Increase in FDI in India Despite Sinking Economy

The sinking economy of India amid the Covid-19 pandemic couldn’t stop foreign investors from investing big time in the country’s stocks. This has assured a recovery of the economy sooner than the actual analyses. India is the third-largest economy in the Asian continent. It has been stated that till around 6 billion US$ has been invested in the country till August 2020. This amount is one of the largest amounts since March, 2019.

India has been placed at the top of the list for foreign investment returns in the next 1-2 years along with its neighboring country China. It is stated that Indian equities represented one of the fastest-growing ones in the world, making the country one of the most favored countries to make foreign investments. Also, it has been ranked in the top 100 countries where ease of doing business is on rising.

Foreign Investments - Ezybiz India

Even after a major drop of 23.9% in Indian economy till June 2020, foreign investments have remained constant. The curbs were eased after the lockdown that improved the business operations letting the GDP cure itself of the fall down. This gives hopes and reasons for why investors must remain optimistic about the Indian shares.

UNCTADs take on Indian Economy:

UNCTAD stands for United Nations Conference on Trade and Development (UNCTAD) has pointed these major beneficial for investing in India and remarks that prove it is one of the favorite destinations for foreign companies for making foreign investments. These remarks are as follows-

  1. The economy of India can prove as one of the most resilient economies in South Asia.
  2. The market here is one of the largest that continuously is attracting foreign investments seeking a vast market. And all this amid a pandemic where a major fall has been seen in Foreign Investments or Foreign Direct Investments globally.
  3. As per the UNCTAD, a sharp shrinkage have been noticed in the inflows, but still India has managed to step up to the 9th position in the year 2019 from 12th position in the year 2018, in the top Global FDI Recipient list.
  4. Also, it has been forecasted that the Covid-19 issues will bring down a major 40% dip in the year 2020 in the Foreign Investments globally with respect to the data of the year 2019. The FDIs has come to 1 trillion US$ from 1.54 trillion US$, this year, which is one of the lowest since the year 2005.
  5. It has been projected that the Foreign Investments are likely to dip down further between 5 to 10%. And the recovery from this economic fall down seems possible in 2022.
  6. In its World Investment Report 2020, UNCTAD has reported that in the financial year 2020 the Foreign Investment inflows have increased to 13%, which is about 49.97 billion US$. This more than the 44.36 billion US$ in the financial year 2019.
  7. Foreign Investments in India have now become a trend that is coming of age and long term growth focused. Post this pandemic it is said that a positive surge will be seen in the India market that will attract such investments.
  8. The UNCTAD in its report has also said that industries like digital economy and professional sector may see a faster rebound because of the interest shown by technological companies and global venture capital firms to invest in India.
  9. Singapore is one of the largest sources of foreign investments in India making it the major investor.
  10. The UNCTAD has also stated that the investments from India are expected to decline to up to 25% due to this global pandemic in the financial year 2020.

Major investments made in India in 2020:

There have been significant foreign investments and other announcements during the Covid-19 pandemic. These are as follows-

  1. The Dutch health tech and leading consumer electronics company, Philips has announced in May 2020, that it plans to invest 35.47 to 42.56 million US$ to upsurge the manufacturing facility and Research and Development sector in India.
  2. Jio Platforms Ltd. in April to July 2020 has sold around 25.24% which is 21.57 billion US$ to various investors across the globe. Some of these include Vista, Google, Facebook, General Atlantic and many more.
  3. In August 2020, the machine learning based log analytics and monitoring solution giant from Israel, Coralogix has announced a major strategic expansion in the Indian market by announcing to invest more than 30 million US$ in the coming five years.
  4. Foreign investments or FIs of 63.84 million US$ has been announced by the Singapore Government in August 2020. This is made in the Qualified Institutional Placement (QIP) that offers mall developer by Phoenix Mills Ltd.

Major foreign investments in Health sector in India:

Some economies have adopted policies for boosting investments to highlight the adverse impact of the Covid-19 pandemic across the globe. Such investments are being made in industries that are working on finding a solution to the spread of this virus. Some countries that adopted these health-related policies are Italy, India and United States of America (USA). There focus is on encouraging manufacturers for expanding the production and quantity of medical devices, equipments and Personal Protective Equipments (PPE) kits. Many countries have made such investments in sectors in India and increased the foreign investments in the country.

Initiatives taken by Government to boost Foreign Investments:

Some major initiatives have been taken by the Government of India amid this pandemic that promises to boost economy and foreign investments. These includes-

  1. In the month of March 2020 the government permitted Non-Resident Indians (NRIs) to acquire Air India’s stakes to up to 100%.
  2. The government made amendments in April 2020 in the existing consolidated Foreign Direct Investment (FDI) policy and restricted any opportunistic acquisition or taking over of the Indian companies from neighboring countries.

In May 2020, the FDI in the manufacturing in defense has been increased by the government to 74% from 49% under the automatic route.

Author: Anil Agrawal
EZYBIZ India Consulting LLP, New Delhi. The firm is business and tax consultancy firm providing consultancy in Taxation, Regulatory, Transfer pricing, Valuation, Corporate funding and Business set up matters. He may be reached at 9899217778 or