According to UNCTAD'sWorld Investment Report 2023, FDI inflows reached USD 49.3 billion in 2022, up by 10.3% year-on-year, making it the third-largest host country for announced greenfield projects and the second-largest for international project finance deals, as well as the eighth-largest FDI recipient worldwide. Among the largest greenfield projects was the plan by Foxconn (Taiwan) and Vedanta Resources (India) to build one of the first chip factories in India for USD 19 billion and a USD 5 billion project to produce urea from green hydrogen by a joint venture of TotalEnergies (France) and Adani Group (India). In the same year, the total stock of FDI stood at 510.7 billion, around 15.1% of the country’s GDP. In terms of outward FDI, Indian multinational enterprises (MNEs) experienced a 16% decline in outward investment, totalling USD 15 billion. Nonetheless, there was a notable surge in greenfield project declarations by Indian MNEs, reaching USD 42 billion, more than triple the previous figures. Among the significant greenfield ventures, two standout projects were in the renewable energy sector: Acme Group disclosed plans for a USD 13 billion facility in Egypt aimed at producing 2.2 billion tons of green hydrogen annually, while ReNew Power unveiled intentions to establish a USD 8 billion green hydrogen plant within the Suez Canal Economic Zone. Data from Invest India show that total FDI inflows in the country in FY 22-23 amounted to USD 70.97 billion, with total FDI equity inflows standing at USD 46.03 billion. Mauritius (24%), Singapore (23%), the U.S. (9%), the Netherlands (7%), and Japan (6%) emerged as the top five countries for FDI equity inflows into India during the period; whereas the services sector (finance, banking, insurance, non-fin/ business, outsourcing, r&d, courier, tech. testing and analysis, other - 16%), computer software & hardware (15%), trading (6%), telecommunications (6%), and the automobile industry (5%) were the main sectors. The top five states that received the highest FDI equity inflow during FY 2022-23 were Maharashtra (29%), Karnataka (24%), Gujarat (17%), Delhi (13%), and Tamil Nadu (5%).
In recent years, India has implemented significant structural economic reforms aimed at enhancing the business environment. These reforms encompass liberalizing restrictions on foreign investment, updating bankruptcy and labour laws, abolishing retroactive taxation, and replacing state border taxes with a national Goods and Services Tax. Nevertheless, persistent protectionist measures hinder the expansion of bilateral trade and pose challenges for Indian producers seeking integration into global supply chains. These measures include imposing some of the highest tariffs among major economies, promoting manufacturing localization to foster "self-reliance," and implementing India-specific standards and regulations that effectively exclude foreign goods and services. Global investors typically focus on India mainly because of its demographics, but also for its stable barometers, whether it be inflation, fiscal deficit or growth. However, the country still has several restrictive laws on foreign investment, excessive bureaucracy, and high levels of corruption. Still, given India’s growing demographics, and huge e-commerce and technological markets, activity in both areas is expected to grow in the upcoming years. FDI entering India is subject to either the "automatic route" or the "government route" review process. The majority of sectors fall under the automatic route, where foreign investors only need to notify India's central bank, the Reserve Bank of India (RBI), and adhere to applicable domestic laws and regulations for the respective sector. Conversely, investments in specific sensitive sectors, like defence, undergo scrutiny under the government route. This necessitates prior approval from the ministry overseeing the concerned sector, along with the agreement of DPIIT (Department for Promotion of Industry and Internal Trade). India ranks 40th among the 132 economies on theGlobal Innovation Index 2023and 126th out of 184 countries on the2023 Index of Economic Freedom.
