Foreign Direct Investment (FDI) in India, FDI Inflows

Foreign Direct Investment (FDI)

Overview

Last updated: Sep, 2024

Introduction

Foreign Direct Investment (FDI) stands as a key catalyst for India's economic growth, constituting a substantial non-debt financial reservoir for the nation's developmental endeavours. International corporations strategically invest in India, capitalizing on the country's unique investment incentives, including tax incentives and relatively competitive labour costs. This not only facilitates the acquisition of technological expertise but also fosters job creation and various ancillary advantages. The influx of these investments into India is a direct result of the government's proactive policy framework, a dynamic business environment, improving global competitiveness, and a burgeoning economic influence.

The Indian government has implemented a range of policies and initiatives to enhance Foreign Direct Investment (FDI) in the country. Notable efforts include the "Make in India" campaign, which focuses on simplifying procedures and promoting a favourable investment climate across sectors. Liberalization of FDI policies, particularly in retail, defence, insurance, and single-brand retail trading, has been a key strategy. The Goods and Services Tax (GST) implementation has improved transparency, while Special Economic Zones (SEZs) provide dedicated spaces with tax incentives. India's FDI inflows reached record levels, at US$ 84.84 billion during 2021-22. Service sector, Computer software and hardware and Trading were the major receivers of FDI.

As per the World Investment Report 2022, India held the eighth position among the primary global recipients of Foreign Direct Investment (FDI) until the year 2020. With the help of significant transactions in the technology and health sectors, Multinational companies (MNCs) have pursued strategic collaborations with top domestic business groups, fuelling an increase in cross-border M&A of 83% to US$ 27 billion in 2020. According to the World Investment Report 2023, India emerged as the FDI powerhouse and secured the third-highest investment for the greenfield projects. The total amount of FDI inflows received during the last ten years (April 2014-June 2024) was US$ 725.96 billion. This FDI has come from more than 170 countries that have invested across 33 UTs and States and 63 sectors in the country.

Market Size

India's FDI inflows have increased ~20 times from 2000-01 to 2023-24. According to the Department for Promotion of Industry and Internal Trade (DPIIT), India's cumulative FDI inflow stood at US$ 695.04 billion between April 2000-June 2024, mainly due to the government's efforts to improve the ease of doing business and easing of FDI norms. The total FDI inflow into India from April 2024 to June 2024 stood at US$ 22.5 billion and FDI equity inflow for the same period stood at US$ 16.2 billion.

From April 2000-June 2024, India's service sector attracted the highest FDI equity inflow of 16.33% amounting to US$ 113.49 billion, followed by the computer software and hardware industry at 15.20%, amounting to US$ 105.62 billion, trading at 6.31% (US$ 43.85 billion), telecommunications at 5.72% (US$ 39.78 billion), and automobile industry at 5.27% (US$ 36.65 billion).

India also had major FDI inflows during April 2000-June 2024, coming from Mauritius at US$ 175.05 billion with a total share of 25%, followed by Singapore at 24% (US$ 163.85 billion), the USA at 10% (US$ 66.70 billion), the Netherlands at 7% (US$ 51.13 billion), and Japan at 6% (US$ 42.54 billion).

The state that received the highest FDI equity inflow during October 2019-June 2024, was Maharashtra (US$ 77.57 billion) at 31%, followed by Karnataka (US$ 53.31 billion) at 21%, Gujarat (US$ 40.22 billion) 16%, Delhi (US$ 33.01 billion) 13%, and Tamil Nadu (US$ 11.93 billion) 5%.

India was the third largest recipient of greenfield projects with 1,008 greenfield project announcements as per the World Investment Report 2023. The number of international project finance deals in India also increased by 64%, making it the recipient of the second largest number of international project finance deals.

