Foreign Investment In India: Global Reach

India has become an increasingly attractive destination for foreign direct investment (FDI) in recent years, with FDI inflows reaching US$84.84 billion during 2021-22 and total FDI inflows over the last ten years (April 2014-June 2024) amounting to US$725.96 billion. The country's stable political environment, dynamic business environment, and improving global competitiveness have all contributed to its appeal for international corporations. India's FDI inflows have increased by around 20 times from 2000-01 to 2023-24, with the country now ranking 10th in the top destinations for FDI. The top sources of FDI inflows to India include Mauritius, Singapore, the United States, the Netherlands, and Japan.

Singapore, Mauritius, the US, the Netherlands and Japan are the top five countries for FDI equity inflows into India

Singapore, Mauritius, the US, the Netherlands, and Japan are the top five countries for FDI equity inflows into India. In the 2023-24 financial year, Singapore accounted for the highest FDI equity inflow to India, valued at over $11 billion, followed by Mauritius with over $7 billion. Singapore and Mauritius are jurisdictions used by global investors to route their money into developing economies like India.

Singapore's status as one of the world's prominent financial hubs makes it attractive to global investors seeking Asian investment opportunities. Additionally, India's initiatives, such as the SEBI amendments to the REIT Regulations 2014, have created new opportunities for Singapore-based investors. The double tax avoidance agreement between India and Singapore also contributes to Singapore's appeal.

Mauritius used to be the preferred jurisdiction for foreign investment in India due to its tax advantages as a low-tax jurisdiction. However, in 2016, India amended its tax treaty with Mauritius, introducing a source-based taxation regime for capital gains, reducing Mauritius's attractiveness.

The US is the third-largest source of FDI for India, with investments of nearly $5 billion in 2023-24. The Netherlands and Japan are also significant investors, with the Netherlands accounting for 7% of FDI equity inflows, and Japan contributing 6%.

Overall, India's FDI inflows have increased significantly, and the country aims to attract at least $100 billion annually in gross FDI.

India's FDI inflows have increased by 20 times from 2000-01 to 2023-24

From April 2000 to June 2024, India's cumulative FDI inflow stood at US$695.04 billion, with the service sector attracting the highest FDI equity inflow of 16.33%, amounting to US$113.49 billion. This was followed by the computer software and hardware industry at 15.20% (US$105.62 billion), trading at 6.31% (US$43.85 billion), telecommunications at 5.72% (US$39.78 billion), and the automobile industry at 5.27% (US$36.65 billion).

The top five countries for FDI equity inflows into India during this period were Mauritius (25%), Singapore (24%), the USA (10%), the Netherlands (7%), and Japan (6%). In terms of states, Maharashtra received the highest FDI equity inflow (31%), followed by Karnataka (21%), Gujarat (16%), Delhi (13%), and Tamil Nadu (5%).

India's FDI inflows reached a record high of US$84.84 billion during 2021-22, with the service sector, computer software and hardware, and trading being the major receivers. According to the World Investment Report 2022, India was the eighth-largest recipient of FDI globally until 2020.

The Indian government has implemented several policies and initiatives to enhance FDI, including the "Make in India" campaign, which simplifies procedures and promotes a favourable investment climate across sectors. Liberalization of FDI policies, particularly in retail, defence, insurance, and single-brand retail trading, has also played a key role.

FDI inflows play a crucial role in India's economic development, contributing to job creation and technological expertise. They also provide a substantial non-debt financial reservoir for the nation's developmental endeavours. India's FDI inflows are expected to continue growing, with the country aiming to attract at least US$100 billion annually in gross FDI.

India's service sector attracted the highest FDI equity inflow of 16.33% from April 2000 to June 2024

India has become an attractive destination for foreign direct investment (FDI) in recent years, influenced by several factors that have boosted FDI. According to the Department for Promotion of Industry and Internal Trade (DPIIT), India's cumulative FDI inflow stood at US$695.04 billion between April 2000 and June 2024, mainly due to the government's efforts to improve the ease of doing business and relax FDI norms.

