FDI Inflow Nearly $82 Bn in FY21
Source : Business Today
GS III : Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment

Why in News ?

India managed to rake in the highest ever foreign direct investment during financial year 2020-21 at $81.72 billion.

• This happens to be 10 per cent higher than $74.39 billion in the previous fiscal.

Key Facts

• FDI Inflow Nearly $82 Bn in FY21 as result of measures taken by the government on the fronts of Foreign Direct Investment (FDI) policy reforms, investment facilitation and ease of doing business have resulted in increased FDI inflows into the country.
• FDI equity inflow increased 19 per cent during FY21 to $59.64 billion, as against $49.98 billion in FY20
  • Singapore was the biggest investor in India last fiscal accounting for 29 per cent FDI
  • United States at 23 per cent
  • Mauritius at 9 per cent
• Saudi Arabia was the top investor in terms of percentage increase during FY21.
• Invested States
  • Gujarat received the highest FDI at 37 per cent of the total equity inflows
  • Maharashtra had the second at 27 per cent
  •  Karnataka  third highest flow 13 per cent
• Which Segment Received highest ?
  • Computer software and hardware segment received the most FDI in FY21, accounting for 44 per cent of total FDI equity inflow.
  • Construction and infrastructure) activities with 13 per cent
  • Services sector followed and 8 per cent share

What is Foreign Direct Investment ?

• When a firm or individual in one country invest into business located in another country.
• Economic Regulation
  • Foreign direct investments are commonly made in open economies that offer a skilled workforce and above average growth prospects for the investor, as opposed to tightly regulated economies.
• It establishes either effective control of or at least substantial influence over the decision-making of a foreign business.
• FDI can help foster and maintain economic growth, both for the recipient country and for the country making the investment.
  • Economic stimulation
  • Development of human capital
  • Increase in employment
  • Access to management expertise, skills, and technology
• What is the disadvantage of FDI ?
  • The entry of large firms may displace local businesses.
  • firms will not reinvest profits back into the host country and leads to large capital outflows from the host country.

FDI in India

• Since Economic liberalisation started in India in 1991 FDI has steadily increased in the country.
• How can Investment made in India ?
  • Automatic Route : The non-resident investor or the Indian company does not require any approval from Government of India for the investment.
    • Agriculture & Animal Husbandry, Asset Reconstruction Companies, Auto-components, Biotechnology (Greenfield), Thermal Power, Tourism & Hospitality and White Label ATM Operations are some Automatic Routed Sectors.
  • Government Route : Approval from the Government of India is required before investment considered by concerned Ministry and Department.
    • Banking & Public sector, Broadcasting Content Services, Mining & Minerals separations of titanium bearing minerals and ores, Core Investment Company are some Government Routed Sectors
• Which sectors are prohibited from FDI ?
  • There are a few industries where FDI is strictly prohibited under any route.
  • Atomic Energy Generation, Any Gambling or Betting businesses, Lotteries all Kind, Investment in Chit Funds, Nidhi Company, Agricultural or Plantation Activities (although there are many exceptions like horticulture, fisheries, tea plantations, Pisciculture, animal husbandry, etc) Housing and Real Estate (except townships, commercial projects, etc) Trading in TDR’s, Cigars, Cigarettes, or any related tobacco industry.

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