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Over the years, India has successfully positioned itself as one of the most attractive destinations for Foreign Direct Investment across the globe.
India was the fourth major host of greenfield FDI projects and eighth major host of cross-border M&A deals between 2004 to 2015, according to a research paper titled ‘Future of Regional Cooperation in Asia and Pacific’ released on the Asian Development Bank website on 25 November 2020.
Since January 2020, the Coronavirus (COVID-19) pandemic has taken a huge toll on the global economy. In India as well, the impact of the national lockdown imposed in March 2020, followed by cautious “un-locking” since June 2020, resulted in 24% contraction in GDP during the first quarter (April – June) of 2021. FDI into India, at US$6.5 billion during the first quarter, also registered a steep decline compared to the previous year. However, since then there has been a remarkable recovery. In the second quarter of the financial year 2020-21 (July to September 2020), the contraction in GDP was 7.5%. However, after two consecutive quarters of contraction, India’s GDP for the October-December quarter (Q3) grew by 0.4 per cent, marking a return to the pre-pandemic times of positive growth rates, as well as a further strengthening of V-shaped recovery that began in Q2 of 2020-21 (more details) and continued in the next quarter (Q4) as well. As per the Provisional Estimates of National Income for 2020-21, released by the Government on 31 May 2021, India registered GDP growth of 1.6 per cent in the last quarter (January to March 2021) of the year. Accordingly, the annual growth in GDP at Constant (2011-12) Prices during 2020-21, is estimated at (-)7.3 percent as compared to 4.0 percent in 2019-20.
The Government of India has resolved to convert the economic setback due to the COVID-19 pandemic into an opportunity to make India self-reliant, and a bigger, stronger and more important part of the global economy. The Prime Minister launched the Atmanirbhar Bharat Abhiyan (self reliant India programme) on 12 May 2020 with the announcement of a stimulus package worth nearly Rs.21 trillion (US$277 billion), equivalent to around 10 per cent of national GDP, designed to open up new avenues of trade and investment in the post-Coronavirus economy. This was followed with further stimuli in October and November 2020, taking the total value of stimulus package to Rs. 29.87 trillion, i.e. about 15% of national GDP. Further, the Government of India has shown an appetite for bold policy reforms relating to agriculture markets, labour laws and redefinition of MSMEs, as well as taking concrete steps for employment generation and to create new opportunities for trade and investment.
The implementation of Atmanirbhar Bharat package and calibrated unlocking of the economy have ensured that economic recovery in India has gained momentum across all sectors. As a result, India has attracted the highest ever total FDI inflow of US$ 81.72 billion during the year 2020-21, which is 10% higher than the previous year (US$ 74.39 billion), as per the annual data released by Ministry of Commerce and Industry on 24 May 2021. Further, the FDI Equity inflows into India during 2020-21 were recorded at US$59.64 billion, marking a year-on-year jump of 19 per cent.
As per UNCTAD Global Investment Trends Monitor (UNCTAD GITM), January 2021, India registered a 13% rise in foreign direct investment (FDI) to US$57 billion in 2020 compared to the previous year – the highest among 153 economies included in the study. This demonstrates that India remains one of the most attractive destinations for big-ticket investments globally.
Further, as per UNCTAD’s World Investment Report 2021, published on 21 June, 2021, FDI in South Asia rose by 20% to $71 billion, driven mainly by a 27% rise in FDI in India, with robust investment in ICT and construction, and 83% surge in cross-border M&As, making India the fifth largest FDI recipient in 2020 globally, a significant improvement from eighth rank in 2019.
