India remains a bright spot in the world economy although a decrease has been recorded in the government’s latest figures for foreign direct investment (FDI). The decline in FDI can be attributed to global headwinds such as the Russia-Ukraine conflict, global recessionary pressures, spillover of the COVID-19 pandemic, and other economic uncertainties.
Yet, the Indian market is key for global firms as they strategize the diversification of their supply chains beyond China. India has several growth factors that continue to create prospects for greenfield and brownfield investment – a large labor market, enabling policy environment, and expanding digital economy. In terms of consumption growth, this has been boosted by steadily growing disposable incomes and the economic rise of non-metropolitan tier-2 and tier-3 cities. This article delves into the latest data on the top states and sectors receiving FDI in FY 2023.
Over the last decade, India has experienced an average GDP growth rate of 5.5 percent, reflective of its aggressive economic expansion. With a thriving population of 1.4 billion, India is well-positioned to seize commercial leadership in the current decade, buoyed by impressive economic growth and a flourishing stock market that could propel it to become the world’s third-largest economy by 2030. These factors have created unparalleled opportunities for growth in a country that recently overtook China as the world’s most populous nation.
With this growth, India is emerging as a major player in the global economy, presenting a unique opportunity for investors and businesses alike. The country’s unique attributes, such as its enabling policy landscape, vast consumer markets, and distinctive digital infrastructure, are making it an attractive destination for investment.
By 2031, India is projected to drive one-fifth of global growth, propelled by the convergence of trends such as global offshoring capabilities, digital innovation, and energy transition.
Advantage India
India’s advantageous demography and steady growth trajectory make it an appealing destination for foreign investment. In the last two decades (April 2000 – March 2023), India has attracted over US$919.63 billion in total FDI.
Despite the Indian government’s restrictions on FDI from countries that share land borders with India, such as China, the country received a record FDI inflow of approximately US$84.8 billion in the fiscal year (FY) 2022, including US$7.1 billion in FDI equity inflows in the services sector.
However, FY 2023 saw a drop in FDI inflows in India due to various factors, including the ongoing conflict between Russia and Ukraine, changes in US monetary policy, and other global uncertainties.
Find Business Support
However, according to the 2023 Economic Survey, a rebound in incoming FDI is expected. This can be attributed to the sectoral production-linked incentive (PLI) schemes, growth prospects in tier-2 and tier-3 cities, and new investment facilitation measures like the National Single-Window System (NSWS), which streamlines the approval and clearance process for investors, entrepreneurs, and businesses. Other factors pushing India’s growth trajectory forward include high-tech industrial development, market size, and advancements in the digital and technology ecosystem.
How much FDI did India receive in FY 2023?
In terms of foreign equity inflows, as per government data, India received US$52.34 billion in 2022, marking an increase from the US$51.34 billion recorded in 2021 but falling short of the US$64.68 billion recorded in 2020. In FY 2023, India received equity inflows worth US$46.03 billion.
The total FDI inflows received in FY 2023, which includes equity inflows, reinvested earnings, and other capital sources, amounted to US$70.97 billion – a decrease from the US$84.83 billion recorded during FY 2022.
Top FDI recipient sectors in India in FY 2023
In the FY 2023, foreign investors showed keen interest in multiple sectors in India, with the highest FDI inflows seen in computer software and hardware, attracting investments worth US$9.39 billion. The services sector also received significant foreign investment, totaling US$8.70 billion, covering financial, banking, insurance, and business services.
Additionally, the trading sector received investments worth US$4.79 billion, followed by drugs and pharmaceuticals (US$2.05 billion), the automobile industry (US$1.90 billion), chemicals (US$1.85 billion), and construction (infrastructure) activities (US$1.70 billion).
Top investor countries in India in FY 2023
In FY 2023, Singapore accounted for maximum inward FDI in India at US$17.20 billion, followed by Mauritius (US$6.13 billion), the US (US$6.04 billion), UAE (US$3.35 billion), and the Netherlands (US$2.49 billion).
Other top countries in terms of FDI equity inflow in India during the first three quarters of FY 2023 include UK, Japan, Cyprus, Cayman Islands, and Germany.
From April 2000 to March 2023, Mauritius was the top source of FDI equity inflow into India, accounting for 26 percent of investments worth US$163.87 billion. Singapore emerged as the second largest investor, contributing 23 percent of the investments in India during this period – valued at US$148.16 billion.
