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India’s FDI Policies: Investing in Incentives
Paving the way
It was 24 July 1991 when Dr. Manmohan Singh (Finance Minister of India at the time) delivered his speech on the new models for economic reforms, now commonly known as Liberalisation, Privatisation, and Globalisation. This became a game-changing moment when policymakers of India shed the skin of state ownership and embraced the benefits of free enterprise.
A top investment
Fast forward to 2021, India has received a sum of USD59.64bn in equity investments for the Financial Year (FY) 2020-21, which registered a 19% growth from FY 2019-20 (USD49.98bn).[1] When it comes to top investment countries, Singapore takes the top spot with a 29% share, followed by the United States of America at 23% and Mauritius at 9%. These staggering numbers are the result of the recent measures and steps taken to promote FDI inflow, such as reducing corporate tax rates for new manufacturing set-ups.
The budget of 2021 ensured that the benefits of the schemes should not be restricted to the large scale industries only, but also to medium to small scale industries as well. According to a report published by The World Bank in 2020, India ranked 63rd in terms of Ease of Doing Business, rising 17 places since its last position.[2] India as a market has immense potential in the form of an untapped market, a skilled workforce, and a politically stable government with extensive international relations.
Attractive future
India became a major consideration during the COVID-19 pandemic for businesses on the world stage. When the pandemic hit supply chains globally, India was a major runner-up in the “China Plus One” strategy being adopted by companies across the globe. With its abundant resources and lucrative policies, India is looking at attracting more than USD100bn by 2025.
The Government also extended the incentives, which made conducting business within the country a much more lucrative proposition. Several Production Linked Incentives (PLIs) have been introduced to diminish sectoral limitations, enhance economies of scale, improve exports, and create a robust ecosystem in India that employs the masses and acts as the world’s manufacturing hub. The PLI schemes aim to extend an incentive of 4-10% on incremental sales over the base year for a period of 5 years. The Government has already approved schemes for nine sectors, and several global giants have enrolled under these PLIs to take advantage of the incentives.
The subsequent steps taken by the Government have put India on an upward trajectory. Healthy diplomatic relations and encouraging business policies are paving the way for a brighter future. India has come a long way since its independence, and as a developing economy, it has immense growth potential.
[1] FDI Statistics, January – March 2021, The Department for Promotion of Industry and Internal Trade (DPIIT) – https://dipp.gov.in/sites/default/files/FDI_Factsheet_March%2C21.pdf, accessed on 5 July 2021.
[2] Ease of Doing Business Rankings, The World Bank – https://www.doingbusiness.org/en/rankings, accessed on 5 July 2021.
For more information please contact:
Manoj Gidwani
Vice President, Global Marketing
Nexdigm (SKP), India
E: manoj.gidwani@nexdigm.com
