FDI: A grand success story of Modi govt

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New Delhi: From today onwards, we are publishing a series of report cards on the performance of the Narendra Modi government. This will continue till 26 May, the day when ministers of the current government were sworn in. We begin with the government’s performance in bringing in foreign direct investment (FDI).

FDI
FDI inflows rose during UPA 1 and slumped after 2009-10 under UPA II despite green signal to FDI in retail. Lag effect of socialist policies during UPA 1?

In the last 3 years, 21 sectors covering 87 areas of FDI policy have undergone reforms. This has resulted in increased inflows. If the inflows of $55.6 billion for the year ending March 2016 were at an all-time high, the record was not meant to last long. The country registered an inflow of $60.08 billion in the next financial year (2016-17).

The country in the year ending March 2015 received $45.15 billion as against $36.05 billion in the preceding fiscal.

The country has now become the topmost attractive destination for foreign investment. The Modi government gave a new direction to FDI policy reforms in 2014 with the liberalisation of conservative sectors like railway infrastructure and defence. This was accompanied by reforms in other sectors such as medical devices and construction sector.

With a view to providing ease of doing business, the government placed licensed and non-sensitive activities under the automatic route and raised investment caps. It overhauled the policy provisions radically across sectors such as construction development, broadcasting, retail trading, air transport, insurance and pension among others. In addition, the government took initiatives such as the introduction of composite caps in the FDI policy and raising the FIPB approval limit to promote ease of doing business in the country. These initiatives resulted in the country receiving the then highest ever FDI inflow of $55.6 billion.

For retail trading of food products, the government permitted 100% FDI with an unqualified condition that such food products have to be manufactured and/or produced in India. The measure promoted domestic industry, restricts imports, creates local jobs and results in conserving valuable foreign exchange.

In financial services, the Modi government promulgated that any financial sector activity regulated by a financial sector regulator would be eligible for 100% FDI under the automatic route. The government said that the approval would be needed only for unregulated financial sector activities. During the last financial year, the government reformed other sectors such as defence, airport infrastructure, broadcasting, animal husbandry and retail trading, too. India then surpassed the FDI received in 2015-16 and registered an inflow of $60.08 billion during 2016-17, a new all-time high.

FDI trends during the last 3 years, and after the launch of the ‘Make in India’ initiative are presented below.

FDI in the last 3 years

  • The FDI equity inflow received during the last three financial years is US$ 114.41 billion. It shows an increase of 40% compared to the previous period of 3 financial years (2011-12 to 2013-14) ($81.84 billion).
  • The FDI equity inflow received through approval route amounts to $11.69 billion, which is 64% higher than the previous three years ($7.15 billion).
  • The overall manufacturing sectors have witnessed a growth of 4% in comparison to previous three financial years (i.e. from $48.03 billion to $50.09 billion).
  • The total FDI inflow during last three years grew by 38%.

FDI post-Make in India (October 2014-March 2017)

  • The FDI equity inflow received after the launch of Make in India initiative (October 2014 to March 2017) of 30 months is $99.72 billion. It shows an increase of 62% compared to previous 30 months before the launch of MII initiative (April 2012 to September 2014 ($61.41 billion).
  • The overall manufacturing sectors have witnessed a growth of 14% in comparison to previous 30 months before the launch of Make in India initiative (from $35.52 billion to $40.47 billion).
  • The total inflow grew by 51%, or $137.44 billion in comparison to $90.98 billion of the previous 30 months before the launch of Make in India initiative (April 2012 to September 2014).

Last year

  • The FDI equity inflow received during the FY 2016-17 is $43.48 billion. It shows an increase of 9% compared to the previous FY 2015-16 ($40.00 billion). It is the highest ever for a particular financial year.
  • Such equity inflow received through approval route during FY 2016-17 amounts to $5.90 billion, which is 65% higher than the previous year ($3.57 billion).
  • The overall manufacturing sectors have witnessed a tremendous growth of 52% in comparison to previous FY 2015-16 (from $13.35 billion to $20.26 billion).
  • The total FDI inflow grew by 8%, i.e. $60.08 billion in 2016-17 in comparison to $55.56 billion of the previous year. It is the highest ever for a particular financial year. Prior to this, the highest inflow was reported in the FY (2015-16).

Get further statistics from these links: January-March 2017October to December 2016April to September 2016January to March 2016October to December 2015July to September 2015June 2015May 2015April 2015March 2015February 2015January 2015December 2014November 2014October 2014September 2014August 2014July 2014June 2014 and May 2014.

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