The US accounted for nine percent of the FDI equity inflow, followed by the Netherlands (seven percent), Japan (six percent), and the UK (five percent). The UAE, Germany, Cyprus, and the Cayman Islands each accounted for the remaining two percent.
Top Investing Countries’ FDI Equity Inflow into India (US$ Million) |
Country | FY 2021
| FY 2022
| FY 2023
| Cumulative equity inflow
(April, 2000-March, 2023) | Percentage share |
Mauritius | 5,639 | 9,392 | 6,134 | 1,63,876 | 26% |
Singapore | 17,419 | 15,878 | 17,203 | 1,48,169 | 23% |
USA | 13,823 | 10,549 | 6,044 | 60,196 | 9% |
Netherland | 2,789 | 4,620 | 2,498 | 43,759 | 7% |
Japan | 1,950 | 1,494 | 1,798 | 38,740 | 6% |
UK | 2,116 | 1,657 | 1,738 | 33,875 | 5% |
UAE | 4,203 | 1,032 | 3,353 | 15,578 | 2% |
Cayman Island | 2,799 | 3,818 | 772 | 14,924 | 2% |
Germany | 667 | 728 | 547 | 14,138 | 2% |
Cyprus | 386 | 233 | 1,277 | 12,644 | 2% |
Leading Indian states attracting FDI in FY 2023
According to data from the DPIIT, Maharashtra and Karnataka and were the frontrunners in attracting FDI inflows in FY 2023. Maharashtra emerged as the top recipient of FDI with a total of US$14.80 billion, followed by Karnataka (US$10.42 billion), Delhi (US$7.53 billion), and Gujarat (US$4.71 billion).
Find Business Support
An analysis of the period from October 2019 to March 2023 indicates that Maharashtra was the most preferred state for FDI, accounting for 29 percent (US$53.97 billion) of the total investments received in the country. Karnataka, Gujarat, and Delhi followed with 24 percent (US$44.46 billion), 17 percent (US$31.90 billion), and 13 percent (US$25.19 billion), respectively.
India’s liberal investment climate
Most sectors in India allow FDI through the automatic route. However, in areas such as telecom, media, pharmaceuticals, and insurance, foreign investors must obtain government approval. For investments made under the government approval route, foreign investors must obtain prior clearance from the respective ministry or department. In contrast, investments made under the automatic route only require the investor to inform the Reserve Bank of India (RBI) after the investment is made.
There are currently nine sectors in which FDI is prohibited in India, including lottery, gambling and betting, chit funds, Nidhi company, real estate business, and manufacturing of cigars, cheroots, cigarillos and cigarettes using tobacco.
(This article was originally published on April 20, 2023 and last updated on June 7, 2023.)
About Us
India Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in Delhi and Mumbai. Readers may write to india@dezshira.com for more support on doing business in in India.
We also maintain offices or have alliance partners assisting foreign investors in Indonesia, Singapore, Vietnam, Philippines, Malaysia, Thailand, Italy, Germany, and the United States, in addition to practices in Bangladesh and Russia.
FAQs
In FY 2023, India received equity inflows worth US$46.03 billion. The total FDI inflows received in FY 2023, which includes equity inflows, reinvested earnings, and other capital sources, amounted to US$70.97 billion – a decrease from the US$84.83 billion recorded during FY 2022.
Which country has the highest FDI in India in 2023? ›
During the first half of this fiscal, Singapore emerged as the top investor. It was followed by Mauritius, the U.A.E., the U.S.A., the Netherlands and Japan.
What are the recent changes in FDI inflows in India? ›
In FY 2014-15, FDI inflow in India stood at mere $ 45.15 bn, which increased to $ 60.22 bn in 2016-17 and further to the highest ever annual FDI inflow of $ 83.57 bn reported during the FY 2021-22. Total FDI inflows in the country in the FY 22-23 is $ 70.97 Bn and total FDI equity inflows stands at $ 46.03 Bn.
What is the data on FDI inflows in India? ›
India foreign direct investment for 2021 was $44.73B, a 30.51% decline from 2020. India foreign direct investment for 2020 was $64.36B, a 27.17% increase from 2019.
Which country has highest FDI in 2023? ›
Download Table Data
| Country | 2023 Population |
|---|
| India | 1,428,627,663 |
| China | 1,425,671,352 |
| United States | 339,996,563 |
| Indonesia | 277,534,122 |
222 more rowsIn FY 2023, India received equity inflows worth US$46.03 billion. The total FDI inflows received in FY 2023, which includes equity inflows, reinvested earnings, and other capital sources, amounted to US$70.97 billion – a decrease from the US$84.83 billion recorded during FY 2022.
