In the Union Budget 2021-22, Finance Minister Nirmala Sitharaman may announce measures to attract more foreign direct investment (FDI). The government may announce steps to liberalise FDI norms in key sectors like education, insurance, pharma, manufacturing, electronics and automobile.
In the backdrop of slowing economy, there is high hope from the government to remove FDI caps in different sectors to attract substantial foreign investment. The increase in FDI limit could pave the way for foreign players who are expected to bring in new technologies, new products and ensure better market penetration. This will also ensure long-term funds stay invested in India.
Recently, the government relaxed foreign investment norms in sectors such as brand retail trading, coal mining and contract manufacturing. The government allowed 100 per cent FDI in coal mining and approved 26 per cent foreign investment in digital media.
The year 2020 saw a steady rise in FDI in India, in contrast to decline in global economies, despite uncertainties looming over economic growth in wake of COVID-19 pandemic. Data with the Department for Promotion of Industry and Internal Trade (DPIIT) shows that FDI inflows in the first half of the current fiscal (April-September) stood at $30 billion, registering a 15 per cent growth over the previous year. Sectors which attracted maximum foreign inflows during April-September 2020-21 included computer software and hardware ($17.55 billion), services ($ 2.25 billion), trading ($ 949 billion), chemicals ($ 437 million) and automobile ($ 417 million).
Country-wise, Singapore emerged as the largest source of FDI in India during the period with $8.3 billion investments. It was followed by the US ($7.12 billion), Cayman Islands ($2.1 billion), Mauritius ($2 billion), the Netherlands ($1.5 billion), UK ($1.35 billion), France ($1.13 billion) and Japan ($653 million).
As per DPIIT, total FDI (including reinvested earnings) stood at about $40 billion during the first half of FY21. FDI is a major driver of economic growth and an important source of non-debt finance for the economic development of the country.