How Did India Achieve Record FDI in FY21 Despite Pandemic?

FDI increased by 40 per cent to $51.4 billion in April-December 2020-21 as per the official data, which depicts the biggest jump in the foreign investment in Indian companies after Narendra Modi came into power.

FDI in India had increased to 30 per cent in 2015-16, but it has got a mixed response in recent years, it has raised to 12.6 per cent in 2019-20 after the shrink of 11 per cent in the previous fiscal year. The recent development in FDI is due to the continuous funding by the US organizations in India. Policymakers allocate this to India’s policy to aggressively take over the global supply chain that desired to leave China in the wake of the covid-19 pandemic. In the initial days of the pandemic, Beijing faced outrage for the fault to contain the virus. New Delhi boosted efforts to motivate China-based manufacturer to shift to India and benefit from low labor cost and plenty of incentives from an investment-friendly government. The efforts have worked as the FDI from the US has reached the recorded figure. As a result, the US was the fifth-largest source of FDI for India in terms of the historical FDI since 2000.

Data revealed by the Department for Promotion of Industry and Internal Trade, the investment in the sectoral distribution remained inconsistent. In the nine months of the financial year, there was a huge jump in the computer software and hardware domain despite the pandemic and nationwide lockdown. FDI in this domain jumps to $24.3 billion over this period from $7.9 billion in FY20.

The government’s production associated incentive plan for mobile phones, components and IT hardware is the credible reason for this. The PLI scheme for a mobile phone was declared in April 2020, July 31, 2020, was the final date for the application. Despite being at the height of the Covid-19 pandemic, the government received the agreement of all the major global; organizations, this has led to the Rs, 35,000 worth of goods being manufactured and 22,500 jobs creation as well as Rs, 1300 crore investment coming up in the country. The construction and infrastructure domain was attracted by the investors by getting an FDI of $7 billion from $2 billion last year. Last year the sector stood third. As far as the FDI in states is concerned, Industrial dominate states such as Gujarat, Maharashtra and Karnataka continued to captivate FDI in India. The government has continued to seek more foreign direct investment opportunities on its own.

India continued to be in the eighth position in the global pecking order in 2019, though France and Canada stood in seventh and nine positions in 2018 and 2019. FDI inflow has been a roller coaster ride, however, it was shrunk for three years, but during 1 year of NDA, it raised by 1 per cent. 43 frontier business can generate $2.5 trillion of economic value by 2030. The digital transformation in India is the current wave to enhance the growth of e-commerce and modification in the retail consumer market over the next decade.