India- Preferred Investment Destination | Gist of Rajya Sabha TV / RSTV (now Sansad TV) - UPSC PDF Download

Introduction:

The Parliamentary Committee appreciates the efforts made by the Government in taking proactive steps to attract investment and promote domestic manufacturing. The Committee is hopeful that these measures will help in realising the goal of ‘Atmanirbhar Bharat’ and making India a global manufacturing hub. It recommends the government to ensure that the newly introduced schemes or measures are implemented in a timely manner.

Indepth analysis:

• India is rapidly emerging as a preferred country for foreign investments. The FDI inflow in India was at its highest ever at USD 81.97 billion in 2020-21
• Trends in India’s FDI are an endorsement of its status as a preferred investment destination, reported Saudi Gazette.
• The government reviews the FDI policy on an ongoing basis and makes significant changes from time to time, to ensure that India remains an attractive and investor-friendly destination.
• India’s FDI policy is liberal and transparent. Most of the sectors are open to FDI under the automatic route. To further liberalize and simplify FDI policy for providing ease of doing business and attract investments, reforms have been undertaken recently across sectors such as Coal Mining, Contract Manufacturing, Digital Media, Single Brand Retail Trading, Civil Aviation, Defense, Insurance and Telecom.
• Various initiatives have been launched by the government for promoting growth and attracting investment in India. India jumped to 63rd place in World Bank’s Ease of Doing Business [EODB] ranking as per World Bank’s Doing Business Report (DBR) 2020 from a rank of 142 in 2014.
• India’s highest ever foreign direct investment (FDI) was up by 1.95 percent on year. In terms of top investor countries of FDI Equity inflow, ‘Singapore’ is at the apex with 27 per cent, followed by the US (18 per cent) and Mauritius (16 per cent) for the Fiscal Year 2021-22.
• The top recipient sector of FDI Equity inflow during FY 2021-22 was Computer Software and Hardware. It emerged on top with around 25 per cent share followed by services sector (12 per cent) and automobile industry (12 per cent) respectively, as per the media portal.
• Manufacturing sector is also seeing a boost with global investors seeing India as a preferred destination. In a major boost to the economy, FDI Equity inflow in the Manufacturing Sectors has increased by 76 per cent in FY 2021-22 (USD 21.34 billion) compared to previous FY 2020-21 (USD 12.09 billion).
• Karnataka is the top recipient state with 38 per cent share of the total FDI Equity inflow reported during the FY 2021-22 followed by Maharashtra (26 per cent) and Delhi (14 per cent).

Rising economic influence

• Centre of global maritime trade to move from the Pacific to the Indian Ocean Region. India and China will be the largest manufacturing hubs of the world by 2030.
• Connectivity to Central Asia and Europe via the International North-South Transport Corridor (INSTC).
• In the next five years, India to have greater economic influence across the Asia-Pacific Region.

Measures:

• The government’s policy is very dynamic one.
• Comprehensive reform exercise in states and union territories to attract investors. These reforms were started after consultations between the Department for Promotion of Industry and Internal Trade (DPIIT) with the state governments under Business Reforms Action Plan (BRAP).
• All states and union territories are ranked on the basis of reforms implemented by them. There are certain designated parameters which are taken into consideration post which the ranking is done.
• An Empowered Group of Secretaries that had been constituted to fast-track investments in the country.
• The government has been from time to time relaxing more policies to include more items in the automatic list rather than restrictive list
• In 2020, schemes like production-linked incentive (PLI) scheme for electronics manufacturing, have been notified to attract foreign investments.
• In 2019, the Central Government amended FDI Policy 2017, to permit 100% FDI under automatic route in coal mining activities.
• Foreign Investment Facilitation Portal (FIFP) is the online single point interface of the Government of India with investors to facilitate FDI. It is administered by the Department for Promotion of Industry and Internal Trade, Ministry of Commerce and Industry.

Conclusion

• Foreign Direct Investment (FDI) is a major driver of economic growth and an important source of non-debt finance for the economic development of India.
• A robust and easily accessible FDI regime, thus, should be ensured. Economic growth in the post-pandemic period and India’s large market shall continue to attract market-seeking investments to the country.