During the calendar year 2021, a total FDI inflow of US$ 74.01 billion has been reported in India and thus, showing a decline of over 15% as compared to the calendar year 2020.
As per Reserve Bank of India (RBI) data, a total FDI inflow of US$ 74.01 billion has been reported in the calendar year 2021 compared to US$ 87.55 billion in the calendar year 2020.
The total FDI inflow includes equity inflow, the equity capital of unincorporated bodies, re-invested earnings, and other capital.
FDI is largely a matter of commercial business decisions and FDI inflow depends on a host of factors such as availability of natural resources, market size, infrastructure, political and general investment climate as well as macro-economic stability and investment decision of foreign investors.
Why Foreign Direct Investment matters?
Foreign Direct Investment inflows serve to augment domestic investments, promote industrial development and employment generation across sectors and ancillary industries.
Further, such investments bring international best practices and the latest technologies that facilitate skill development, export promotion, and improvement of the overall competitiveness of the economy leading to overall economic growth and development of the country.
Which Sectors of the Economy Received the Highest FDI Inflow?
The major sectors which received the highest FDI equity inflow from April 2000 to December 2021 are Services Sector, Computer Software & Hardware, Telecommunications, Trading, and Automobile Industry.
Amongst the States, Karnataka received the highest FDI equity inflow with over US$ 18,554.29 million followed by Maharashtra with over US$ 12,226.15 million.
Government Policy to Promote Foreign Direct Investment
To promote Foreign Direct Investment (FDI), the Government has put in place an investor-friendly policy, wherein most sectors except certain strategically important sectors are open for 100% FDI under the automatic route.
The government has recently undertaken a number of reforms across sectors. In the recent past, reforms in the FDI policy have been undertaken in sectors such as Insurance, Petroleum and Natural Gas, Telecom, etc.
Further, the policy on FDI is reviewed on an ongoing basis, to ensure that India remains an attractive and investor-friendly destination.
Changes are made in the policy after having consultations with stakeholders including apex industry chambers, associations, representatives of industries/groups, and other organizations.