A foreign direct investment (FDI) is an investment made by a firm or individual based in one country into a business located in another country. Under FDI, an investor does not simply purchase equities of foreign-based companies but establishes foreign business operations or acquires foreign business assets— the former is called foreign portfolio investments, which is differentiated from foreign direct investment in terms of lasting interest.
Under FDI, an investor is given at least 10 per cent voting rights in the company where the investment is being made. A share of 10 per cent ensures that the investor gets a sense of belonging without giving them the power of sole decision makers.
Foreign direct investment equity inflows in India amounted to USD 456.79 billion during April 2000 to December 2019, according to the data released by the Department for Promotion of Industry and Internal Trade (DPIIT).
Favourable FDI policies, amended time and again by the Indian government helps attract foreign investors. Apart from this, foreign investors also take advantage of relatively lower wages and special investment privileges such as tax exemptions, etc
FDI in India is critical driver of economic growth and is a significant source of non-debt financial resource for the economic development of India. Foreign investments also bring in technological know-how, managerial skills, new technology, employment, and better infrastructure.
In the fiscal year 2019-20, India received the highest foreign direct investment from Singapore with USD 1.65 billion. This figure was followed by Mauritius with USD 7.45 billion, the Netherlands with USD 3.53 billion, Japan with USD 2.80 billion, and the USA with USD 2.79 billion.
In the previous cycle also Singapore was the highest investor in India.
Today, the country has become one of the most attractive FDI destinations in the world. As per a recent market attractiveness survey conducted by Emerging Market Private Equity Association (EMPEA), India is the most attractive emerging market for global partners (GP) investment for the coming 12 months.