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High Inflow of FDI shaping Indian business environment

India Procuring the spot for stable economic growth

The economic prosperity of every nation depends on government policies and implementation strategies. India has shown the potential to grow at a major scale in the global market with contributions in pharmaceuticals, Information Technology, and the Automobile sector to name a few. Foreign Direct Investment (FDI) plays a major role for developing nations to make growth in particular regions of the market. Foreign investments bring advanced technology and the global market to the host country.

India was witnessing the golden era of FDI as the new government policies were taking the charge to cut the monopoly of China being the manufacturing hub for the world. “Depending on one country could lead to a great fall”, that’s what happened in the year 2020 when the whole world went to a halt for at least 4-6 months due to the Chinese spread Covid19 (SARS2) virus. Multinational corporates started searching for alternatives to Chinese manufacturing units, as it was now not the trustable partner to rely on.

The rise in the FDI Inflow

India was already preparing to cut down dependency on China-made products as it was not helping Indians grow at the pace we expected. Later, the Government of India came up with initiatives to make India a reliable spot for foreign manufacturers. According to the Department for Promotion of Industry and Internal Trade (DPIIT), FDI equity inflow in India stood at US$ 547.2 Billion between April 2000 and June 2021. This indicates that the government’s efforts to improve the Ease of Doing Business and relaxing FDI norms have yield results.

If we had a look at the current FDI inflow despite the concerns for the second & third wave covid19 pandemic, foreign investors were bullish and had confidence in the administration of the Indian government. FDI equity inflow in India stood at US$ 17.56 Billion between April 2021 and June2021. The Automobile sector attracted the highest FDI equity inflow of US$ 4.66 Billion, followed by the Computer Software & Hardware sector (US$ 3.06 Billion), Services sector (US$ 1.89 Billion), and Metallurgical industries (US$ 1.26 Billion).

The top state-wise count goes like this: between April 2021 and June 2021, Karnataka registered the highest FDI equity inflow of US$ 8.45 Billion, followed by Maharashtra US$ 4.09 Billion, Delhi US$ 1.95 Billion, and Gujarat US$ 765 Million.

Recent Developments/Investments

  • In August 2021, Copenhagen Infrastructure Partners (CIP) announced to invest US$ 100 Million in Amp Energy India PVT. Ltd. to expand in the renewable energy market in India.

  • In July 2021, FedEx express announced an investment of US$100 Million in Delhivery, an Indian logistics startup, to expand in the country.

  • In April 2021, Amazon India launched the US$ 250 Million ‘Amazon Smbhav Venture Fund’ for Indian startups and entrepreneurs to boost technology innovations in the areas of digitization, agriculture, and healthcare.

  • In November 2020, Rs. 2,480 crore (US$ 337.53 Million) Foreign Direct Investment in ATC Telecom Infra Pvt. Ltd. was approved by the Union Cabinet.

  • In November 2020, Amazon Web Services (AWS) announced to invest US$ 2.77 Billion (Rs. 20,761 crores) in Telangana state to set up multiple data centres; this is the largest FDI in the History of the state.

Final Thoughts

There’s an economic trade when the situation in the region is normal and the government is strong enough to hold the extreme situation in the market. The Indian government has proved to be strong and is the reason why investors are turning heads towards India over China.

The new normal is indicating a strong comeback for the economic operations in the nation which will definitely drive its economic cycle far ahead of predicted numbers by the global financial institutions. There’s a lot more to happen in a very short period, keeping eye on the Indian market for production and consumption will be a key factor for the growth of companies as well as India’s economy.

Source : https://www.ibef.org/economy/foreign-direct-investment.aspx and https://dpiit.gov.in/publications/fdi-statistics

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