarkable increase in Foreign Direct Investment (FDI). The inflow rose by 45 per cent year-on-year, reaching $29.79 billion. This surge is attributed to robust investments in various sectors, particularly services, computer technology, telecommunications, and pharmaceuticals. The data from the Department for Promotion of Industry and Internal Trade (DPIIT) marks the growth in FDI during this period.
Recent Trends in FDI
FDI inflows in India have shown a consistent upward trajectory. The inflows for the July-September quarter reached $13.6 billion, marking a 43 per cent increase from the previous year. The April-June quarter also saw a substantial rise, with inflows hitting $16.17 billion, up 47.8 per cent. Overall, total FDI, including equity, reinvested earnings, and other capital, grew by 28 per cent to $42.1 billion.
Sectoral Contributions
The FDI growth is diverse across sectors. Services emerged as a leading sector, attracting $5.69 billion, an increase from $3.85 billion in the previous year. Other notable sectors include computer software and hardware, telecommunications, and pharmaceuticals. Non-conventional energy also received attention with inflows of $2 billion.
Geographical Sources of FDI
Key countries contributing to India’s FDI include Mauritius, Singapore, and the United States. Mauritius led with $5.34 billion, followed by Singapore at $7.53 billion. The US contributed $2.57 billion. However, there was a decline in inflows from Japan and the UK, denoting shifting investment patterns.
State-wise FDI Distribution
Maharashtra emerged as the top recipient of FDI, attracting $13.55 billion. Karnataka followed with $3.54 billion, while Telangana and Gujarat received $1.54 billion and approximately $4 billion, respectively. This distribution puts stress on the regional disparities in FDI attraction within India.
Implications for the Economy
The increase in FDI is expected to boost India’s economic growth. It enhances job creation and promotes technological advancements. The inflow of foreign capital also signifies investor confidence in India’s market potential and economic stability.
Challenges and Opportunities
While the surge in FDI is promising, challenges remain. The decline from certain countries indicates potential concerns that need addressing. Additionally, maintaining a conducive environment for foreign investors is crucial for sustaining this growth trajectory.
Conclusion
The data reflects a robust FDI landscape in India, driven by key sectors and geographical sources. The government’s initiatives to attract foreign investment continue to pay off, paving the way for future economic development.
Questions for UPSC:
- Critically analyse the impact of Foreign Direct Investment on India’s economic growth.
- What are the primary sectors attracting Foreign Direct Investment in India? Estimate their contributions to the economy.
- Point out the countries that have increased their Foreign Direct Investment in India. What factors influence these investments?
- With suitable examples, underline the regional disparities in Foreign Direct Investment inflows within India.
Answer Hints:
1. Critically analyse the impact of Foreign Direct Investment on India’s economic growth.
- FDI boosts economic growth by increasing capital inflow, which can enhance productivity.
- It creates job opportunities, thereby reducing unemployment and improving living standards.
- Foreign investments often bring technological advancements and expertise, encouraging innovation.
- Increased FDI can improve the balance of payments by enhancing export capabilities.
- However, reliance on foreign capital can pose risks, such as economic vulnerability to global market fluctuations.
2. What are the primary sectors attracting Foreign Direct Investment in India? Estimate their contributions to the economy.
- Services sector attracted $5.69 billion, showing growth from previous years.
- Computer software and hardware also saw substantial investments, reflecting the tech boom.
- Telecommunications and pharmaceuticals are key sectors indicating strong foreign interest.
- Non-conventional energy received $2 billion, denoting a shift towards sustainable investments.
- These sectors collectively contribute to GDP growth and enhance India’s global competitiveness.
3. Point out the countries that have increased their Foreign Direct Investment in India. What factors influence these investments?
- Mauritius ($5.34 billion) and Singapore ($7.53 billion) are the top contributors in recent FDI inflows.
- The US also increased its investment to $2.57 billion, indicating strong bilateral ties.
- Factors influencing investments include India’s market potential, economic reforms, and ease of doing business.
- Political stability and favorable regulatory frameworks also attract foreign investors.
- Conversely, declines from Japan and the UK suggest concerns over market conditions or competition.
4. With suitable examples, underline the regional disparities in Foreign Direct Investment inflows within India.
- Maharashtra received the highest FDI inflow of $13.55 billion, showcasing its economic prominence.
- Karnataka attracted $3.54 billion, benefiting from its IT and startup ecosystem.
- Telangana and Gujarat received $1.54 billion and approximately $4 billion, respectively, indicating regional strengths.
- These disparities highlight the concentration of investments in developed states versus emerging regions.
- Addressing these disparities is crucial for balanced regional development and inclusive growth.
