FDI inflow touches $82 bn in FY21

Context: Recently, Commerce and Industry Ministry said that Foreign direct investment (FDI) flows into India grew 10% in 2020-21 to touch a record $81.72 billion, with FDI equity inflows rising 19% to almost $60 billion.

• In 2019-20, India had received $74.39 billion in FDI, with almost $50 billion coming in the form of equity investments.

Key Findings regarding India

• Investments from Saudi Arabia rose sharply in FY21 to $2816.08 million from $89.93 million in the year before. 
• Inflows from the US and the UK grew by 227% and 44% respectively in FY21 from the year before.
• In construction, computer software and hardware, rubber goods, retail trading, drugs and pharmaceuticals and electrical equipment, FDI inflow in FY21 was more than the inflow in the previous fiscal.

In India top FDI Destinations

• Gujarat was the top FDI destination in 2020-21, accounting for 37% of the foreign equity inflows, followed by Maharashtra (2nd) which got 27% of the equity inflows.
• Karnataka (3rd) accounted for another 13% of the equity investments.

"Measures taken by the government on the fronts of FDI inflow are

• Foreign Direct Investment (FDI) policy reforms;
• Investment facilitation and 
• ease of doing business 
• attract investments into domestic manufacturing capacity and an ambitious infrastructure project pipeline

Global Scenario

• Singapore was the biggest investor in India last fiscal, accounting for 29 per cent FDI, followed by the United States at 23 per cent and Mauritius at 9 per cent.

About Foreign direct investment

• FDI is when a company takes controlling ownership in a business entity in another country. With FDI, foreign companies are directly involved with day-to-day operations in the other country. This means they aren’t just bringing money with them, but also knowledge, skills and technology.
• Generally, FDI takes place when an investor establishes foreign business operations or acquires foreign business assets, including establishing ownership or controlling interest in a foreign company.  

Additional Information
Where is FDI made?

• Foreign Direct Investments are commonly made in open economies that have skilled workforce and growth prospect. FDIs not only bring money with them but also skills, technology and knowledge.

FDI in India
FDI is an important monetary source for India's economic development. Economic liberalisation started in India in the wake of the 1991 crisis and since then, FDI has steadily increased in the country. 

• India, today is a part of top 100-club on Ease of Doing Business (EoDB) and globally ranks number 1 in the greenfield FDI ranking.

Routes through which India gets FDI

• Automatic route: The non-resident or Indian company does not require prior nod of the RBI or government of India for FDI.

Govt route

• The government's approval is mandatory. The company will have to file an application through Foreign Investment Facilitation Portal, which facilitates single-window clearance. 
• The application is then forwarded to the respective ministry, which will approve/reject the application in consultation with the Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce. 
• DPIIT will issue the Standard Operating Procedure (SOP) for processing of applications under the existing FDI policy.