India Investment Potential: Foreign Direct Investment (FDI)

India Investment Potential: Foreign Direct Investment (FDI) 

Being a critical driver of economic growth, Foreign Direct Investment (FDI) has been a major non-debt financial resource for the economic development of India. For a country where foreign investment is coming in, it also means advancing technical know-how and generating employment.

The United Nations Conference on Trade and Development (UNCTAD) has said that India's economy could prove to be the most resilient in South Asia. Its large market will continue to attract investment opportunities to the country even as it expects a dramatic fall in the global foreign direct investment (FDI).

However, the inflow of FDI may shrink sharply when it comes to the market conditions post COVID-19 pandemic, the UNCTAD survey has shown that India jumped to ninth spot in 2019 from the twelfth spot in 2018 on the list of top global FDI recipients.

Market Size: 

According to the Department of Promotion of Industry and Internal Trade (DPIIT), FDI equity flow in India stood at US$ 469.99 billion from April 2000 to March 2020 indicating that the government's efforts to improve ease of doing business and relaxing FDI norms have yielded results. FDI equity inflows in India stood at UD$ 49.97 billion in 2019-20. 

• Service sector at the highest FDI equity flow of US$ 7.85 billion 
• Computer software and hardware at US$ 7.67 billion 
• Telecommunication sector at US$ 4.44 billion 
• Trading sector at US$ 4.57 billion

India: Investment Potential 

There is no dearth of investment options in India after the investment under the automatic route has been allowed by the Government. The Government has also revised its policy regarding FDI in Indian companies engaged in retail trade. Foreign investors will now be permitted, subject to certain conditions, to own up to 100 per cent of single-brand retail trading companies in India.

 According to UNCTAD's World's Investment Prospects survey, India is the second most profitable destination for foreign investment. India's markets have significant potential offering prospects of high profitability and a favourable regulatory regime for investments. 

Some of the significant FDI announcements made recently are as follows: 

• In June 2020, Jio Platforms Ltd. sold 22.38 per cent stake worth Rs 1.04 trillion (US$ 14.75 billion) to ten global investors in a span of eight weeks under separate deals, involving Facebook, Silver Lake, Vista, General Atlantic, Mubadala, Abu Dhabi Investment Authority (ADIA), TPG Capital and L. Catterton. This is the largest continuous fundraise by any company in the world. 
• In January 2020, Amazon India announced an investment of US$ 1 billion for digitising small and medium businesses and creating one million jobs by 2025.
•  In January 2020, Mastercard announced its plans to invest up to US$ 1 billion in India over the next five years to double its research and development effort in the Indian market. 
• In October 2019, French oil and gas giant, Total S.A., acquired 37.4 per cent stake in Adani Gas Ltd for Rs 5,662 crore (US$ 810 million), making it the largest FDI in India’s city gas distribution (CGD) sector. 
• In August 2019, Reliance Industries (RIL) announced one of India's biggest FDI deals with Saudi Aramco to buy a 20 per cent stake in Reliance's oil-to-chemicals (OTC) business at an enterprise value of US$ 75 billion.

Road Ahead:

India is set to be the most attractive emerging market for global partners investments for the coming 12 months as per a recent market surge and shift towards the market. 

The government of India is aiming to achieve a whopping US$ 100 billion worth of Foreign Direct Investment (FDI) inflow in the next two years. 

Thus, we can say that the market conditions post COVID-19 seems to grow exponentially, with a vast array of investment options for the people of India.