India likely to be top priority for FDI in 2023
Foreign investors continue to focus on the fastest growing economy as global uncertainties pose challenges; However, FDI equity inflows into India contracted by 14% to $26.9 bn during the April-September period
image for illustrative purpose
New Delhi: India may attract eyes of overseas investors in 2023 as well on account of measures such as rollout of the Production-linked Incentive (PLI) schemes and projection of healthy economic growth, though global economic uncertainties due to monetary policy tightening in the US and ongoing Russia-Ukraine war may remain cause for concern.
Steps to promote ease of doing business, skilled manpower, presence of natural resources, liberal FDI policies, huge domestic market and prospects of healthy GDP growth are the reasons for optimism on the foreign inflows front for India in 2023 but issues such as delay in enforcement of contracts, cumbersome procedures and high interest rates are still sore points.
According to the latest world investment report 2022 of UNCTAD, the recovery of Greenfield investment in industry remains fragile, especially in developing countries. It has also stated that the fallout of the war in Ukraine with the triple food, fuel and finance crises, along with the ongoing Covid-19 pandemic and climate disruption, are adding stress, particularly in developing countries. India has so far received healthy foreign direct investment (FDI) in 2022. As per the latest figures of the government, India has received foreign investments worth $42.5 billion during January-September 2022. It stood at $51.3 billion in 2021. The country has registered its highest-ever total FDI inflows of $84.84 billion in 2021-22.
FDI equity inflows into India, however, contracted by 14 per cent to $26.9 billion during the April-September period this fiscal. The total FDI inflows (which include equity inflows, reinvested earnings and other capital) too has declined to $39 billion during the first half of this fiscal as against $42.86 billion in the year-ago period.
Secretary in the Department for Promotion of Industry and Internal Trade (DPIIT) Anurag Jain said India is the preferred investment destination due to series of measures such as liberalisation in the FDI policy, steps to further promote ease of doing business, reducing compliance burden for industry, rollout of the PLI schemes and the PM GatiShakti National Master Plan for integrated infrastructure development.
"For the past eight consecutive years, a new record FDI flow into the country has been set. However, given the challenges of sluggish economic growth and geopolitical realities, there are bound to be challenges in times ahead," Jain said.
He added that players worldwide are keen to avail the benefits of the PLI schemes and several global firms are looking to shift their manufacturing bases to India. Development of the National Single Window System (NSWS) portal is completely changing the way businesses used to seek approvals and it will also help investors to come to India, Jain said, adding free trade agreements with the UAE and Australia too will help attract healthy FDI inflows in 2022-23.
The PLI scheme was announced for 14 sectors, including white goods, telecom and auto components with an outlay of Rs 1.97 lakh crore to enhance India's manufacturing capabilities and exports. So far, 650 applications have been approved under 13 sectors. The RBI has projected a growth rate of 6.8 per cent for 2022-23. Experts have also exuded confidence that reform measures taken by the government would help India attract robust FDI inflows in 2023. Rumki Majumdar, Economist, Deloitte India, said going forward, the country's relatively better performance and strong growth outlook will help it stand out as an investment destination. She said that FDI from the US has dried up, but there is a healthy rise in the equity inflows from Japan, Singapore, the UK, and the UAE in the first half of 2022-23.