In 2022 (until August 2022) India received 811 Industrial Investment Proposals which were valued at US$ 42.78 billion (Rs. 352,697 crore). Cumulatively, the total amount of Industrial investment proposals for 2022 increased to US$ 298 billion (Rs. 23.6 lakh crore) as compared to US$ 169.5 billion (Rs. 13.8 lakh core) in the previous year.

During FY23, FDI inflow of US$ 71.35 billion was reported while during FY24, FDI worth US$ 70.95 billion has been reported on provisional basis.

Investments/Developments

India has become an attractive destination for FDI in recent years, influenced by several factors which have boosted FDI. India ranked 40th in the World Competitive Index 2024 jumping 3 positions from the 43rd rank in 2021. India was also named as the 48th most innovative country among the top 50 countries, securing 40th position out of 132 economies in the Global Innovation Index 2023. India rose from 81st position in 2015 to 40th position in 2023. These factors have boosted FDI investments in India. Some of the recent developments are as follows:

Taiwanese companies are progressively shifting their supply chains from China to India amidst rising global trade tensions, strengthening economic connections between Taipei and New Delhi. Chairman of the Taiwan External Trade Development Council, Mr. James Huang, emphasized a notable increase in Taiwan's for FDI in India, surpassing US$ 665 million in the 5 years leading up to 2023, in contrast to the approximately US$ 277 million invested between 2006 and 2017.
In June 2024, India saw a rise in outward foreign direct investment (FDI) commitments to US$ 2.14 billion compared to US$ 1.14 billion in June 2023. However, these commitments decreased from US$ 2.22 billion in May 2024 according to data from the Reserve Bank of India (RBI). Over the period of April-June 2024, the total outward FDI amounted to US$ 3.16 billion, comprising US$ 1.94 billion in equity and US$ 1.21 billion in debt investments, with no guarantees reported.
According to the RBI data, the net FDI flows in India for FY24 were US$ 10.58 billion. Of the US$ 70.9 billion gross FDI inflows in the country, US$ 44.4 billion was repatriated through dividends, share sale or disinvestment, while US$15.96 billion was invested overseas by the Indians. Indian companies also announced over 550 greenfield FDI projects abroad, as per the RBI report.
FDI inflows in India were US$ 26.69 billion and outflows were US$ 12.14 billion from April 2023 to February 2024 as per the RBI’s April 2024 bulletin. More than 60% of the FDI equity flows were directed towards manufacturing, computer services, electricity and other energy, retail and wholesale trade, and financial services.
As of April 17, 2024, the Ministry of Finance's notification on Foreign Direct Investment (FDI) in the Space sector signifies a pivotal advancement, offering Indian space startups expanded avenues to global capital. This development underscores a commitment to fostering growth, innovation, and alignment with international benchmarks within the space industry.
India aims to attract at least US$ 100 billion annually in gross foreign direct investment (FDI), reflecting a significant increase from the previous average of over US$ 70 billion in the last five years through March 2023; despite a dip in FDI last year due to global uncertainties, the country anticipates achieving the US$ 100 billion target for the current fiscal year, with a positive and upward trend projected over the next five years, suggesting the need for continued reforms and policies to enhance investment attractiveness and stimulate growth across sectors.
Over the past 9 years, the Indian insurance sector has attracted approximately Rs 54,000 crore (US$ 6.48 billion) in foreign direct investment (FDI), with significant increases in FDI limits and a rise in the number of insurance players, contributing to enhanced insurance penetration and density in the country.
As of March 05, 2024, the Ministry of Commerce & Industry in India has reviewed the Foreign Direct Investment (FDI) Policy regarding the space sector, implementing changes in sectoral caps and entry routes for various activities within the sector, effective from the date of FEMA notification, and subject to sectoral guidelines issued by the Department of Space.
The amendment in the Foreign Direct Investment (FDI) policy for the space sector, approved by the Union Cabinet under Prime Minister Mr. Narendra Modi, it divides the satellites sub-sector into three activities with specified foreign investment limits. It also permits 100% FDI to attract investors to Indian space companies through enhanced entry routes.
