India is rapidly emerging as a preferred country for foreign investments in the manufacturing sector.
According to UNCTAD World Investment Report (WIR) 2022’s analysis of the global trends in FDI inflows, India has improved one position reaching 7th place among the top 20 host economies for 2021.
FDI Equity inflow in Manufacturing Sectors have increased by 76% in FY21-22 (USD 21.34 billion) compared to previous FY20-21 (USD 12.09 billion).
The Government has implemented several transformative reforms under the FDI policy regime across sectors such as insurance, defense, telecom, financial services, pharmaceuticals, retail trading, e-commerce, construction & development, civil aviation, manufacturing etc. It also 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.
The top 5 sectors receiving highest FDI Equity Inflow during FY21-22 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 FY21-22 are:
- Karnataka (37.55%),
- Maharashtra (26.26%),
- Delhi (13.93%),
- Tamil Nadu (5.10%), and
- Haryana (4.76%)
During FY 2021-22 FDI has been reported from 101 countries, whereas it was reported from 97 countries during previous FY 2020-21.
In brief key points to note are:
- The Government encourages foreign productive and commercial investments through a series of measures (The primary program being “Make in India”), to make India the first production hub in the world.
- In India today it is easier to invest: Foreign Direct Investments in the country have gone from 22.1 billion euros in 2014 to 40.4 in 2018.
- A favorable tax towards foreign companies: today manufacturing companies established after 01.10.2019 can avail of a 17% rate tax on profits.
- India is looking for technology, know-how and skills to support its growth.
- India will become the third world economy and investing in India today is truly far-sighted.