The economic fallout of the COVID-19 pandemic is making the valuation of businesses attractive, especially in India. India has not been in the forefront of raising capital as much as China in the past, but the current pattern of economic shift and government policies has taken a turn and made India a favourable market for the investment of foreign capital.
The reason for this change is catered through the Foreign direct investment (“FDI”) regime of India which is described as the most liberal in the World. For instance, the FDI regime has focussed on inviting foreign investors from around the globe to invest in India by assuring that deep structural reforms shall be undertaken by the Government to support such investments, however, on the other hand, the FDI regime is now scanning the investments from China. Let's see the benefits of Foreign Direct Investment in detail.
India has continued to attract huge investments, even during the COVID-19 pandemic, which is evident from the 22 billion worth of direct investments routed in India, out of which almost 98% is from the automatic route, which indicates ease of restrictions in the FDI movement. The ease of investing in India has resulted in a jump of about 79 positions in the World Bank’s- ease of doing business and is expected to get up to the top 50 by the end of this year.
India shall prove to be a robust nation in the whole of South Asia in respect to the flow of investments in India through foreign investors, as per the United Nations Conference on Trade and Development (UNCTAD), wherein India has jumped to the 9th position in the list of countries with top FDI investments in the year 2019 from its 12th position in the year 2018.
India needs FDI as it is a critical trigger for economic growth and further accounts for a major non-debt financial resource for an economic boost for any developing nation like India. Foreign companies that invest in India take advantage of the relatively lower wages, achieving technical know-how, which further helps the nation in generating employment for its commonwealth.
The Indian Government’s favourable policy regime and robust business environment have ensured that foreign capital keeps flowing into the country. The Government has taken many initiatives in recent years such as relaxing FDI norms across sectors such as defence, PSU oil refineries, telecom, power exchanges, and stock exchanges, among many others.
The following are the key advantages of Foreign Direct Investment in India
Market size: India with the largest population in the world is one of the biggest markets in the world as its consumer base is huge and diversified. The massive middle-class population of the country makes it a great consumer base for foreign companies and their products. Market size is the most important benefit of FDI in India.
Rationalisation of Policies: The Government of India has rationalised the economic policies in such ways as to make it a very attractive destination for foreign companies to invest.
Good demographics and quality companies: India is a very talented and entrepreneurial society with a young and highly educated population. Out of the diverse market of more than 6,000 companies listed on the stock market, there are a lot of quality businesses with excellent accounting practices in which one can invest.
Manufacturing and outsourcing hub: India is a relatively cheaper place to conduct business as compared to other countries due to various reasons which include huge labour availability and access to markets around Asia. Therefore, it plays a major role in attracting foreign institutions to set up their facilities in India.
Strong Economic Growth: India has realized strong historical growth rates over the past few years, particularly in the sector of Information Technology and business process outsourcing. These extend to be among the substantial sectors of the global economy as a whole.
Conclusion: The preeminent significance of the FDI regime and the constant Governmental reforms brought in at regular intervals in support thereof are essential for a developing nation like India as the domestic sources and investment are not enough and therefore the need for foreign investment help in filling the gaps between domestic savings and investment requirements of the country. Hence, to boost the flow of FDI in India, the Government is further liberalising by easing the restrictions, with minimal supervision and thereby maximizing the utilization of the automatic route.
Foreign direct investment (FDI) is a key source of funds for India's economic development.
To take advantage of India's evolving economic climate and lower labour, foreign firms engage directly in fast-growing private Indian enterprises.
Benefits of Foreign Direct Investment
FDI has a positive influence on developing host nations, according to both economic theory and current empirical data.
The purchase of securities and other financial assets by investors from another nation is known as foreign portfolio investment (FPI). Foreign direct investment (FDI) is capital invested in a business in another nation by a person or a company from one country.
There are 3 types of FDI:
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The economic development of India has witnessed a significant boom and by infusion of foreign direct investments from all across theView More
Foreign Direct Investment (“FDI”) refers to the investment made by an individual, company, or entity from one country into anotherView More
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