Who are the 5 largest investors of FDI? ›
10 Countries That Receive the Most Foreign Direct Investment
- U.S.
- U.K.
- China.
- Netherlands.
- Ireland.
- Brazil.
- Singapore.
- Germany.
This sector included finance, banking, insurance, and other non-financial sectors like research and development, testing, analysis, and outsourcing. The computer hardware and software sector came second amounting to almost 542 billion Indian rupees that year.
What are the bottlenecks for FDI in India? ›
Some of the major impediments for India's poor performance in the area of FDI are: political instability, poor infrastructure, confusing tax and tariff policies, Draconian labor laws, well entrenched corruption and governmental regulations.
Which state has highest FDI inflows in India? ›
The combined tally of investment of three years makes Maharashtra the most attractive investment destination, states the survey. The investment is more than Karnataka ( ₹2,93,149 crore, 331 projects) and Gujarat ( ₹ 2,36,866 crore, 602 projects), states the survey.
India Investment accounted for 28.4 % of its Nominal GDP in Dec 2022, compared with a ratio of 32.1 % in the previous quarter. India investment share of Nominal GDP data is updated quarterly, available from Jun 2004 to Dec 2022, with an average ratio of 33.4 %.
Why FDI is increasing in India? ›
The major encouraging factor for the foreign investors to invest in India is the low wages, highly skilled workforce and liberal foreign direct investment policies. India is termed as the fastest growing economy and the capital markets of the country are also booming.
Why FDI inflows to India are declining? ›
New Delhi: Gross foreign direct investment (FDI) flows, for the first time in a decade, declined on an annual basis in 2022-23 to USD 71 billion mainly due to a slowdown in the global economy, according to the RBI data. The annual decline works out to be 16.3 per cent in 2022-23 compared to inflows in 2021-22.
Who are the top FDI investors in India 2023? ›
Economic Survey 2023: During the first half of this fiscal, Singapore emerged as the top investor. It was followed by Mauritius, the UAE, the USA, the Netherlands and Japan.
Which country has highest return on investment? ›
Switzerland is one of the best countries to invest in. It has one of the lowest federal corporate tax rates in the world, at 8.5%, allowing businesses to save a significant amount of money on their profits. Switzerland's innovation performance is 142.4% of the EU average.
Which country is most attractive for FDI? ›
France remains Europe's leading destination for FDI, showing growth of 3% last year, with the UK placing second and Germany in third place.
Is FDI increasing or decreasing in India? ›
India shall see FDI increase once the market is again ready to invest in growth stage companies." In comparison to inflows in 2021–2022, the yearly reduction equals 16.3% in 2022–2023. Gross FDI inflows increased by 10% from fiscal 2019–20 to USD 81.97 billion in 2021–22.
Which countries invest more in India? ›
FDI EQUITY INFLOWS BY COUNTRY AND INDUSTRY
| Main Investing Countries | FY 2020/21 (April 2020-March 2021), in % |
|---|
| Singapore | 22.0 |
| USA | 8.0 |
| Netherlands | 7.0 |
| Japan | 7.0 |
4 more rowsThe main investing countries in the U.S. are Japan, Germany, Canada, the United Kingdom, Ireland and France. Most of these investments are in manufacturing, financial and insurance activities, and trade and maintenance. In 2021, California received the most investment, followed by Massachusetts and New York (BEA).
What are the statistics for investing? ›
Statistics About Investing in the Stock Market
89% of US households with annual incomes of more than $100,000 own stocks. 79% of the postgraduates in the USA are stock owners. 58% of Americans have invested some money in the stock market in 2022. 67% of Americans aged between 50 and 64 invest in the stock market.
Percent of world Foreign Direct Investment, 2020 - Country rankings: The average for 2020 based on 186 countries was 0.54 percent. The highest value was in China: 21.36 percent and the lowest value was in Switzerland: -21.72 percent. The indicator is available from 1993 to 2020.
Who is the biggest investor In India? ›
Often referred to as the 'Big Bull', Rakesh Jhunjhunwala was one of the most popular and successful investors in the Indian stock market. Before entering the financial markets, Rakesh Jhunjhunwala qualified as a Chartered Accountant.
