FDI growth story to continue in 2021 too: Experts say

New Delhi: The high growth story of foreign direct investments (FDI) into India will "go well" in the new year too as there is a growing interest among overseas investors about the country amid the government's continuing reform measures to further improve the business climate. With relaxed FDI norms, defence production will be among the areas that will be looked at for fresh overseas investments in the months ahead while easing compliance burden of businesses will be a priority area. Irrespective of the global slowdown and the Covid-19 pandemic, FDI into India recorded a significant jump, according to Secretary in the Department for Promotion of Industry and Internal Trade (DPIIT) Guruprasad Mohapatra.

Facebook's huge investment in Mukesh Ambani's Jio platform helped India receive around $43.5 billion FDI during the January-September 2020 period and going ahead, the bullish trend is expected to continue. "There was a global slowdown. We also thought that the growth patterns of FDI in India, which was very encouraging, might decline post-Covid. But the decline has not happened and the FDI continues to grow well and now the general revival is there in the economy. I do not have any anxieties now, it (FDI growth) should go well in 2021," Mohapatra told this reporter. In the wake of the Covid-19 pandemic, the government imposed a nationwide lockdown in late March to curb spreading of infections and the move had also severely impacted economic activities. The government has relaxed FDI norms in sectors such as defence production and that is also one of the areas "which one will look forward to", Mohapatra said.

According to him, some big ticket investments will keep happening as "overall there is an interest in India's growth story" particularly now because the worst part of the pandemic is over. After taking a lot of steps to significantly improve the ease of doing business, Mohapatra said, now the government is working to reduce compliance burden of businesses. "This is a priority of the government. Every compliance which is a burden needs to be removed and this includes de-criminalisation of civil wrongs," he emphasised. In the World Bank's Doing Business report released last year, India's ranking improved 14 places to the 63rd position among 190 economies. The country was at the 77th spot in the previous year. Among several areas, the government has relaxed FDI norms in coal mining, contract manufacturing, and single-brand retail trading. The DPIIT is also looking at easing the norms in areas like AVGC (Animation, Visual Effects, Gaming and Comics). Foreign direct investment equity inflows into India crossed the $500 billion milestone between April 2000 to September 2020, strengthening the country's credentials as an investment destination. In 2016-17, 2017-18, 2018-19 and 2019-20, FDI stood at $43.5 billion, $44.85 billion, $44.37 billion and $50 billion, respectively. The key sectors which attracted the maximum FDI include services segment, computer software and hardware, telecommunications, trading, construction developm- ent, automobile, chemicals, and pharmaceuticals.

Prohibited sectors

At present, FDI is prohibited in as many as nine sectors. They are lottery business, gambling and betting, chit funds, nidhi company, real estate business, and manufacturing of cigars, cheroots, cigarillos and cigarettes using tobacco.

In April this year, the government made prior approval mandatory for foreign investments from countries that share land border with India to curb "opportunistic takeovers" of domestic firms following the Covid-19 pandemic, a move which was aimed at restricting FDI from China.

Experts opined that the government would continue to ease FDI norms and investments into the country would record growth rates in 2021 too.

Pratibha Jain, Delhi Head and Partner at Nishith Desai Associates, said there is a global recognition of the Indian growth potential due to its young and large population, educated middle class, and also being the world's second-largest Internet user base.

"All of these make India an undeniable candidate for investment by global investors," Jain said.

FDI is important as India would require huge investments in the coming years to overhaul its infrastructure sector to boost growth.