How Has Covid-19 Impacted FDI India?
With the emergence of the covid-19 pandemic, the whole world has just got stagnant. With the cases emerging, the imposition of lockdown has made everyone’s lives still. The pandemic has affected the economy very much. India has seen a substantial increase in FDI after liberalization in 1991-92. Foreign direct investment (FDI) was generally regarded as a positive indicator for the Indian economy because it demonstrated foreign investors’ confidence. The pandemic is putting global investors’ faith in India to the test. Because the other two sources of investment in India, government expenditures and private investments, have decreased, it is especially crucial to track changes in FDI and understand the underlying patterns of change.
FDI Inflows in covid-19
When the whole world was facing an economic crisis; India has seen a substantial increase in FDI after liberalization in 1991-92. Foreign direct investment (FDI) was generally regarded as a positive indicator for the Indian economy because it demonstrated foreign investors’ confidence. However, the pandemic is putting global investors’ faith in India to the test. Because the other two sources of investment in India, government expenditures and private
investments, have decreased, it is especially crucial to track changes in FDI and understand the underlying patterns of change.
The total inward FDI into India in the financial year (FY) 2020-21 achieved a new high of US$81.72 billion. The entire amount of foreign direct investment (FDI), which includes equity, capital, and re-invested earnings, increased by 10% over the previous fiscal year’s total of US$74.39 billion.
Reasons of increment in FDI
According to the federal government, this growth in FDI inflow is linked to several government-led facilitative policies and reforms to make India a preferred global investment destination. As a result, total FDI intake into India increased at a compound annual growth rate (CAGR) of 6% between FY 2015-16 and FY 2019-20.
Gujarat is famous for its robust logistical networks and industrial infrastructure, boosted by technological advances throughout the supply chain, attracting the most significant FDI inflows. Inflows of foreign direct investment (FDI) into Delhi, on the other hand, have declined in recent years.
With the entire world getting online in this Covid-19, computer software and hardware were the top sectors attracting FDI equity inflows, accounting for 44%. From April to December 2020, FDI equity inflows into this sector were US$24.4 billion, up from around US$6.4 billion in FY 2018-19. In FY20, foreign direct investment into this industry totaled $7.7 billion.
India remains a popular international investment destination due to its inherent advantages: a large market with a relatively young generation, democratic setup, investor-friendly reforms, increased pace of urbanization, steady rise in rural consumption levels, and sustained increase in disposable per capita incomes. Despite this, the pandemic has wreaked havoc on the country, delaying progress across the board. As a result, global investors will be watching how India’s economy recovers from a disastrous COVID outbreak and how the country executes vaccination programs and returns to normalcy.