According to figures issued by the Department for Promotion of Industry and Internal Trade (DPIIT), India has reached a significant milestone in its economic path, with FDI inflows surpassing $1 trillion since April 2000. This sum includes reinvested earnings, stock investments, and other capital inflows.
"FDI has played a transformative role in India's development by providing substantial non-debt financial resources, fostering technology transfers, and creating employment opportunities," according to the Commerce and Industry Ministry.
Who are the Leading Investors?
Mauritius led the way in foreign direct investment, accounting for 25% of total inflows, followed by Singapore (24%). The United States, along with the Netherlands (7%), Japan (6%), and the United Kingdom (5%), finished third with 10%. The UAE, Cayman Islands, Germany, and Cyprus were all lesser contributors, accounting for 2% to 3% of the total contributions.
The dominance of Singapore and Mauritius can be ascribed to their advantageous tax agreements with India, which have facilitated and encouraged investment flows.
Surprisingly, the Himachal Pradesh Budget states that the state's FY24 gross state product (GSDP) of Rs 1.91 lakh crore was higher than the Maldives' FY24 GDP of Rs 1.336 lakh crore.
Important Industries Fueling Investment
Sectorial distribution
The services sector, which includes finance, banking, insurance, outsourcing, R&D, and technology testing, had the most FDI equity inflows in FY2023-24, accounting for 16% of the total, according to DPIIT data. It was closely followed by computer software and hardware at 15%, trading at 6%, telecommunications at 6%, and the automobile industry at 5%, according to the report.
The largest inflows were from the services industry, which includes subsectors including consulting, IT, and financial services. Infrastructure development, commerce, telecommunications, and computer software and hardware were other significant beneficiaries. Over the past ten years, manufacturing has also seen a 69% growth in foreign direct investment, driven by the "Make in India" campaign.
Ten Years of Growth
The last ten years (April 2014 to September 2024) saw $709.84 billion of the $1 trillion in total FDI inflows. This indicates a notable acceleration of foreign investments under India's current economic policies, accounting for roughly 69% of all FDI received since the turn of the century.
"While competitive labor costs and strategic incentives continue to attract multinational corporations, initiatives like 'Make in India', liberalized sectoral policies, and the Goods and Services Tax (GST) have enhanced investor confidence," the Ministry stated.
Why Is India a Great Place to Invest?
Long-term economic changes have supported India's ascent as a major international investment destination. Under the automatic method, the majority of sectors permit 100% FDI; investors only need to notify the Reserve Bank of India after making an investment. Government approval, including previous clearance from the relevant ministry, is required for industries such as media, insurance, and telecommunications.
In several sectors, including gaming, real estate, tobacco manufacture, and lotteries, India has banned foreign direct investment. These limitations guarantee that investment flows are in line with ethics and strategy.
The investment climate has been significantly loosened by recent policy reforms. The government lowered corporate tax rates for overseas businesses and eliminated the angel tax on startup funding in 2024. India's strategic position as the fifth-largest economy in the world and its competitive labor costs are enhanced by these reforms.
FDI in Relation to the Indian Economy
Consider this to get a sense of the size of $1 trillion: it would take 31,709 years to earn $1 each second. In contrast, India's GDP increased significantly from $2 trillion in 2014 to almost $3.89 trillion in 2024.
Broad-based investment opportunities are reflected in the fact that FDI inflows have dispersed over 31 states and union territories and 60 sectors. The administration anticipates more FDI growth as India continues its reforms and conforms to international economic trends.