From April 2000 to June 2024, India's service sector attracted the highest FDI equity inflow of 16.33%, amounting to US$113.49 billion. This was followed by the computer software and hardware industry at 15.20% (US$105.62 billion), trading at 6.31% (US$43.85 billion), telecommunications at 5.72% (US$39.78 billion), and the automobile industry at 5.27% (US$36.65 billion). The service sector includes financial, banking, insurance, non-financial/business, outsourcing, R&D, courier, technical testing, and analysis.

In the financial year 2024, Singapore accounted for the highest FDI equity inflow to India, valued at over US$11 billion, followed by Mauritius with over US$7 billion. Singapore accounted for roughly 24% of the total FDI inflows in the financial year 2024. The computer and hardware sector received the highest FDI equity inflow in the financial year 2023, followed by the services sector.

FDI inflows play a significant role in India's economic development. They often result in the opening of factories in the destination country, leading to higher employment and improved productivity. The total FDI inflow into India from April 2024 to June 2024 stood at US$22.5 billion, with FDI equity inflow for the same period at US$16.2 billion.

India's FDI inflows reached a record US$84.84 billion during 2021-22

India's FDI inflows reached a record high of US$84.84 billion during the 2021-22 financial year, marking a notable increase from the US$81.97 billion inflows in 2020-21. This achievement underscores the country's emergence as a preferred destination for foreign investments, particularly in the manufacturing sector. The Indian government's proactive policy framework, dynamic business environment, and economic reforms have been instrumental in attracting these investments.

The service sector, computer software and hardware, and trading were the primary sectors that received the highest FDI inflows during 2021-22. Notably, the computer and hardware sector attracted the highest FDI equity inflow in the fiscal year 2023, followed by the services sector. This influx of foreign investment plays a pivotal role in India's economic development, often resulting in the opening of new factories and increased employment opportunities.

The leading investing countries contributing to India's FDI equity inflows in 2021-22 were Singapore, the United States, and Mauritius. Singapore accounted for approximately 27% of the total FDI inflows, while the US and Mauritius contributed 18% and 16%, respectively. These countries have strategically capitalised on India's investment incentives, such as tax breaks and competitive labour costs.

The state of Karnataka stood out as the top recipient of FDI equity inflows during 2021-22, capturing 38% of the total inflows. Maharashtra and Delhi followed closely, with 26% and 14% shares, respectively. These states have been attractive destinations for foreign investors due to their favourable business climate and infrastructure.

The "Make in India" campaign, simplified procedures, and a favourable investment climate across sectors have been key strategies in enhancing FDI inflows into India. Additionally, the liberalisation of FDI policies, particularly in retail, defence, insurance, and single-brand retail trading, has played a pivotal role in making India a compelling investment destination.

The cumulative FDI inflow into India from April 2000 to June 2024 stood at a substantial US$695.04 billion, showcasing the country's enduring appeal to international investors. Over the years, India has implemented structural economic reforms, including easing restrictions on foreign investment and updating bankruptcy and labour laws, to enhance its business environment and boost FDI.

India is an investment-friendly nation, attracting the attention of leading multinational organisations

The Indian government has played a proactive role in enhancing the country's attractiveness to foreign investors. Notable efforts include the "Make in India" campaign, which simplifies procedures and promotes a favourable investment climate across sectors, and the liberalisation of FDI policies in retail, defence, insurance, and single-brand retail trading. The implementation of the Goods and Services Tax (GST) has improved transparency, while Special Economic Zones (SEZs) provide dedicated spaces with tax incentives. These initiatives have made India a desirable destination for multinational companies seeking strategic collaborations and cross-border M&As.

The total FDI inflows into India between April 2000 and June 2024 amounted to $1,013.45 billion, with the top five countries being Mauritius, Singapore, the United States, the Netherlands, and Japan. The services sector, including finance, banking, and insurance, along with the computer software and hardware industry, have been the major receivers of FDI. India's vast and growing consumer base, stable political environment, and competitive labour costs further add to its appeal for foreign investors.

Leading multinational organisations that have invested in India include Vodafone, Amazon, Unilever, Samsung, Adidas, Lotte, DHL, Mercedes-Benz, Toyota, Garnier, Panasonic, LG, Microsoft, IBM, Nestlé, and Coca-Cola. India's growing demographics, huge e-commerce market, and technological advancements make it an attractive destination for foreign investment, with the country expected to attract annual FDI inflows of $120-160 billion by 2025.

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