As of February 9, 2024, companies in the defence sector have disclosed FDI valued at US$ 612 million (Rs. 5,077 crore). The government further encourages FDI by fostering collaboration on specialized defence technologies with foreign OEMs.
The IT minister of India Mr. Ashwini Vaishnaw announced on 17th January 2024, that the country aims to achieve US$ 100 billion in annual Foreign direct investment (FDI) in the coming years, they anticipate a consistent growth rate of 6-8% over the next decade, underpinned by a meticulously devised strategy consisting of four major components.
Financial Services Secretary Mr. Vivek Joshi stated in March 2024, that the insurance sector has attracted approximately US$ 6.51 billion (Rs. 54,000 crore) in foreign direct investment (FDI) over the past nine years due to the government's continued liberalization of overseas capital flow regulations. He mentioned government raised the allowable FDI cap from 26% in 2014 to 49% in 2015, and subsequently to 74% in 2021.
The Ministry of Food Processing Industries Organised World Food India-2023 in New Delhi in November 2023. The event saw investment interests and MoUs totalling US$ 4 billion (Rs. 33,129 crore). To bolster the food processing sector, the Ministry promotes investment through schemes like PMKSY, PLISFPI, and PMFME, which has resulted in an estimated investment leverage of over US$ 3.12 billion (Rs. 25,869 crore).
NTPC Green Energy Limited (NGEL) signed a Memorandum of Understanding (MoU) with the Government of Maharashtra to collaborate on the development of Green Hydrogen and its derivatives, along with Pumped Storage Projects and renewable energy projects. This partnership, aligned with the state's Green Investment Plan for the next five years, anticipates an investment of around US$ 9.65 billion (Rs. 80,000 crores).
The renewable energy sector received a total FDI equity investment of US$ 6.14 billion from April 2020 till September 2023, per the data from the Department for Promotion of Industry and Internal Trade (DPIIT). According to the existing FDI policy, up to 100% investment is permitted in the sector via the automatic route.
Union Minister Dr. Jitendra Singh announced that India has attracted over US$ 120 million (Rs. 1,000 crore) in investments in space startups within the first nine months of FY24, owing to the opening up of the space sector for private players by Prime Minister Mr. Narendra Modi. The sector has also witnessed a surge from one startup to nearly 190 in four years.
Karnataka has sealed eight MoUs valued at US$ 2.76 billion (Rs 23,000 crore) with global giants, showcasing a robust economic stride. Key agreements include Web Werks' US$ 2.4 billion (Rs 20,000) crore investment in a hyper-scale data centre and Microsoft's commitment to digital skilling initiatives. Hitachi aims to stimulate economic growth in rural areas. Additionally, MoUs worth US$ 360.97 million (Rs 3000 crore) span digital healthcare, smart city infrastructure, renewable energy, and data centres. Companies, including Lulu Group and BL Agro, are set to establish facilities in north Karnataka, promoting equitable development. AI, sustainability, and citizen services emerged as focal points, signalling Karnataka's prowess in attracting diverse industries.
In January 2024, DP World has sealed agreements worth US$ 3.0 billion (Rs 25,000 crore) with the Gujarat government during the Vibrant Gujarat Global Summit 2024. DP World Group Chairman and CEO, H.E. Sultan Ahmed bin Sulayem, inked these MoUs with Additional Chief Secretary of Ports and Transport Department Mr. M K Das, in the presence of Prime Minister Mr. Narendra Modi and President of the United Arab Emirates Mr. Sheikh Mohamed bin Zayed Al Nahyan. The deals focus on developing deep-draft ports, economic zones, and Special Economic Zones in south Gujarat and along the western coast. DP World's commitment includes investments in Gati Shakti Cargo Terminals and Private Freight Stations at various locations in Gujarat.
In January 2024, Prime Minister Mr. Narendra Modi inaugurated Boeing's cutting-edge US$ 192.51 million (Rs 1,600 crore) Engineering and Technology Centre near Bengaluru. Spanning 43 acres, it marks Boeing's largest investment outside the US. Located in Devanahalli, the campus is set to foster collaborations with startups, private entities, and the government, driving next-gen aerospace and defence solutions globally. The new campus aligns with Boeing's global engineering expansion, featuring future avionics manufacturing and assembly capabilities.
