The inflow of foreign direct investment (FDI) for the financial year 2021-22 has reached $83.57 billion which is the highest ever.
Foreign Direct Investment (FDI)
- Foreign direct investment (FDI) is an investment made by a firm or an individual of a country into business interests located in another country.
- FDI is a key driver of economic growth.
- FDI goes beyond capital investment, it includes the provision of management, technology, and equipment.
Trends in FDI in recent years
Image source: PIB
- India is emerging as a country preferred for foreign investments in the manufacturing sector.
- FDI inflows in Manufacturing Sectors have raised by 76% in FY 2021-22 (USD 21.34 billion) compared to FY 2020-21 (USD 12.09 billion)
- FDI inflows have increased by 23% after the COVID pandemic compared to FDI inflow reported pre-COVID.
Trends in FDI in FY 2021-22
- Top FDI inflow contributors: Singapore is the biggest source of FDI accounting for 27%, followed by the U.S.A (18%) and Mauritius (16%).
- Top FDI inflow recipient States: Karnataka is the top recipient state accounting for 38% of the total FDI inflow, followed by Maharashtra (26%) and Delhi (14%).
- The majority inflow of FDI to Karnataka is seen in sectors such as Computer Software & Hardware, Automobile Industry and Education.
- Top FDI inflow recipient sectors: Computer Software & Hardware is the top recipient sector with around 25% share followed by Services Sector (12%) and Automobile Industry (12%).
- Under the Computer Software & Hardware sector, the major recipient states are Karnataka (53%), Delhi (17%) and Maharashtra (17%).
Government’s initiatives to boost FDI
- The government has formulated a liberal and transparent policy for FDI, which has resulted in most of the sectors being open to FDI under the automatic route.
- The government has undertaken various reforms in sectors like coal mining, contract manufacturing, digital media, single-brand retail trading, civil aviation, defence, insurance and telecom which has further simplified and liberalised FDI inflows policies.