India has emerged as a significant global destination for Foreign Direct Investments (FDIs) in recent times. A survey revealed that India was positioned among the top three preferred global FDI spots, with approximately 80% of worldwide respondents expressing intentions to invest in the country. Additionally, India has taken measures such as substantial reductions in corporate taxes and simplification of labor laws to facilitate investment. Over the past 16 years, India has also progressively eased FDI restrictions, lowering the overall restrictions from 0.42 to 0.21. The country’s appeal to international investors extends across both short and long-term prospects.
The increase in foreign investments in India is largely due to the country’s efforts to make it more attractive for international investors. In the fiscal year 2014-15, foreign direct investment (FDI) in India was at a modest $45.15 billion, but since then, it has experienced steady growth. Over the past 23 years, spanning from April 2000 to December 2023, India has received a total of $953.143 billion in FDI. Notably, a significant portion of this, approximately $595.25 billion, has come in the last 9 years (from April 2014 to March 2023), making up nearly 65% of the total FDI during this period. For the fiscal year 2022-23, the total FDI inflow into India amounted to $70.97 billion, with FDI equity inflows specifically totaling $46.03 billion.
India’s impressive FDI performance in 2023 is expected to continue in 2024, playing a crucial role in propelling the nation’s economic growth. Analysts predict a further 7-10% growth in FDI inflows in 2024, reaching upwards of $54 billion. This sustained momentum showcases India’s increasing attractiveness as a global investment destination.
The primary countries contributing to FDI equity inflows in the financial year 2022-23 were Mauritius (26%), Singapore (23%), USA (9%), Netherlands (7%), and Japan (6%).
Regarding sectors, the ones attracting the highest FDI equity inflows during the same period were the Services Sector (16%), Computer Software & Hardware (15%), Trading (6%), Telecommunications (6%), and the Automobile Industry (5%).
In terms of states, Maharashtra led with the highest FDI equity inflow at 29%, followed by Karnataka (24%), Gujarat (17%), Delhi (13%), and Tamil Nadu (5%) in the financial year 2022-23.
Collectively, these factors position India to potentially attract FDI ranging from US$ 120-160 billion annually by 2025.
India Making Good Progress to Attract $100 Billion in Foreign Investment this Fiscal Year Due to Reforms: Government
The Indian government has declared its intention to attract $100 billion in foreign direct investment (FDI) during the ongoing fiscal year (from April 2023 to March 2024). This aspiration is grounded in a strong start, with the first quarter already witnessing a substantial inflow of $25.6 billion in FDI. The government credits this positive FDI trend to recent economic reforms and endeavors aimed at improving the ease of doing business in India. These changes encompass streamlining the FDI approval process, reducing corporate taxes, providing incentives for specific sectors, and overall enhancements in the business environment.
Furthermore, the government expects FDI to receive an additional boost from initiatives designed to bolster the manufacturing sector in India. One of these initiatives is the Production Linked Incentive (PLI) Scheme, which offers incentives to companies for establishing manufacturing units in the country. Achieving the $100 billion FDI target within this fiscal year would mark a record inflow of foreign investment in a single year. This achievement is projected to yield significant benefits for the Indian economy by creating job opportunities and driving economic growth.
FDI Entry Routes :
Foreign investment in various sectors can take place either through the Automatic route or the Government route.
Automatic Route: When utilizing the Automatic route, non-resident individuals or Indian companies can invest without needing approval from the Government of India.
Government Route: The Government route, on the other hand, involves obtaining prior approval from the Government of India before making the investment. Proposals for foreign investment through the Government route are evaluated by the relevant Administrative Ministry/Department.
The Indian Economy : All Information Growth Rate & Statistics
| Sector | FDI Limit (%) | Route |
|---|---|---|
| Infrastructure Company in Securities Market | Up to 49 | Automatic |
| Insurance | Up to 49 | Automatic |
| Medical Devices | Up to 100 | Automatic |
| Pension | Up to 49 | Automatic |
| Petroleum Refining (By PSUs) | Up to 49 | Automatic |
| Power Exchanges | Up to 49 | Automatic |
| Banking (Public sector) | Up to 20 | Govt. |
| Broadcasting Content Services | Up to 49 | Automatic |
| Uploading/Streaming of ‘News & Current affairs’ | Up to 26 | Automatic |
| Investment by Foreign airlines | Up to 49 | Automatic |
| Core Investment Company | Up to 100 | Automatic |
| Food Products Retail Trading | Up to 100 | Automatic |
| Mining & Minerals (titanium) | Up to 100 | Automatic |
| Multi-Brand Retail Trading | Up to 51 | Automatic |
| Print Media (scientific, technical, etc.) | Up to 100 | Automatic |
| Print Media (news & current affairs) | Up to 26 | Automatic |
| Satellite (Establishment and operations) | Up to 100 | Automatic |
| Air transport services (Scheduled) | Up to 49 | Automatic |
| Air transport services (Regional) | Up to 74 | Govt. |
| Banking (Private sector) | Up to 49 | Automatic |
| Banking (Private sector) | Up to 74 | Govt. |
| Biotechnology (brownfield) | Up to 74 | Govt. |
| Defence | Up to 74 | Govt. |
| Healthcare (Brownfield) | Up to 74 | Govt. |
| Pharmaceuticals (Brownfield) | Up to 74 | Govt. |
| Private Security Agencies | Up to 79 | Automatic |
| Telecom Services | Up to 49 | Govt. |
To register any investor queries, click here for official Invest India Desk
What is Foreign Direct Investment (FDI)?
FDI refers to the investment made by individuals, companies, or entities from one country into another country, with the aim of establishing business operations or acquiring ownership in the target country.
Why has India become a hub for FDI?
India’s growing economy, market potential, skilled workforce, and favorable business environment have made it an attractive destination for foreign investors.
What sectors in India have received significant FDI?
Sectors like manufacturing, technology, finance, healthcare, and retail have attracted substantial FDI due to their growth prospects and government incentives.
What is the role of the Automatic route in FDI?
The Automatic route allows non-resident individuals and Indian companies to invest in certain sectors without needing prior approval from the Indian government.
When is the Government route for FDI used?
The Government route is used when FDI proposals require approval from the Indian government, typically for sectors that have strategic or sensitive implications.
Where can I find official information on FDI regulations and sectors?
The Department for Promotion of Industry and Internal Trade (DPIIT) and the Reserve Bank of India (RBI) provide official guidelines and information on FDI regulations and sectors eligible for investment.