Hyundai Motors has successfully acquired General Motors India's Talegaon plant in Maharashtra and announced a substantial investment of US$ 721.94 million (Rs 6000 crore) in the state. The agreement, finalized at the World Economic Forum in Davos, signifies Hyundai Motors' commitment to expanding its manufacturing capacity in India. The Talegaon plant, with an annual capacity of 130,000 units, is set to resume operations in 2025. Hyundai Motors plans phased investments to upgrade infrastructure and equipment, aligning with global standards, aiming to achieve a one-million-unit annual production capacity, and further solidifying its position in the Indian market.
The 10th Vibrant Gujarat Global Summit (VGGS), themed 'Gateway to the Future,' solidified Gujarat's role as a foreign investment magnet. The event featured partnerships with 28 countries and saw the signing of Memorandums of Understanding (MoUs) for 41,299 projects, with proposed investments totalling US$ 31.66 billion (Rs 26.33 lakh crore). Gujarat's impressive economic growth, contributing 8.3% to India's GDP (approx. US$ 282 billion), and a cumulative FDI of US$ 55 billion (2002-2022) highlight its ongoing appeal. The VGGS remains a vital catalyst for sustaining this economic momentum and global investment attractiveness.
In 2024, Mercedes-Benz plans a US$ 24.03 million (Rs. 200 crore) investment in India, unveiling over 12 vehicles, including three electric models. Nearly half will be in the top-end vehicle segment, with prices starting at US$ 1,80,201 (Rs 1.5 crore). The move reflects the luxury carmaker's commitment to expanding its presence and embracing the growing electric vehicle market in India.
Corning Inc., a key supplier to Apple, known for its Gorilla Glass technology, is set to invest US$ 120.13 million (Rs.1,000 crore) in establishing a new manufacturing facility in Tamil Nadu. This strategic move, as reported by Economic Times sources, underscores Corning's commitment to expanding its production capabilities and furthering its collaboration with Apple.
In October 2023, Reliance Retail Ventures Limited (RRVL) announced that a wholly owned subsidiary of the Abu Dhabi Investment Authority (ADIA) will invest Rs. 4,966.80 crore (US$ 596.63 million) into the company.
In September 2023, Hindalco signed a technology partnership with Italy-based, Metra SpA, to bring the latest aluminium extrusion technology to India for building rail coaches.
In September 2023, US chipmaker, Nvidia Corporation announced separate partnerships with Reliance and Tata group companies to help them develop AI-powered supercomputers, AI clouds and generative AI applications.
In September 2023, Singapore's investment firm, Temasek led US$ 140 million Ola Electric funding at a US$ 5.4 billion valuation.
In August 2023, Qatar Investment Authority (QIA) invested Rs. 8,278 crore (US$ 994.39 million) in Reliance Retail Ventures Limited (RRVL) to get an equity stake of 0.99%.
In August 2023, the global investment firm Temasek invested Rs. 1,200 crore (US$ 144,15 million) in its electric vehicle subsidiary Mahindra Electric Automobile Ltd (MAEL).
In August 2023, Brookfield Asset Management entered into an agreement with Reliance Industries (RIL) to invest US$ 20-30 billion over the next decade in Australia's renewable energy sector.
In August 2023, Walmart paid US$ 1.4 billion to buy out hedge fund Tiger Global's stake in Flipkart.
In July 2023, Jio Financial partnered with BlackRock to launch an asset management firm with a combined investment of US$ 300 million.
In July 2023, U.S.-based investment firm, Bain Capital announced that it has entered into an agreement to acquire 90% of Adani Capital and Adani Housing.
In July 2023, Walt Disney is considering options for its Star India business, including a joint venture or sale, as it looks to help the India business grow and reduce costs.
In July 2023, French advertising and public relations company Havas’s India arm announced the acquisition of Pivot Roots.
In June 2023, All cargo Logistics completed the acquisition of a 30% stake in Gati-Kintetsu Express (GKEPL) for Rs. 406.71 crore (US$ 49.48 million).
In June 2023, BPEA EQT group (formerly Baring Private Equity Asia), in partnership with ChrysCapital, is set to acquire around 90% stake in Housing Development Finance Corporation's wholly owned education financial subsidiary HDFC Credila Financial Services Ltd (HDFC Cedilla) for Rs. 9,060.5 crore (US$ 1.10 billion).
