Singapore (27.01%) and USA (17.94%) have emerged as top sourcing nations in foreign direct investment (FDI) equity flows into India in FY2021-22 followed by Mauritius (15.98%), Netherland (7.86%) and Switzerland (7.31%). It may be noted that as per the UNCTAD World Investment Report (WIR) 2022, in its analysis of the global trends in FDI inflows, India has improved one position to 7th rank among the top 20 host economies for 2021.
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% in FY 2021-22 ($21.34 billion) compared to the previous FY 2020-21 (USD 12.09 billion).
The government has implemented several transformative reforms under the FDI policy regime across sectors such as insurance, defence, telecom, financial services, pharmaceuticals, retail trading, e-commerce, construction & development, civil aviation, manufacturing etc.
Despite the ongoing pandemic and global developments, India received the highest annual FDI inflows of $84,835 million in FY 21-22 overtaking last year’s FDI by $2.87 billion. Earlier, FDI inflows increased from $74,391 million in FY 19-20 to $81,973 million in FY 20-21.
The Government continues to liberalize investment restrictions, eliminate regulatory barriers, nurture international relations and improve business environment. Changes are made in the FDI policy after having consultations with stakeholders including apex industry chambers, associations, representatives of industries/groups and other organizations. While foreign investments are permitted under the automatic route in most sectors/activities, due to strategic reasons certain investments are either restricted or permitted under the Government approval route through a screening mechanism as per the prescribed framework.
Top 5 sectors receiving highest FDI Equity Inflow during FY 2021-22 are Computer Software & Hardware (24.60%), Services Sector (Fin., Banking, Insurance, Non Fin/Business, Outsourcing, R&D, Courier, Tech. Testing and Analysis, Other) (12.13%), Automobile Industry (11.89%), Trading 7.72% and Construction (Infrastructure) Activities (5.52%).
Top 5 States receiving highest FDI Equity Inflow during FY 2021-22 are Karnataka (37.55%), Maharashtra (26.26%), Delhi (13.93%), Tamil Nadu (5.10%) and Haryana (4.76%)
Top 5 sectors receiving highest FDI Equity Inflow during FY 2021-22 are Computer Software & Hardware (24.60%), Services Sector (Fin., Banking, Insurance, Non Fin/Business, Outsourcing, R&D, Courier, Tech. Testing and Analysis, Other) (12.13%), Automobile Industry (11.89%), Trading 7.72% and Construction (Infrastructure) Activities (5.52%).
During FY 2021-22 FDI has been reported from 101 countries, whereas, it was reported from 97 countries during previous FY 2020-21.
In India FDI up to 100% is allowed in non-critical sectors through the automatic route, not requiring security clearance from the Ministry of Home Affairs (MHA). Prior government approval or security clearance from MHA is required for investments in sensitive sectors such as defence, media, telecommunication, satellites, private security agencies, civil aviation and mining, besides any investment from Pakistan and Bangladesh. All foreign investments are required to be in compliance with the applicable entry route, sectoral cap, attendant conditions, sectoral laws, Companies Act, 2013 and rules thereunder, pricing guidelines, documentation and reporting requirements.
