RECENT TRENDS OF US INVESTMENTS IN INDIA Affluence Advisory Pvt. Ltd.
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Contents: FDI in India: An Overview US FDI in India Ease of Doing Business in India
FDI in India: An Overview Value
India received its highest ever annual FDI inflow (gross) of USD 83.57 billion in FY 2021-22, beating the previous high of USD 81.97 billion set in FY 2020-21. FDI Equity inflow in manufacturing increased by 76% in FY 2021-22 to USD 21.34 billion ‘Computer Software & Hardware’ has emerged as the top recipient sector of FDI Equity inflow during FY 202122 with around 25% share followed by Services Sector (12%) and Automobile Industry (12%) respectively. 1
Opportunity
FDI inflow to India is expected to touch USD 100 billion in FY 2022-23. This is also supported by the CPI inflation rates which are projected to reduce to less than 4.5% due to supply chain easing in the coming months. The expected ease of doing business is set to increase which will attract more foreign capital flows. 2
Ideas
Effective collaboration among investment partners for strategic growth and expansion into the Indian subcontinent. Targeting untapped Indian markets where recent Ease of Doing Business Reforms have been implemented. Sectors include coal mining, insurance and civil aviation. Curating investment strategies for large scale investments.
Sources: (1) Ministry of Commerce and Industry, Ministry Press Release, 2022; (2) PHD Chamber of Commerce and Industry, Economy to resume Normal Growth Curve in 2022-23, 2022
Implications:
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From the graph, it can be deduced that the total net FDI inflow in India has given a sizeable rise in the past 5 financial years growing at a CAGR of 5.54% in the said time period. The net FDI inflow of the US has grown at a CAGR of 37.97% during the same period. This is a very healthy growth rate since the absolute amount of FDI from the US quite sizeable, contributing to 17.85% of the total FDI inflow in 2021-22, growing from 4.67% of the total FDI inflow in 2017-18.
This clearly represents an opportunity to advance FDI inflows from the US.
Data Sources: (1) Reserve Bank of India, Annual Report, 2022
70
60
Net FDI (Billion $)
•
Net FDI inflow into India country wise (FY 2017-22)
50
40
30
20
10
0 2017-18
Total FDI
2018-19
UK FDI
2019-20
Financial Year Singapore FDI
2020-21
US FDI
2021-22
Mauritius FDI
GOVERNMENT REFORMS TOWARDS EASE OF DOING BUSINESS • India has emerged as a top investor destination, largely due to the new government reforms that have facilitated the ease of doing business in India. • Business executives have become better informed about reforms resulting in renewed optimism about doing business in India. Approximately 70 to 80 percent of MNC leaders are more likely to do business in India after recent policy reforms. 1 • India ranked 63rd in the Business Doing Report, 2019, jumping up 79 places from the 142nd position in the Report published in 2014.
Advantages of doing business in India: • Large population • Low operational costs • New wave of startups in India • Business friendly laws
Sources: (1) Deloitte, India’s FDI Opportunity Through an Investor’s Lens, 2021; (2) Ministry of Commerce and Industry, Ease of Doing Business Report, 2020