In June 2023, Private equity (PE) investors Blackstone Inc., BPEA EQT ((formerly Baring Private Equity Asia), CVC Capital Partners, and General Atlantic Service Company are competing to acquire Mumbai-based Indira IVF Hospital Pvt. Ltd.
In April 2023, Sheares Healthcare, a subsidiary of Singapore-based Temasek, agreed to purchase a majority position in Manipal Health Enterprises, increasing its holding from 18% to nearly 59% for around Rs. 16,400 crore (US$ 2 billion).
In February 2023, Singapore Airlines acquired a 25.1% share in the Air India group after investing US$ 267 million.
VilCart, the rural economy-focused technology startup bagged US$ 18 million in January 2023 from Asia Impact SA, Nabventures Fund and Texterity Pvt Ltd to expand their operations.
Data Science and AI Solutions company, Tredence raised US$ 175 million in series B funding from Advent International in December 2022.
In December 2022, a portfolio company of Edelweiss Alternative Asset Advisors Ltd.'s Infrastructure Yield Plus Strategy, Epic Concesiones Pvt Ltd., acquired a 100% equity stake in L&T Infrastructure Development Projects Limited (L&T IDPL) for an enterprise value of approximately Rs. 6,000 crore (US$ 734.57 million).
Indian beer startup Bira 91 raised US$ 70 million from Japanese beverage conglomerate Kirin Holdings in November 2022.
A business-to-business (B2B) e-commerce startup, Udaan bagged an investment of US$ 120 million in October 2022, from existing shareholders and another US$ 35 million from Evolution, started by DBS and Temasek via convertible notes and debt in November 2022.
A Software-as-a-service (SaaS) company, Icertis bagged a funding of US$ 150 million on October 31^st, 2022, from Silicon Valley Bank.
In October 2022, BYJU’s raised US$ 250 million from the existing lead investor Qatar Investment Authority (QIA).
upGrad, an ed-tech unicorn recently raised US$ 210 million in a funding round led by ETS Global, Singapore's Kaizen Management Advisors and Bodhi Tree at a valuation of US$ 2.25 billion in August 2022.
Novo Holdings, a leading international investor in healthcare and life sciences invested US$ 50 million in MedGenome, a health tech startup in August 2022.
In July 2022, OneCard, a mobile-first credit card company, raised US$100 million backed by Temasek, making it the 104^th unicorn in India.
O.A.T Brand Labs raised US$ 50 million led by Winter Capital, 9Unicorns, Venture Catalysts, Vivriti Capital and Oxyzo on June 16^th, 2020.
In April- September 2022, India received FDI investments of US$ 3.21 million in the defence manufacturing sector.
In May 2022, Italian financial services major Generali completed the acquisition of a 25% stake in Future Generali India Insurance from Future Enterprises for Rs. 1,252.96 crore (US$ 161.92 million).
In May 2022, GenWorks Health secured a second round of funding worth Rs. 135 crore (US$ 17.44 million) from a consortium of investors, including Somerset Indus Capital Partners, Morgan Stanley, through its funding arm Grand Vista, Evolvence and Wipro GE.
In May 2022, Toplyne, a Software-as-a-Service (SaaS) start-up, raised US$ 15 million in a funding round led by Tiger Global and Sequoia Capital India.
In May 2022, Kiranakart Technologies Pvt. Ltd, which runs the 10-minute grocery delivery platform Zepto, raised US$ 200 million in a Series D funding round led by Y Combinator's Continuity Fund, which valued it at US$ 900 million.
In May 2022, KoinBasket, a thematic crypto investment start-up, raised US$ 2 million in a pre-seed funding round.
In May 2022, Invictus Insurance Broking Services Pvt. Ltd, which runs the insurtech platform Turtlemint Insurance Services Pvt. Ltd. raised US$ 120 million in a Series E funding round led by Amansa Capital, Jungle Ventures and Nexus Venture Partners.
In May 2022, Jaipur-based online furniture, and home decor platform Woodenstreet.com raised around US$ 30 million in a Series B funding round led by WestBridge Capital.
In May 2022, B2B cross-border tech platform Geniemode received US$ 28 million in a Series B funding round led by Tiger Global and Info Edge Ventures.
In January 2022, Google announced a US$ 1 billion investment in Indian telecom Bharti Airtel, which includes an equity investment of US$ 700 million for a 1.28% stake in the company, and US$ 300 million for a potential future investment in areas such as smartphone access, networks, and the cloud.

