• India received $81.72 billion foreign direct investment (FDI), including equity, reinvested earnings and capital during 2020-21. It is the highest ever and 10 per cent more compared to $74.39 billion in 2019-20.

• FDI equity inflow grew 19 per cent to $59.64 billion during 2020-21. It was $49.98 billion during 2019-20.

• In terms of top investor countries, Singapore is at the top with 29 per cent share. It was followed by the US (23 per cent) and Mauritius (9 per cent) during the last fiscal.

• Saudi Arabia is the top investor in terms of percentage increase during 2020-21. It invested $2816.08 million in comparison to $89.93 million reported in the previous financial year.

• The computer software and hardware sector attracted the highest inflows with around 44 per cent share of the total FDI equity inflows. It was followed by construction (infrastructure) activities (13 per cent) and services sector (8 per cent), respectively.

• Gujarat is the top recipient state during 2020-21 with 37 per cent share of the total FDI equity inflows, followed by Maharashtra (27 per cent) and Karnataka (13 per cent).

• Majority of the equity inflow of Gujarat has been reported in the sectors computer software and hardware sector (94 per cent) and construction (infrastructure) activities (2 per cent). 

• The commerce and industry ministry said that measures taken by the government on the fronts of FDI policy reforms, investment facilitation and ease of doing business have resulted in increased FDI inflows into the country.

• It added that the inflows are an endorsement of India’s status as a preferred investment destination among global investors.

• The major sectors — construction (infrastructure) activities, computer software and hardware, rubber goods, retail trading, drugs & pharmaceuticals and electrical equipment have recorded more than 100 per cent jump in equity during 2020-21 as compared to the previous year.

Foreign Direct Investment (FDI)

• Foreign direct investment (FDI) is a major driver of economic growth and a source of non-debt finance for the economic development of India. 

• After abolition of the erstwhile foreign investment Promotion Board (FIPB), process for granting FDI approvals has been simplified wherein the work relating to processing of applications for FDI and approval of the government thereon under the extant FDI Policy and FEMA, is now handled by the concerned ministries/departments. 

• The Department for Promotion of Industry and Internal Trade (DPIIT) is mandated with the task of formulation of FDI policy of the government of India. 

• A portal (www.fifp.gov.in ) has been created, which is administered by this Department and the portal will continue to facilitate the single window clearance of applications which are through approval route. 

• The policy pronouncements on FDI are made by DPIIT and necessary notifications are issued under Foreign Exchange Management Act, 1999.

• The Department also maintains data on inward FDI into India based upon the remittances reported by the Reserve Bank of India (RBI). 

• FDI in India is permitted either through the automatic route or the government approval route. 

Automatic Route: Under the Automatic Route, the non-resident investor or the Indian company does not require any approval from the government of India for the investment.

Government Route: Under the Government Route, prior to investment, approval from the government of India is required. Proposals for foreign direct investment under Government route, are considered by respective administrative ministry/department.

• It has been the intent and objective of the government to attract and promote FDI and make the FDI policy regime more investor friendly, in keeping with national interests. 

• In line with its stated objective, the government has put in place a transparent and easily comprehensible policy framework on FDI. 

• Further, FDI policy regime has been liberalised continuously over the years wherein FDI up to 100 per cent is permitted under automatic route in most sectors/activities. 

Government measures to increase FDI:

Production Linked Incentive Scheme (PLI): It aims to boost domestic manufacturing and attract large investments in mobile phone manufacturing and specified electronic components, including Assembly, Testing, Marking and Packaging (ATMP) units. The scheme would tremendously boost the electronics manufacturing landscape and establish India at the global level in the electronics sector.

Coal sector: 100 per cent FDI permitted under automatic route in coal mining activities, including associated processing infrastructure, for sale of coal, subject to the provisions of Coal Mines (Special Provisions) Act, 2015 and the Mines and Minerals (Development and Regulation) Act, 1957 as amended from time to time and other relevant Acts on the subject.

Insurance Intermediaries: 100 per cent FDI has been permitted in intermediaries or insurance intermediaries including insurance brokers, re-insurance brokers, insurance consultants, corporate agents, third party administrator, surveyors and loss assessors and such other entities, as may be notified by the Insurance Regulatory and Development Authority from time to time.

Civil Aviation: Government amended the extant FDI policy to permit foreign investment in Air India Ltd by NRIs, who are Indian Nationals, up to 100 per cent under automatic route.

Defence sector: FDI in defence sector is allowed up to 74 per cent through automatic route (from earlier 49 per cent) for companies seeking new industrial licenses. FDI beyond 74 per cent and up to 100 per cent will be permitted under government route.

For existing FDI approved holders/defence licensees, infusion of fresh foreign investment up to 49 per cent resulting in change in equity/shareholding pattern can be done by making declaration within 30 days (earlier government approval was required). Now, foreign investments in the defence sector shall be subject to scrutiny on grounds on national security.

Manufacturing sector: FDI in manufacturing was already under the 100 per cent automatic route, however in 2019, the government clarified that investments in Indian entities engaged in contract manufacturing is also permitted under the 100 per cent automatic route provided it is undertaken through a legitimate contract.

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