Which is the largest investment industry In India? ›
Computer hardware and software sector in India received the highest share in FDIs amounting to over 14 billion U.S. dollars in fiscal year 2022. The services sector came second amounting to over seven billion dollars.
In which industries in India is 100% FDI prohibited? ›
FDI limit in various sectors of the Economy (Consolidated FDI Policy)
| Sector | % of equity/FDI Cap |
|---|
| Petroleum and natural gas | 100% |
| Industrial Parks | 100% |
| Satellites- establishment and operation, subject to the sectoral guidelines of Department of Space/ISRO | 100% |
| Private Security Agencies | 74% |
1 more rowMar 13, 2022
Gujarat attracts investments due to its industrial and investment friendly policies and is one of the leading industrialized states in India. The state is recognized as an “Achiever” among the coastal states by DPIIT in Logistics Ease (LEADS 2022).
How much foreign investors invest in India? ›
India's headline foreign direct investment (FDI) numbers rose from $62 billion in 2018-19 to a record $84.8 billion in 2021-22. This represents a 36.8 per cent increase in FDI since the pandemic began, but the growth is less impressive when one considers India's economic growth in the interim.
What is the investment scenario in India? ›
Startup PE/VC investing in India stood at US$ 28.5 billion in 2021, a 290% YoY growth. Technology (US$ 16.3 billion), e-commerce (US$ 15.9 billion) and financial services (US$ 11.7 billion) accounted for 57% of the total PE/VC investments by value in 2021.
Why China attracts more FDI than India? ›
Many studies show that China is one of the most important countries for FDI inflow due to its improved infrastructure [7], continuously open market [8] , strengthened property rights protection [9,10], rapid expansion of economic scale, and competitive cost advantage [11].
Which country is the largest source of FDI in India? ›
Singapore is ranked one FDI provider to India. The small island nation has invested $15.9 billion in FY22 which is accounted for 27 per cent of India's total FDI received. USA is India's second biggest investor with FDI of $10.5 billion, with 18 per cent of total FDI.
Which country is continued to be the largest FDI source in India? ›
Singapore (27.01%) and USA (17.94%) have emerged as top 2 sourcing nations in FDI equity flows into India in FY2021-22 followed by Mauritius (15.98%), Netherland (7.86%) and Switzerland (7.31%).
Mauritius, Singapore, the U.S., the Netherlands, Japan, the U.K., Germany, and the United Arab Emirates are the main investing countries in India. Investments were mainly oriented towards services, computer software and hardware, telecommunications, trade, the automobile industry, construction, and chemicals.
Which country ranks in FDI investment in India? ›
India was the 9th largest recipient of FDI in 2019 according to World Investment Report 2020 by UNCTAD. India is also the biggest FDI host in South Asia and contributed largely to the overall FDI growth of 10% recorded in the region.
Where does India rank in FDI? ›
After a hiatus in 2022, India has rejoined Kearney's foreign direct investment (FDI) confidence index list in the 16th position, signalling a renewed interest from foreign investors in the Indian markets.
Which country attracts the largest FDI inflow? ›
The United States is the top destination of inward foreign direct investment. Source: IMF Data, Coordinated Direct Investment Survey. Note: Chart shows inward FDI positions.
Which sector has attracted the highest FDI inflows into India? ›
Detailed Solution. The correct answer is Services Sector. For economic growth, Foreign Direct Investment (FDI) has been a major non-debt financial resource for the economic development of India.
Why FDI is decreasing In India? ›
Net FDI too declined by nearly 27 per cent to USD 28 billion in 2022-23 as compared with USD 38.6 billion a year ago, mainly due to moderation in gross foreign direct investment inflows and an increase in repatriation, RBI's latest monthly bulletin further added.
What is the outflow of FDI from India? ›
FDI outflows originating in India have risen from $2 billion in 2004 to $15 billion in 2021, constituting around 1 per cent of the global outflows.
Which US companies are investing In India? ›
US in India
- Google. Google is a leading technology company with a presence across 50 countries. ...
- Microsoft Corporation. Leading technology company with 11,500 stores under 63 banners in 28 countries and e-commerce websites in 11 countries. ...
- Apple. ...
- Amazon. ...
- ExxonMobil. ...
- General Electric. ...
- PepsiCo. ...
- JP Morgan.
Key Findings of the WIR 2022. UNCTAD World Investment Report (WIR) 2022 has ranked India at 7th rank among the top 20 host economies for 2021, in terms of FDI.
