Foreign Direct Investment (FDI) in India has been an instrumental in shaping the Nation’s economic landscape. As per the Department for Promotion of Industry and Internal Trade (DPIIT), India’s influx of FDI has increased 20 times in the past 23 years. Ashwini Vaishnaw, India’s former IT minister said that the nation is eyeing $100 billion in annual Foreign Direct Investment (FDI) in the upcoming few years.
To ensure that the country stays an investor-friendly destination, various FDI initiatives have taken place. The Indian government reviews them regularly to ensure the ease of doing business for foreign investors.
In this article, we’ll discuss the major FDI initiatives as per the latest FDI policy in India: –
The Startup India Program
Make in India
Investment Clearance Cell (ICC)
One District One Product (ODOP)
The Startup India Program The Startup India Initiative was launched in 2016. It aims to support start-ups in India through innovation and design. It strengthens India’s FDI ecosystem, making it easier for foreign investors to invest and runstartups in India. Another objective of the initiative is to provide employment. From 400 startups in 2016 to 1.18 lakh startups till date, the Startup India Program has brought impressive results.
Owing to the Startup India Initiative, India’s technology and innovation sector has become an especially attractive investment sector for foreign investors.
1.1 Multiple Schemes There are several schemes under the initiative such as the Credit Guarantee Scheme for Startups (CGHS), Startup India Seed Fund Scheme (SISFS), and FFS Scheme. All of them offer capital for startups at different stages of their business cycle. The Startup India Team manages these schemes. The Department for Promotion of Industry and Internal Trade (DPIIT) oversees it.
1.2 Handholding Support Under the current FDI policy in India, many processes have been simplified and the government offers extensive support for start-ups to grow. This includes a mobile app and a portal for information exchange, legal support at less cost, relaxation in norms of public procurement, faster exit routes for startups, etc. The government has also established the Startup India Hub that offers handholding support for startups at different stages of their development.
1.3 Monetary Incentives Under the initiative, the government offers funding support, a credit guarantee fund, tax exemption on capital gains invested in Fund of Funds, and exemption of taxes for startups for three years. The Indian government has aided investments of around INR 17,534 crores in 938 startups since 2016.
1.4 Industry-Academia Partnership and Incubation To further support start-ups, the government intends to bridge the gap between scientific research and its practical implementation in the industry. For this, different measures are being taken. For instance, organizing startup fests, setting up incubators, research labs, and innovation labs, organizing MAARG mentorship connect, offering grants to startups, etc. This also includes launching the Atal Innovation Mission (AIM) with Self–Employment, Talent Utilization (SETU), and Program of NITI Aayog.
The DPIIT recognized more than 98,119 startups as of April 2023. Due to the Startup India Initiative, the technology and innovation sector in India has become a particularly attractive investment sector for foreign investors.
The initiative aligns with many others like it has helped India to climb up in the World Bank’s Doing Business Report (DBR) to 63rd position in 2020, a significant jump from its 77th rank in 2019.
Make in India Launched in 2014, Make in India is a significant step in the long-term vision of turning India into a global manufacturing hub. It aims to utilize the manufacturing potential of India, foster innovation, help in building high-quality infrastructure, and attract foreign investment. Owing to this initiative, the manufacturing sector in India recorded a 57% increase in FDI equity inflow between 2014-2022 as compared to the previous eight years (2006-2014).
Under the initiative, many reforms have been brought about to boost FDI investment in India: –
2.1 Simplified Regulations: The initiative has reduced red tape, enhancing the ease of doing business in India. These reforms include relaxation in payment of taxes, ease of securing power connection, time-bound clearances for applications of foreign investors, quick insolvency resolution, decreasing the number of documents for exports, etc.
2.2 Multiple Schemes: There are numerous schemes to support the initiative such as Skill India, Digital India, Pradhan Mantri Jan Dhan Yojana (PMJDY), Swachh Bharat Abhiyan, etc.
2.3 Relaxation in FDI rules: Sectors like medical devices, defense, railway, insurance, etc. have been opened to receive foreign investment. The medical and surgical appliances sector saw an FDI inflow of US$3.22 billion between April 2000 to September 2023.
2.4 Infrastructure Building: There is more investment in ports, roads, and power grids under the initiative to create a better environment to run businesses. As per Budget 2023-2024, the Indian government is enhancing the capital investment outlay for infrastructure to Rs. 10 lakh crores. This is around thrice the outlay as in 2019-20.
2.5 Attractive incentives: There are tax relaxations under Make in India which makes it even more attractive for foreign investors. A significant instance is reducing the corporate income tax rate to 15% for manufacturing companies.
Investment Clearance Cell (ICC) Investment Clearance Cell (ICC) is one of the measures taken by the Indian government to enhance the ease of doing business in the country. Soft-launched in 2021, the Investment Clearance Cell (ICC) offers “end-to-end” support to investors.
3.1 Easy Accessibility: It’s envisioned to operate as an online digital portal. This makes it easily accessible to the public.
3.2 Optimal Support: This includes offering information related to land banks, lending support in getting clearances at the State and Centre level, pre-investment advisory support, etc.
3.3 Medium for regulatory approvals: The idea is to develop it into a one-stop platform for getting regulatory approvals. It combines the current clearance systems of various departments and ministries of the central and state governments.
One District One Product (ODOP) The concept behind the One District One Product initiative is to select, brand, and promote one product from every district of India. It aims to help local businesses to compete in domestic and international markets. Its main objectives are to generate employment, boost economic growth, and enhance rural entrepreneurship. According to government data, the value of exports from Uttar Pradesh under the ODOP initiative has grown from Rs. 58,000 crore in FY17-18 to a whopping Rs. 96,000 crore in FY21-22.
4.1 Financial Support The initiative includes giving financial support in the form of capital investment to micro-businesses in manufacturing ODOP products. Other forms of financial aid include a credit-linked capital subsidy of up to Rs. 10 lakhs under the Pradhan Mantri Formalisation of Micro Food Processing Enterprises (PMFME) Scheme, a credit-linked grant of 35% for SHGs, Producer Cooperatives, etc.
4.2 Training The initiative offers training on subjects like business growth, GST registration, operations, marketing, FSSAI norms, and much more.
4.3 Branding and Marketing Support One of the key benefits of the initiative is that it offers branding and marketing help to SHGs and cooperatives. This is done mostly through grants that cover up to 50% of the total expenses for the ODOP product at the regional or state level.
Conclusion FDI is an important catalyst of the economic development of India. The Indian government has brought about various initiatives. Initiatives such as Make in India and Startup India facilitate startups and boost India’s manufacturing capabilities, initiatives like Investment Clearance Cell and One District One Product (ODOP) intend to simplify processes and empower communities
With many more such initiatives in the upcoming years and their proper implementation, India is on its way to becoming one of the most attractive destinations for foreign investment. This shall further strengthen its position as a significant player in the world economy. If you’re planning to invest in a business in India, it’s important to choose a reliable partner who can assist you in streamlining the process and help you reap optimal benefits. At Mercurius, our team consists of experts who offer end-to-end support in navigating the formalities regarding taxes, registration, bookkeeping, compliance, and more. If you have further queries or need personalized support, feel free to contact us here.
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