Foreign Direct Investment at record high, led by manufacturing sector

By Bhalchandra Chorghade, Editor, CNCTimes.com

India has recorded highest ever annual FDI inflow of USD 83.57 billion in the Financial Year 2021-22. Foreign Direct Investment (FDI) is playing a major role in the economic development of India by being the major non-debt financial resource.

In spite of the Russia- Ukraine conflict and COVID-19 pandemic, India took to this record high in the financial year 2021-22 surpassing last year’s FDI by USD 1.60 billion. The glaring change is visible, when compared to 2014-2015 FDI inflow of 45.15 USD billion, as the new high is 85 percent increase over FY 14-15 level.

Growth led by manufacturing sector

India showed its acumen to attract more foreign investments in the manufacturing sector. FDI Equity inflow in Manufacturing Sectors have increased by 76% in FY 2021-22 (USD 21.34 billion) compared to previous FY 2020-21 (USD 12.09 billion). To enhance India’s manufacturing capabilities, an outlay of INR 1.97 lakh crore (over US$ 26 billion) has been announced in Union Budget 2021-22 for PLI schemes for 13 key sectors of manufacturing starting from fiscal year (FY) 2021-22.

Since its launch, Make in India has made significant achievements in facilitating investment, fostering innovation, building best in class infrastructure and is now focusing on 27 sectors under Make in India 2.0.

Trends of FDI equity inflow

As for FY 2021-22, Singapore is the top investor country in FDI equity inflow, followed by the U.S.A. (18%) and Mauritius (16%). ‘Computer Software & Hardware’ has emerged as the top recipient sector of FDI Equity inflow during FY 2021-22 with around 25% share followed by Services Sector (12%) and Automobile Industry (12%) respectively.

Karnataka is the top recipient state with 38% share of the total FDI Equity inflow reported during the FY 2021-22 followed by Maharashtra (26%) and Delhi (14%). Majority of the equity inflow of Karnataka has been reported in the sectors `Computer Software & Hardware’ (35%), Automobile Industry (20%) and `Education’ (12%) during the FY 2021-22.

Government efforts to increase FDI inflow

The Government reviews the FDI policy on an ongoing basis and makes significant changes from time to time, to ensure that India remains an attractive and investor friendly destination.

Government has put in place a liberal and transparent policy for FDI, wherein most of the sectors are open to FDI under the automatic route. To further liberalise and simplify FDI policy for providing Ease of doing business and attracting investments, reforms have been undertaken recently across sectors such as Coal Mining, Contract Manufacturing, Digital Media, Single Brand Retail Trading, Civil Aviation, Defence, Insurance and Telecom.

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