Government Initiatives

In recent years, India has become an attractive destination for FDI because of favourable government policies. India has developed various schemes and policies that have helped boost India's FDI. These schemes have prompted India's FDI investment, especially in upcoming sectors such as defence manufacturing, real estate, and research and development. Some of the major government initiatives are:

Government permits 100% Foreign Direct Investment via automatic route for Aircraft Maintenance, Repair and Overhaul (MRO).
The government is taking steps such as facilitating foreign direct investments, nudge prioritisation, and promoting opportunities for using Indian rupee as a currency for overseas investments to simplify FDI regulations and to speed up the approval process.
In Union Budget 2024-25, a proposal has been made to support foreign shipping companies operating domestic cruises, recognizing the significant potential of cruise tourism. Additionally, foreign mining companies selling raw diamonds in the country will now be able to take advantage of safe harbour rates, which will benefit the diamond industry. Furthermore, the corporate tax rate for foreign companies has been reduced from 40% to 35% to attract foreign investment.
The Union Cabinet approved the signing and ratification of a Bilateral Investment Treaty between India and the United Arab Emirates aiming to boost investor confidence, attract foreign investments, and create opportunities for overseas direct investment, potentially leading to job creation. Additionally, it is anticipated to stimulate investments in India, aligning with the vision of ‘Atmanirbhar Bharat’ by promoting domestic manufacturing, reducing import reliance, and boosting exports.
The Union Cabinet approved an amendment to the Foreign Direct Investment (FDI) policy concerning the Space Sector, aligning with the vision of ‘Atmanirbhar Bharat’ outlined by Prime Minister Mr. Narendra Modi. This amendment liberalised the Space sector, allowing 100% foreign direct investment in specified sub-sectors/activities. The reform is expected to improve the Ease of Doing Business in India, attract greater FDI inflows, and stimulate investment, income, and employment growth.
In line with the 'Atmanirbhar Bharat' vision, the Union Cabinet approved the PLI Scheme for White Goods (Air Conditioners and LED lights) with a budget of US$ 752 million (Rs. 6,238 crore) from FY 2021-22 to FY 2028-29. The scheme has approved 64 applicants, with a total committed investment of US$ 816 million (Rs. 6,766 crore).
Due to the Make in India Initiative, FDI equity inﬂow in the manufacturing sector between 2014-2022 has increased by 57% over the previous 8 years i.e. 2006- 2014.
The Reserve Bank of India has taken several actions to increase foreign exchange inflows. These actions consist of:
- Exempting additional Foreign Currency Non-Resident (Bank) [FCNR(B)] and Non-Resident (External) Rupee (NRE) deposits from Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR).
- Authorization for banks to accept new FCNR(B) and NRE deposits without regard to current interest rate regulations until the end of October 2022.
- Inclusion of all new issuances of 7-year and 14-year G-Secs under the Fully Accessible Route (FAR) for FPls.
- Exemption from the short-term limit for FPls' investments in G-Secs and corporate debt made until October 31^st, 2022.
- Permitting FPI in commercial paper and non-convertible debentures with an original maturity of up to one year.
- A temporary increase in the limit for external commercial borrowings (ECBs) under the automated route from US$ 750 million or its equivalent per fiscal year to US$ 1.5 billion.
