FDI inflows into India have increased 20 times between 2000-01 and 2021-22. According to the Department for Promotion of Industry and Internal Trade (DPIIT), cumulative FDI inflows into India stood at USD 953.43 billion between April 2000 and September 2023, mainly due to efforts by the government to improve ease of doing business and relax FDI regulations. Total FDI inflows into India from July to September 2023 reached USD 15.34 billion.
From April 2000 to September 2023, India's services sector attracted the largest FDI inflows of 16%, amounting to 106.7 billion USD, followed by the software and technology industry.
India also recorded significant FDI inflows from April 2000 to September 2023, the highest from Mauritius amounting to 166.82 billion USD, accounting for a total market share of 25%. The state that received the most FDI during this period was Maharashtra (61.92 billion USD), followed by Karnataka (47.3 billion USD).
India ranked 37th in the World Competitiveness Index 2022, up by 6 places from 43rd in 2021. India also retained the 40th rank as the most innovative country among 132 economies, in the 2023 Global Innovation Index.
India is considered to be among the top three global FDI destinations. Additionally, in recent years, India has made huge corporate tax cuts and simplified labor laws. The country has also eased restrictions on FDI; Overall FDI restrictions have decreased from 0.42 to 0.21 over the past 16 years. India remains an attractive market for international investors in terms of short-term and long-term prospects.
India's low-skilled manufacturing sector is one of the most promising areas for FDI as it witnessed a 76% increase in FDI, reaching USD 21.34 billion in FY 2021-22, up from USD 12.09 billion in the previous year. The surge is attributed to the success of Production Linked Incentive (PLI) schemes, attracting major smartphone manufacturers like Foxconn, Wistron, and Pegatron. In just three years, India achieved a 20% value addition in mobile manufacturing, outpacing countries like Vietnam (18% in 15 years) and China (49% in 25 years). Majority of Indians hold a positive outlook regarding the economic reforms implemented by the central government according to a survey conducted by Dhruvresearch in August 2023.
During the Russia-Ukraine war, the Indian economy demonstrated remarkable resilience to external pressures, registering a robust 13.5% expansion in the first quarter of the financial year 2022-23 (April-June 2022). The subsequent quarter, July-September 2022, saw a GDP growth of 6.3%. FDI inflows rose by 23% post-Covid. India's economic performance stands out positively compared to other global economies, earning recognition from both the World Bank and the International Monetary Fund (IMF) as a bright spot amidst challenging global conditions. Additionally, the Indian economy remained largely unaffected by the ongoing Israel-Palestine conflict, showing resilience in the face of geopolitical tensions.
India experienced a significant 24% decline in Foreign Direct Investment (FDI) to $20.48 billion in April-September 2023-24. However, Despite short-term variations, the country continues to garner interest for its economic potential and resilience in the global investment landscape. In October 2023, net FDI surged to a 21-month high at $5.9 billion, driven by robust gross inflows and reduced repatriation. Despite the overall dip in FDI, India remains an appealing destination for investments, especially amid global efforts to shift from China to India. Experts assert that these fluctuations, attributed to geopolitical issues and economic challenges in some developed countries, are unlikely to impact long-term investment trends into India.
India's retail inflation reached its peak at 7.8% in April 2022, surpassing the RBI's upper tolerance limit of 6%. However, the inflation overshoot in India was among the lowest globally. Survey conducted by Dhruvresearh indicated optimism among respondents, with the majority expecting an improvement in the inflation rate. According to the survey, most Indians experienced a growth of up to 5% in their annual income this year.
Recent data from the National Statistics Office (NSO) reveals a decline in the Consumer Price Index (CPI) inflation to 5.02% in September, marking a three-month low from 6.83% in August. In May 2023 recorded the lowest point in over two years, with CPI inflation at 4.25%.
India leads in fintech adoption at 87%, well above the global average of 64%. The survey conducted by us indicates that 77% of respondents frequently use UPI, showcasing widespread and regular adoption of digital payment methods.
India has also developed great efficiency of government. The change in government performance is largely due to relatively stable public finances (despite the challenges posed by COVID-19) and optimism among Indian economic actors regarding financing and subsidies that the government provides to private businesses. All these factors can help India attract between 120 billion and 160 billion USD of FDI capital per year by 2025.
After BJP's victory in 3 out of 4 key states, the market responded positively, showing a preference for stability. The BSE Sensex surged 877.43 points (1.30%) to a new high of 68,358.62. The market capitalization of listed companies soared by ₹4.09 lakh crore with Adani Group companies leading the gains. SBI, ICICI Bank, Bharti Airtel, NTPC, and Larsen & Toubro also saw significant increases. Nifty closed at an all-time high of 20,267.90. The Indian currency gained 6 paise against the US dollar as election results alleviated political risks, boosting market sentiment. Simultaneously, gold prices surpassed the $2100 mark for the first time. Indian equities continued their upward trend on Tuesday a day after election results were out, with the Sensex crossing the 69,000 mark for the first time.
India's economic landscape reflects resilience and sustained growth, with FDI inflows witnessing a significant increase despite global challenges which positions India as an attractive destination for investors.
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