India has reached a significant milestone in its economic trajectory, with total Foreign Direct Investment (FDI) inflows surpassing the $1 trillion mark since April 2000. This achievement underscores India’s growing stature as a global investment destination, bolstered by a 26% increase in FDI to $42.1 billion during the first half of FY 2024-25, compared to the same period in the previous fiscal year.
FDI’s Role in Economic Transformation
FDI has been instrumental in shaping India’s development, providing substantial non-debt financial resources, driving technology transfers, and generating employment. Proactive initiatives like Make in India, sectoral policy liberalization, and the implementation of the Goods and Services Tax (GST) have significantly enhanced investor confidence. Competitive labour costs and strategic incentives further contribute to India’s appeal to multinational corporations.
Decade of Growth: April 2014 to September 2024
Over the last decade, India has attracted $709.84 billion in FDI inflows, accounting for nearly 69% of the total inflow over the past 24 years. This substantial growth highlights India’s pivotal role in the global economic landscape.
Key Drivers of FDI Growth
- Improved Competitiveness and Innovation:
- India’s ranking in the World Competitiveness Index 2024 improved to 40th from 43rd in 2021.
- It also secured the 40th position in the Global Innovation Index 2023 among 132 economies, a remarkable leap from 81st in 2015.
- Global Investment Standing:
- India emerged as the third-largest recipient of greenfield projects globally, with 1,008 new project announcements in 2023.
- The country witnessed a 64% rise in international project finance deals, securing the second-highest number of such deals worldwide.
- Enhanced Business Environment:
- Significant improvements in ease of doing business, are reflected in India’s leap from 142nd in 2014 to 63rd in the World Bank’s Doing Business Report 2020.
- Streamlined regulations and reduced bureaucratic hurdles have strengthened investor confidence.
- Policy Reforms:
- Most sectors, except a few strategically critical ones, are open to 100% FDI under the automatic route.
- Recent amendments to the Income Tax Act, of 1961, abolished angel tax and reduced tax rates for foreign companies, simplifying compliance for startups and investors.
Looking Ahead: Sustained Growth and Global Alignment
India’s proactive reforms, including greater FDI allowances in the space sector and the liberalization of other key industries, reinforce its strategic approach to economic growth. These measures, combined with its dynamic innovation ecosystem and competitive global rankings, position India as a frontrunner in attracting sustainable investments.
With $42.1 billion in FDI during the first half of FY 2024-25 and a cumulative $1 trillion in gross inflows, India’s investment story reflects its alignment with global economic trends and its commitment to fostering long-term growth and development.
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