Foreign direct investment (FDI) inflows into India crossed the milestone of USD one trillion in the period April 2000-September 2024, strengthening the country’s reputation as a safe and important destination for global investment.
According to information from the Department of Industrial Promotion and Domestic Trade (DPIIT), the aggregate amount of FDI, including equity, reinvested earnings and other capital, stood at $1,033.40 billion during the said period.
About 25 percent of FDI comes through the Mauritius route. It was followed by Singapore (24%), US (10%), Netherlands (7%), Japan (6%), UK (5%), UAE (3%) and Cayman. The islands, Germany and Cyprus accounted for 2 percent each.
India received $177.18 billion from Mauritius, $167.47 billion from Singapore and $67.8 billion from the US during the period under review, according to the data.
Important sectors that attract a high amount of this inflow include the services sector, computer software and hardware, telecommunications, trade, construction development, automobiles, chemicals, and pharmaceuticals.
According to the Ministry of Commerce and Industry, as of 2014, India has attracted FDI inflows to the tune of $667.4 billion (2014-24), registering a growth of 119 percent over the last decade (2004-14).
“This income covers 31 states and 57 sectors, which is stimulating growth in various industries. Most sectors, except for key sectors, are open to 100% FDI under the automatic route.
Equity FDI inflows into the manufacturing sector over the past decade (2014-24) reached $165.1 billion, marking a 69 percent increase over the past decade (2004-14), which brought in $97.7 billion, the official said.
To ensure that India remains an attractive and investor-friendly destination, the government reviews the FDI policy continuously and makes changes from time to time after extensive consultation with stakeholders.
Overseas inflows to India are likely to grow rapidly in 2025, as healthy economic numbers, better industrial output and attractive PLI plans will attract more overseas players amid the country’s headwinds, say experts.
They added that despite the global challenges, India remains a popular investment destination. Avimukt Dar, Founding Partner, INDUSLAW, said that revenue is likely to continue on a strong path.
It is widely expected that private equity financing in the technology sector, which has slowed down in the past, will pick up again as various funds enjoy positive exits from the public markets and are ready to reinvest.
“The government can continue with structural reforms, especially in the M&A space, by pressuring SEBI to make the takeover system more foreign-friendly,” said Dar.
Rumki Majumdar, economist at Deloitte India, said FDI inflows are likely to remain low amid expected policy changes in the US and the impact of policy stimulus on the Chinese economy.
Geopolitical conditions can change the chains, and trade regulations will calm investors’ sentiments, keep financial flows stable, adding that the government will have to prioritize infrastructure capex with timely project implementation, increase the skills of workers through PPPs and incentives, invest in digital. a profitable ecosystem of production, and encourages R&D of digital solutions that facilitate the inclusion and formalization of the economy.
Commenting on the data, Manav Nagaraj, Partner, Shardul Amarchand Mangaldas & Co, said FDI in India is likely to continue to rise in all areas — early stage investment, growth capital and strategic investment.
“India as an investment destination has historically been attracting foreign investors from various countries, be it US, UK, continental Europe or Asian countries,” he added.
FDI is allowed through the automatic route in many sectors, while in areas such as telecom, media, pharmaceuticals and insurance, government approval is required for foreign investors.
Under the government approval route, the foreign investor must first get approval from the minister or department concerned, while, under the automatic route, the foreign investor is required to notify the Reserve Bank of India (RBI) after investing. .
Currently, FDI is prohibited in some sectors. They are lottery, gambling and betting, chit funds, Nidhi company, real estate business, and production of tobacco, cheroots, cigarillos and tobacco using tobacco.
FDI is important for India as it will require huge investment in the coming years for the infrastructure sector to boost growth. Healthy foreign inflows also help in maintaining the balance of payments and the value of the rupee.
