While New Delhi has attracted quite a lot of investments in over a decade, the last couple of years the state of this has been rather concerning because net FDIs have actually moderated. Net FDI inflow in the fourth quarter stood at $2.0 billion, down from $3.9 billion in the third quarter and $6.4 billion in the same period last year.
Despite its “China Plus One” strategy, India is witnessing stagnating FDI flows and a review of FDI is on cards for Budget 2024 as part of the broader goal to create a more efficient investment regime.
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In the interim budget speech, Sitharaman highlighted that the FDI inflow during 2014-23 was $596 billion, twice the inflow during 2005-14.“For encouraging sustained foreign investment, we are negotiating bilateral investment treaties with our foreign partners, in the spirit of ‘first develop India’,” she said.India’s FDI flows: A status check
A report by CRISIL highlighted that despite continuous inward foreign direct investment (FDI), the rise in outward FDI led to a reduction in net FDI inflows. FDI inflows increased to USD 19.8 billion during the fourth quarter, but this was offset by accelerated FDI outflows, which rose to USD 17.9 billion from USD 10.7 billion, as per the report.
The Reserve Bank of India (RBI) in its Annual Report 2023-24 said that the net FDI flows fell to US$ 10.6 billion during 2023-24 from US$ 28.0 billion a year ago. “Net foreign direct investment (FDI) flows were, however, lower on account of a rise in repatriation of FDI from India.”
The FDI inflow in FY24 decreased by approximately 3.48 per cent from FY23, i.e., from $46 billion to $44.4 billion, data by the central bank showed.
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Though the government has eliminated or simplified more than 40,000 compliances last year under the Jan Vishwas (Amendment of Provisions) Act, Sitharaman may have to take stock of the concerning situation to keep the flow of investments coming.
Commerce and Industry Minister Piyush Goyal in a recent ET interview reiterated that India as an investment destination is doing extremely well with the country witnessing high foreign remittances, foreign direct investment (FDI) and foreign institutional investment (FII) inflows.
In a landmark decision, the government had also allowed investments in the space sector, where up to 74 per cent FDI is permitted under automatic route in satellite-manufacturing and operation, satellite data products and ground and user segments.
What to expect from Budget 2024?
The government is exploring the liberalization of the FDI regime across several sectors. This move, however, is currently in the internal stages of consideration, and is expected to attract more foreign investment and drive economic growth, according to secretary of the Department of Promotion of Industry and Internal Trade (DPIIT), Rajesh Kumar Singh.
Earlier in April, in a media interview, Singh had said that India aims to attract at least $100 billion a year in gross FDI on the back of a positive and upward trend. Singh pointed out that investments from countries sharing land borders with India constitutes less than 1 per cent of the total FDI inflow, highlighting the need for broader reforms, as reported by ANI.
However, Goyal in his ET interview ruled out any reforms in the country’s FDI regime or a change of thinking on India’s policy on investment coming from countries it shares a land border with.
“On both these fronts, nothing as yet. The government is always open to ideas and open to discussion with trade and industry, investors and business. We keep exchanging ideas and seeing how we can facilitate investment and exports,” he had said.
Moreover, a recent report by the Times of India stated that the government is likely to review FDI caps for critical sectors like defence, insurance, and plantations, examining processes that could be streamlined for a more efficient investment regime.
Content Source: economictimes.indiatimes.com