In News:

• India has recorded the "highest ever" annual FDI (foreign direct investment) inflow of USD 83.57 billion in 2021-22.

What’s in Today’s Article:

• Foreign direct investment (FDI) – About, benefits, FDI trend in India, Govt initiatives
• News Summary

Foreign direct investment (FDI)

About

• FDI is when a company takes controlling ownership in a business entity in another country.
• With FDI, foreign companies are directly involved with day-to-day operations in the other country.
• This means they aren’t just bringing money with them, but also knowledge, skills and technology.
• Generally, FDI takes place when an investor establishes foreign business operations or acquires foreign business assets, including establishing ownership or controlling interest in a foreign company. 

Benefits

• Apart from being a critical driver of economic growth, FDI has been a major non-debt financial resource for the economic development of India.
• Foreign companies invest in India to take advantage of the relatively lower wages, special investment privileges like tax exemptions, etc.
• When foreign investment is being made in India, it also helps the country achieve technical know-how and generate employment.

FDI trend in India

• According to the Department for Promotion of Industry and Internal Trade (DPIIT), FDI equity inflow in India stood at US$ 572.81 billion between April 2000-December 2021.
• This indicates that the government's efforts to improve ease of doing business and relaxing FDI norms have yielded results.

Recent Government Initiatives

• The govt has amended rules of the Foreign Exchange Management Act (FEMA), allowing up to 20% FDI in the insurance company LIC through the automatic route.
• The Government is also considering easing scrutiny on certain foreign direct investments from countries that share a border with India.
• The implementation of measures like PM Gati Shakti, single window clearance and GIS-mapped land bank are expected to push FDI inflows in 2022.
• The government is likely to introduce at least three policies (Space Communication policy, Remote Sensing policy and Transfer of Technology policy) as part of the Space Activity Bill in 2022.
  • This Bill is expected to clearly define the scope of foreign FDI in the Indian space sector.
• In September 2021, the Union Cabinet allowed 100% FDI via the automatic route in telecom sector, up from the previous 49%.
• In August 2021, the government allowed the 74% FDI limit in the insurance sector.

News Summary

• The Commerce and Industry ministry revealed that India has recorded the highest ever annual FDI inflow of $83.57 billion during FY22.

Key Highlights

• Highest ever annual FDI inflow
  • In 2014-2015, FDI inflow in India stood at mere $45.15 billion as compared to the highest ever annual FDI inflow of $83.57 billion reported during the financial year 2021-22.
  • It overtook last year's FDI by $1.60 billion despite military operation in Ukraine and COVID-19 pandemic.
• 
• Sectoral performance
  • Among sectors, computer software and hardware attracted maximum inflows.
  • It was followed by the services sector and automobile industry
  • As per the ministry, India is rapidly emerging as a preferred country for foreign investments in the manufacturing sector.
  • FDI equity inflow in manufacturing sectors has increased by 76 per cent in 2021-22 (USD 21.34 billion) compared to 2020-21 (USD 12.09 billion).
• Top investors – country-wise
  • In terms of top investor countries:
    • Singapore is at the top with 27 per cent followed by the US (18 per cent) and Mauritius (16 per cent) during the last fiscal.
  • Major recipient states of FDI Equity inflow
    • Karnataka is the top recipient state with 38 per cent share of the total FDI Equity inflow reported during the FY 2021-22.
    • It was followed by Maharashtra (26 per cent) and Delhi (14 per cent).
  • FDI inflow has increased by 23 per cent post-Covid
    • FDI inflow has increased by 23 per cent post-Covid i.e. March 2020 to March 2022 at $171.84 billion in comparison to FDI inflow reported pre-Covid i.e. February 2018 to February 2020 at $141.10 billion.
  • Reforms undertaken to further attract investment
    • The 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 FDI policy for providing ease of doing business and attract 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.