India Emerging as FDI Destination for The Global Market this 2021
The COVID-19 pandemic has changed the business climate for several organizations around the world and has stressed on the significance of being able to respond, adjust and set up crisis management mechanisms to weather situations of uncertainty. The global businesses and investors are trying to find new markets for investing, India has arisen as the top destination for Foreign Direct Investment (FDI).
India offers a large and exploding consumer market viz an ideal situation for any global business seeking newer growth avenues. The larger international affairs situation, a liberal and inviting FDI strategies in India, sectoral plans and structural reforms introduced by the government at central and state levels are some other key aspects that attract foreign investors to India.
Economic liberalisation in India was initiated in 1991 by Prime Minister P. V. Narasimha Rao and his then-Finance Minister Dr Manmohan Singh. Foreign investment in the country increased from US$132 million in 1991–92 to $5.3 billion in 1995–96. It can be rightly said, India has always been stronger to-reinforce in attracting FDI. According to data revealed by 'The Economic Times', total FDI inflow grew 55% from $231.37 billion in 2008-14 to $358.29 billion in 2014-20 while FDI equity inflows rose 57% from $160.46 billion to $252.42 billion in the same period. Furthermore, the FDI to GDP proportion is another good indicator of how India is being preferred as an FDI destination over some other arising countries. Other competitive countries such as China, the FDI to GDP ratio fell from 3.48% to 1.50% whereas the FDI to GDP ratio of India has doubled from 0.77% to 1.55% in the same period (referring to the time 2000-2018).
During COVID-19 outbreak, China's role in delaying the pandemic information to the world has raised consequential anti-China sentiments world-wide. In other words, the world is finding difficulty in re-building the faith in Chinese supply chains and market. China was one of the leading trade partners of India, it's share in India's total import and export in the FY 2019-20 was 9% and 18% respectively. Consequently, foreign businesses and investors are looking for an alternative investing option and India will be top in their list due to ideal reasons. The opportunity to attract FDIs is the brightest currently and therefore, the Indian Government is actively working in encouraging and persuading these foreign investors and also providing them with the favourable business environment for the same. NITI Aayog announced in August 2020 that the country attracted close to $22 billion in FDI in the March-July period. Hence, India is evolving as a promising market, even in the face of a pandemic.
According to the arguments presented by NITI Aayog, India has the most liberal FDI policies around the world and only a few industries have strict restrictions or require to take the approval of Central Government. Furthermore, especially after Prime Minister Narendra Modi's initiative of 'Atmanirbhar Bharat', many reforms took place in FDI policies.
The Government of India is all set to persuade FDIs and announcing the world, "Atithi Devo Bhava, Welcome to India."