India: $83 billion for FY22: FDI will play an important role in India’s future economic development


Despite the uncertainties related to the pandemic, India remains a favorable destination for foreign investment. In 2021, around 44% of the world’s 1,200 business leaders from developed economies planned to make first-time or additional investments in India.

Several countries have said they see India as a lucrative destination because of its domestic market, not just as an export hub.

Gross foreign direct investment (FDI) inflows increased from $82 billion in fiscal year 2021 to $83.6 billion in fiscal year 2022.

Several sectors remained attractive to investors, including FMCG, IT, Pharmaceuticals, Financial Services, etc. Some of the top countries from which equity inflows were recorded were Singapore ($11.69 billion), the United States ($7.52 billion) and Mauritius, excluding the United Kingdom. , Cayman Islands and the Netherlands.

India’s favorable business landscape and the development of favorable government policies have increased the ease of doing business in the country.

Investor confidence has increased thanks to a high vaccination rate, stimulus packages and foreign investment programs. Additionally, the nation has embarked on a serious sustainability agenda in line with the green and transition assets of global fund managers.

According to the PHD Chamber of Commerce and Industry (PHDCCI), India is expected to attract $100 billion in FDI in 2022-23.

FDI will play an important role in India’s future economic development. Not only is it an important non-debt financial resource, but it is also a channel for technology transfer from major investors. This will increase the country’s competitive advantage on global platforms.

Recent Developments in FDI Space in India:

2022 has started on a high note with search giant Google announcing a $1 billion investment in an Indian telecommunications company

.

This included a capital investment of $700 million and an additional investment of $300 million for potential future projects in the areas of access, networks and cloud.

The investment came under the India Digitization Fund, which was launched in 2020 to accelerate India’s digital economy.

The Pension Funds Investment Board of Canada (CPPIB) has increased its investment portfolio in India from e-commerce to edtech and infrastructure in 2022.

CPPIB has invested over $160.49 million in the IPO of several companies, including

, , FSN E-Commerce Ventures () and (). The company has also invested in companies such as Byju’s, Emeritus and ChargePoint, among others.

In May 2022, Generali became the first foreign insurer to take a majority stake in its Indian life and property joint ventures. This is the first time that India has passed the Insurance (Amendment) Act 2021 to increase the FDI cap in the insurance sector to 74% from 49%.

Generali has just acquired a 25% stake in Future Generali India Insurance from

for $161.92 million.

GenWorks Health completed a second round of financing of $17.44 million through its financing arm, Grand Vista,

GE and evolution. Funding was secured from numerous investors, including Morgan Stanley and Somerset Indus Capital Partners.

The 2022 Union budget and other government policies to support FDI:

Deep sectoral reforms, such as Prime Minister GatiShakti’s initiative, will push FDI inflows in the future. It is a national master plan for multimodal connectivity, where more than 16 ministries will coordinate to attract investment in strategic infrastructure connectivity projects.

Approximately $26 billion in production-related opportunities have been introduced under this program, to enable extensive partnerships with foreign and private investors.

Other reforms, such as one-stop customs clearance and GIS-compatible land bank, have also been implemented.

In May 2021, the “Enhanced Trade Partnership” between India and the UK was announced. This comprehensive free trade agreement will strengthen bilateral relations between the two countries and encourage greater investment from the UK.

In October 2021, 100% FDI was approved by the government in the telecommunications sector. This includes all telecommunications and infrastructure service providers. Their bank guarantees for license agreements have also been reduced to 20%.

In 2022, the government is expected to introduce policies under the Space Activities Bill. This will attract large inflows of FDI into the Indian space sector.

Impact on India’s growth

In recent years, the government has relaxed FDI standards in several sectors, including defence, PSU, energy, stock exchanges, etc.

Foreign companies investing in India benefit from technical expertise and lower wages, which helps India create jobs.

It enables rapid infrastructure development, boosts agricultural productivity and boosts the country’s export performance.

FDI is also a crucial aspect of mobilizing India’s foreign exchange reserves. The Reserve Bank of India (RBI) thus has greater flexibility. With increased foreign exchange reserves, the central bank can keep exchange rates stable and enable favorable economic conditions for the country to grow. FDI has also been instrumental in achieving India’s climate goals.

The renewable energy sector attracted FDI worth over $1.18 billion in the first 9 months of FY 2021-22.

Overall, FDI promotes competitiveness and allows more products and services to enter the market for consumers. This, in turn, stimulates the development of the nation.

(Disclaimer: The recommendations, suggestions, views and opinions given by the experts belong to them. These do not represent the views of Economic Times.)

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