Singapore (27.01%) and USA (17.94%) emerged as the top 2 source countries in FDI flows to India in FY2021-22, followed by Mauritius (15.98%), Netherlands (7.86%) and Switzerland (7.31%). It may be noted that according to the UNCTAD World Investment Report (WIR) 2022, in its analysis of global trends in FDI inflows, India has improved by one position to the 7th position among the top 20 host economies for 2021.India is fast becoming the preferred country for foreign investment in the manufacturing sector. FDI inflows in manufacturing sectors increased by 76% ($21.34 billion) in FY 2021-22 compared to the previous fiscal year 2020-21 ($12.09 billion).
The government has implemented several transformational reforms under the FDI policy regime across sectors such as insurance, defence, telecom, financial services, pharma, retail, e-commerce, construction and development, civil aviation, manufacturing, etc. Despite the ongoing pandemic and global developments, India received the highest annual FDI inflow of USD 84,835 million in FY21-22, surpassing last year’s FDI by USD 2.87 billion. Earlier, FDI inflows increased from USD 74,391 million in FY19-20 to USD 81,973 million in FY20-21.
The government continues to liberalize investment restrictions, remove regulatory barriers, develop international relations and improve the business environment. Changes in foreign direct investment policy are made after consultation with stakeholders including apex chambers of industry, associations, representatives of industries/groups and other organizations. While foreign investment is allowed automatically in most sectors/activities, for strategic reasons some investments are either restricted or allowed through government approval through a vetting mechanism as per the prescribed framework.
The top 5 sectors that received the highest FDI capital inflows during FY 2021-2022 are computer software and hardware (24.60%), service sector (Finland, banking, insurance, non-Finnish/trade, outsourcing, R&D, courier , technical testing and analysis, Other) (12.13%), Automotive (11.89%), Trade 7.72% and Construction (infrastructure) activities (5.52%).The top 5 states that received the highest FDI inflows during FY 2021-22 are Karnataka (37.55%), Maharashtra (26.26%), Delhi (13.93%), Tamil Nadu (5.10%) and Haryana (4.76%)
The top 5 sectors that received the highest FDI capital inflows during FY 2021-2022 are computer software and hardware (24.60%), service sector (Finland, banking, insurance, non-Finnish/trade, outsourcing, R&D, courier , technical testing and analysis, Other) (12.13%), Automotive (11.89%), Trade 7.72% and Construction (infrastructure) activities (5.52%).During the fiscal year 2021-22, FDI was reported from 101 countries, while it was reported from 97 countries during the previous fiscal year 2020-21.In India, up to 100% FDI is allowed in non-critical sectors through the automatic route, which does not require security clearance from the Ministry of Home Affairs (MHA). Investments in sensitive sectors such as defence, media, telecommunications, satellites, private security agencies, civil aviation and mining require prior government approval or security clearance from MHA, except for investments from Pakistan and Bangladesh. All foreign investments must comply with the applicable entry route, sector cap, related conditions, sector laws, the Companies Act 2013 and the rules made thereunder, pricing guidelines, documentation and reporting requirements. The FDI policy regime continues to welcome all investments in the country subject to compliance with applicable entry conditions and rules/regulations.
