Investors’ Paradise

India has emerged as the most attractive investment destination among its Asian counterparts. The country’s long-term trade policies and result-driven measures are an example for the other countries in the region to promote substantial FDI inflows in their economies.

By Asif Javed | July 2023

India is a preferred investment destination for foreign investors due to a number of factors. First and foremost, India is well ahead the rest of the South Asian nations because of its effective, yet sustainable policies, such as liberalization of FDI policy, decreasing the compliance burden for industry, and promoting ease of doing business across the country. The government authorities proclaim that liberal trade policy of the government is making it possible to attract large FDI inflows in the country.

Most multinational companies consider India as an important destination for their global expansion, based on both short-term and long-term prospects. Many global firms are keen to shift their manufacturing bases to India. Samsung Electronics, for example, shifted its manufacturing plants from China and Vietnam to India. Apple Inc. is also going to outsource the assembly of the iPhone 14, its latest flagship model, in India.

This shows the commitment of the Indian government to attract new investment in the country and their long-term vision for the sustainable industrial development and growth.

Such supply side reforms as corporate tax, along with infrastructure investment, have been the key factors in fostering an investor-friendly environment in the country. Besides, the relaxation of the land and labour laws by the central and some of the state governments has also helped in making the country an investors’ paradise. India also has signed various Bilateral Investment Treaties with several countries to secure foreign investment in many business and industrial sectors.

The bulge of a young, educated population, the remarkable growth achieved by the IT sector, digital transformation of the basic telecommunication infrastructure, renewable energy push, and projecting the country as an international manufacturing hub, as well as a rapidly-growing consumer markets are some of the key features of the high-performing Indian economy, corroborating immense growth potential of the country in the years to come. India economy grew by 6.5 per cent in the pre-pandemic decade, and it is strongly expected that India will remain the ‘fastest growing major economy’ in the world over the medium-term. In addition to that, the consumer digital economy in India is projected to be a whopping $800 billion market in 2030.

India has emerged as ultimate choice of foreign investors and multinational corporations (MNCs), thanks to the country’s long-term and sustainable policies, business-friendly rules and regulations, sector specific measures and massive improvement in infrastructure.

As per statistics, the total FDI inflows in India during the last 23 years (April 2000-March 2003) were $919 billion, whereas in the last 9 years (April 2014-March 2023), the country received $595.25 billion in terms of foreign direct investments, accounting for around 65 per cent of the total FDI inflow in the last 23 years. In 2021-22, India received the ‘highest ever’ foreign inflows of $83.6 billion, followed by Mauritius (26%), Singapore (23%), the USA (9%), the Netherlands (7%) and Japan (6%). India is now set to attract $100 billion FDI in the current fiscal year. As a whole, the FDI is coming from some 101 countries and is being invested in a total of 57 business and industrial sectors in more than 30 union territories and states of the country.

The top five sectors that received the highest FDI inflow during FY 2022-23 were: Services sector (16%), computer software and hardware (15%), trading (6%), telecommunications (6%) and automobile industry (5%). FDI is not only benefiting the traditional sectors, but it is also being made in new-age industries. According to a report, India can attract around $475 billion in the next five years.

India ranks 16th on the Kearney’s FDI confidence index, showing a renewed interest from foreign investors in the Indian markets. India secured the second position among the emerging markets and was just behind China and Hong Kong. Besides, India is part of the top 100 clubs on Ease of Doing Business. The private equity and venture capital investments also increased considerably during 2018-22. Most of these investment were made in start-ups, making India the second largest hub of start-ups after the U.S.

The long-term policies and result-driven measures adopted by India are an example for the other regional countries to promote FDI inflows in their economies. Consistent efforts to improve the business environment through ease of doing business are significant reform measures for MNCs. Regional cooperation through bilateral and multilateral investment agreements will also help to increase much-needed foreign investment in countries that are in dire need of foreign investments in order to achieve sustainable economic growth.