FDI flow increased
26/05/2021

Tags:

Context:

  • A data released by the Commerce and Industry Ministry relating to foreign investment into India.

Impressive growth in foreign investment:

  • Foreign direct investment (FDI) flows into India grew 10% in 2020-21 to touch a record $81.72 billion. The FDI equity inflows have risen 19% to total almost $60 billion.

Top investors:

  • Singapore has emerged as the top investor followed by the U.S. and Mauritius.
  • FDI equity flows from the U.S., the U.K. and Saudi Arabia have witnessed sharp increases.

Top destination states:

  • Gujarat was the top FDI destination followed by Maharashtra and Karnataka.
  • The other regions have accounted for a disproportionately lower amount of 23% of the remaining foreign equity capital. This is indicative of the skewed pattern of FDI inflows and concerns of unbalanced growth.

Top sectors:

  • Computer software and hardware has emerged as the top sector during 2020-21 with about 44% share of the total FDI equity inflow followed by construction (infrastructure) activities and services sector.
  • Construction (infrastructure) activities, computer software and hardware, rubber goods, retail trading, drugs and pharmaceuticals and electrical equipment have recorded more than a 100% jump in equity during 2020-21.

Reasons

    • The boost in FDI inflow comes in the backdrop of a series of policy steps taken to improve ease of doing business and to attract investments into domestic manufacturing capacity and an ambitious infrastructure project pipeline.
    • Also, the investments recorded a growth in double digits boosted by investments in the digital sector.

Foreign Direct Investment

  • It refers to the conditions when a company or investor takes ownership and controls operation in a business entity in another country.
  • With FDI, foreign companies are directly involved with day-to-day operations in the other country which implies that along with bringing money, they also bring knowledge, skills, and technology.
  • It is an important non-debt monetary source for India’s economic development.
  • In January 2021, a report by the United Nations Conference on Trade and Development (UNCTAD) highlighted that in 2020developing nations accounted for 72 per cent of global FDI, the highest share on record.
  • China was the world’s largest FDI recipient in 2020, with flows rising 4 per cent to USD 163 billion.
  • India recorded positive growth of 13 per cent, boosted by investments in the digital sector.
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