Economy / Foreign Direct Investment / Recent Trends in FDI
Recent Trends in FDI
Overview:
- Record-High FDI: In the Financial Year 2021-22, India witnessed its highest-ever Foreign Direct Investment (FDI) figure, reaching $83.57 billion.
- Post-Covid Growth: FDI showed a significant increase of around 22% post-Covid, from 2020 to 2022, amounting to $171.84 billion. This represents a notable rise from the pre-Covid inflows of $141.10 billion reported from 2018 to 2020.
Sector-wise Distribution:
- Top Recipient Sectors:
- Computer Software and Hardware: Emerged as the leading sector receiving FDI equity inflows, capturing approximately 25% of the total.
- Services and Automobile Sectors: Followed closely with each sector securing a 12% share.
- Manufacturing Sector Growth: FDI equity inflows in the manufacturing sector experienced a remarkable increase of 76% in FY22, reflecting growing investor confidence in India's manufacturing capabilities.
Geographical Distribution:
- State-specific Data:
- Major Recipient States: Karnataka led with 53% of FDI equity inflows, followed by Delhi and Maharashtra, both at 17%.
- Country-specific Data:
- Top Investor Countries:
- Singapore: Accounted for the highest share at 27% of total FDI.
- United States: Secured the second position with an 18% share.
- Mauritius: Ranked third, contributing 16% to the total FDI.
Significance and Growth Trajectory:
- Emerging Manufacturing Hub: India is rapidly establishing itself as a preferred destination for foreign investments in the manufacturing sector.
- Remarkable Growth: The country's foreign investment inflows have witnessed a substantial increase, growing 20-fold since the financial year 2003-04, when it recorded a mere $4.3 billion.
Implications:
- Positive Economic Indicator: The surge in FDI reflects a positive economic environment, showcasing investor confidence in India's potential across various sectors.
- Manufacturing Boost: The significant rise in manufacturing sector FDI signifies India's increasing attractiveness as a manufacturing hub.
Conclusion: India's record-high FDI in FY 2021-22, particularly in the manufacturing sector, highlights the country's growing prominence as an attractive investment destination. The sustained increase in foreign investment underscores positive economic indicators and sets the stage for continued growth and development.
