Foreign Direct Investment equity inflow in India increased to US $ 27.31 billion in the financial year 2008-09 from US $ 5.5 billion in fiscal 2005-06. Further, the FDI equity inflows in 2007-08 were US $ 24.58 billion and increased to US $ 27.31 billion in 2008-09, despite the economic slowdown, showing a growth of 11 percent over the previous financial year. No target has been fixed for the current financial year. However, for the first two months of the current fiscal FDI inflows reportedly stood at US $ 4.434 billion. Various assessments/ studies have shown that India continues to be one of the most attractive destinations for investments worldwide in the period 2009-2011.
Foreign Direct Investment (FDI) has the potential of enhancing economic activity and employment in the country by complementing and supplementing domestic investment. Additional investments brought in through FDI, over and above investments possible with the available domestic resources, assist in providing additional employment opportunities. FDI also plays a vital role in the upgradation of technology, skills and managerial capabilities.
The Indian government has put in place a
liberal and investor-friendly policy on FDI under which FDI up to 100% is
permitted on the automatic route in most sectors/ activities, including
infrastructure and Research and Development (R&D). The UNCTAD World
Investment Reports (WIR) 2007 & 2008, in their analysis of the global
trends and sustained growth of Foreign Direct Investment (FDI) inflows,
have reported India as the second most attractive location for FDI for
2007- 2009. India has retained the second place in A. T. Kearney’s 2007
Foreign Direct Investment Confidence Index, a position it has held since
2005. Government has also announced a slew of measures to accelerate the
demand in the economy which would enable India to continue as an
attractive investment destination. Under the liberalized economic
environment, investment decisions of investors are based on the
macro-economic policy framework, investment climate in the state,
investment policies of the transnational corporations and other commercial
The government continues to make efforts to increase economic cooperation with the developing as well as developed countries through different fora such as Joint Commissions/Joint Committees, other bilateral channels like interaction with the delegations visiting the country and organizing visits abroad for discussions on issues of mutual interest and business/ investment meets between Indian and foreign entrepreneurs to stimulate foreign investment into India. The Department of Industrial Policy and Promotion also participates in discussions covering industrial cooperation organized by other Ministries and Departments of Government of India and the Joint Business Council meetings.
The government also undertakes investment promotion activities through organisation of Destination India and Invest India events in various countries with FDI potential to create awareness about the investment climate and opportunities in India, as well as to provide support to potential investors
Policymakers estimate that to sustain high growth rate India will need
massive investment in the five year period to March 2012, including $500
billion in infrastructure, to sustain high growth rates. In January,
India raised FDI limits in petroleum refinery, aviation, commodity
exchanges, credit information companies and mining of some precious
metals to attract more capital and boost growth in those sectors. The Congress(I)-led UPA government has plan to raise FDI limits in insurance
to 49 cent. in fact the Cabinet has okayed it, now it will go to
Parliament. However, the retail trade is yet to be opened further. The
government is in the process of fine tuning FDI rules in order to make
India more attractive as FDI destination.
In FDI equity investments Mauritius tops the list of first ten investing
countries followed by US, UK, Singapore, Netherlands, Japan, Germany,
France, Cyprus and Switzerland. Between April 2000 and July 2008
FDI inflows from Mauritius stood at $ 11,208 million followed by $ 3454
million from Singapore; $ 1802 million from the US; $ 864 million from
the UK; $ 883 million from the Netherlands; $ 405 million from Japan;
629 million from Germany; $ 1287 million from Cyprus; and $ 467 million from France.