FDI into India continuously growing

Foreign Direct Investment (FDI)
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January 11, 2021

FDI into India has been continuously growing as the country has one of the most facilitative policies to attract overseas investors. Commerce and industry minister PiyushGoyal said India is witnessing a quick and sustained recovery in economic performance measures amid the Covid-19 pandemic. The country has seen a growth in FDI in the first initial nine months of FY21.

India has been consistently opening up to global investors and encouraging business through strategic connection, strengthening our economic decisions for the future and introducing valuable reforms and facilitation measures to promote greater international involvement. FDI flows have been continuously growing, which has increased up to 13% to about $ 40 million, during April-September 2020. Minister added that 100% FDI is allowed through automatic route in almost all sectors for specific sectors such as telecom, media, pharmaceuticals, insurance, and government consent necessary for foreign lenders. There are nine sectors where FDI is forbidden: lottery business, gambling and betting, chit funds, real estate businesses and manufacturing of cigars, cheroots, cigarillos and cigarettes using tobacco.

Sectors which attracted maximum FDI

Service segment
Computer software and hardware
Telecommunications
Trading
Construction and development
Automobiles
Chemicals
Pharmaceuticals

FDI had plunged by 60% from the year-ago period to $6.5 billion, information delivered by Department for promotion of industry and internal trade (DPIIT):

Mauritius was the primary origin of FDI in the quarter ended 30 September, and the US leapt to the third position from fifth in the trailing quarter. Almost $17.5 billion of FDI came in August alone, the highest monthly inflows seen this fiscal.
In April-August 2020, it received the highest ever total FDI for the first five months of a financial year stating that these trends endorse India’s status as afavoured investment destination amongst global investors.
The total FDI incursion into India in the first five months was $35.73 billion, 1% higher than that in the same interval last fiscal. Total FDI in the first six months of FY21 was $30 billion as against $26.09 billion in the year-ago period.

Under the government, acceptance route, foreign investors have to take prior acceptance of the respective ministry/department. Government’s reforms focus on capital, labour, land and removing barriers to new businesses. Even before the beginning of the pandemic, India was rapidly announcing a slew of reform measures to improve the economy and productivity levels.

Recent updates

Announcement of attractive tax rates, certainly they can’t match with the UAE, but otherwise attractive tax rates available anywhere in the world.
Passenger vehicle sales fatten for the fourth linear month in November while factory output enlarged for the second consecutive month in October to touch an eight-month high.
The government has undertaken a series of reforms during the Covid-19 pandemic period at the centre of Atmanirbhar Bharat’s vision.
The focus has been sloping up domestic manufacturing while ensuring that India becomes integrated mainly with global value chains.
The production linked incentive has been given for ten new sectors while the remission of duties and taxes on exported products will make Indian exports more viable.

According to the announcement, some of the problems foreign investors currently face in investing in India are inconsistency in the interpretation of laws, frequent changes to the rules and lack of coordinated approach amongdifferent regulators in the country. With relaxed FDI norms, defence production will be among the areas that will be looked at for fresh overseas investments in the months ahead while easing businesses’ compliance burden will be a priority area.Thus, India can become a significant foreign investment hub by solving some of these problems.

FDI is significant as India would require considerable investments in the coming years to overhaul its infrastructure sector to boost growth. Healthy growth in foreign inflows helps to maintain the balance of payments and the value of the rupee. The administration schemes would make the FDI strategy more speculator cordial and eliminate the approach impedes venture inflows into the nation.

At AJSH, we assist our clients in setting up their businesses in India and ensuring they comply with all statutory requirements in a timely manner. If you have any questions or wish to know more about India’s FDI norms, kindly contact us.