- Increase in the all-in cost ceiling under the ECB framework by 100 basis points, subject to the borrower having an investment grade rating.
- Permission for AD Cat-I banks to use foreign currency borrowings made abroad to fund foreign currency loans to organisations for a variety of end uses other than exports.
The Government of India increased FDI in the defence sector by liberalizing it to 74% through the automatic route and 100% through the government route.
The Foreign Investment Facilitation Portal (FIFP) is a new online single-point interface of the government for investors to facilitate Foreign Direct Investment proposals to evaluate and further authorise them under the Government approval route.
The sectoral cap for the pharmaceutical industry has been lowered, 74% of FDI is permitted in the Brownfield pharma sector via the automatic method, and 100% is permitted via the approved route.
In the civil aviation sector, 100% FDI is allowed under automatic routes in brownfield airport projects.
For single-brand retail trading, local sourcing norms have been relaxed for up to 3 years and 100% FDI is allowed under automatic route.
The government has amended the Foreign Exchange Management Act (FEMA) rules, allowing up to 20% FDI in insurance company LIC through the automatic route.
The government is considering easing scrutiny on certain FDIs from countries that share a border with India.
The implementation of measures such as PM Gati Shakti, single window clearance and GIS-mapped land bank is expected to push FDI inflows in 2022.
The government is likely to introduce at least three policies as part of the Space Activity Bill in 2022. This bill is expected to clearly define the scope of FDI in the Indian space sector.
In September 2021, India and the UK agreed to an investment boost to strengthen bilateral ties for an 'enhanced trade partnership'.
In September 2021, the Union Cabinet announced that to boost the telecom sector, it will allow 100% FDI via the automatic route, up from the previous 49%.
In August 2021, the government amended the Foreign Exchange Management (non-debt instruments) Rules, 2019, to allow a 74% increase in FDI limit in the insurance sector.
Many reforms like National Technical Textiles, Silk Samagra-2 scheme, Seven PradhanMantri Mega Integrated Textile Region and Apparel (PM MITRA) Parks, Production Linked Incentive (PLI) Scheme for Textiles to promote the production of Man-Made Fibre (MMF) Apparel, MMF Fabrics and Products of Technical Textiles, and more initiatives are taken by the government to enhance export and to promote FDI in the textile sector.

Road ahead

India has recently become a major global hub for FDIs. According to World Investment Report 2023, India was among the top 10 global FDI destinations. Furthermore, India has provided huge corporate tax cuts and simplified labour laws. According to the OECD FDI restrictiveness index, the country has also reduced its restrictions on FDI; overall FDI restrictions have reduced from 0.42 in 2003 to 0.21 in 2020 (i.e. last 17 years). India has remained an attractive market for international investors in terms of short- and long-term prospects. India's low-skill manufacturing is one of the most promising industries for FDI. India has also developed excellent government efficiency. The developments in government efficiency are primarily due to relatively stable public finances (despite COVID-induced challenges) and optimistic sentiment among Indian business stakeholders concerning the funding and subsidies offered by the government to private firms. All these factors may enable India to attract FDI of US$ 120-160 billion yearly by 2025.