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.
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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).
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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.)
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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.
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 $64.36B, a 27.17% increase from 2019.
Which state has highest FDI in India 2023? ›
The combined tally of investment of three years makes Maharashtra the most attractive investment destination, states the survey. The investment is more than Karnataka ( ₹2,93,149 crore, 331 projects) and Gujarat ( ₹ 2,36,866 crore, 602 projects), states the survey.
Which country has highest FDI in 2023? ›
Download Table Data
| Country | 2023 Population |
|---|
| India | 1,428,627,663 |
| China | 1,425,671,352 |
| United States | 339,996,563 |
| Indonesia | 277,534,122 |
222 more rowsAccording to the Department for Promotion of Industry and Internal Trade (DPIIT), India's cumulative FDI inflow stood at US$ 871.01 billion between April 2000-June 2022; this was mainly due to the government's efforts to improve the ease of doing business and relax FDI norms.
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 sectors attract highest FDI inflows 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.
What is the investment data of India? ›
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 %.
What are the problems of FDI inflows 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.
Who are the top 5 FDI investors in India? ›
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).
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.
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.
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.
France remains Europe's leading destination for FDI, showing growth of 3% last year, with the UK placing second and Germany in third place.
Which country has lowest FDI? ›
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.
Where should India invest more? ›
Which Investment Option Should You Choose?
| Investment | Type | Potential to Beat Inflation |
|---|
| Direct Equity | Active | Very high |
| Mutual Funds | Both active and passive | Very high |
| Fixed Deposits | Passive | High |
| Recurring Deposits | Passive | Low |
3 more rowsJan 31, 2023
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.
What is the FDI rank of India? ›
India jumped one notch up to attain the seventh position among top recipients of foreign direct investment (FDI) in calendar year 2021 even as flows shrank to $45 billion from $64 billion in 2020, the United Nations Conference on Trade and Development (UNCTAD) said on Thursday.
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.
Which state in India attracts highest FDI? ›
It is to be noted that Maharashtra, Karnataka and Gujarat historically command the lion's share of FDI inflows into the country. These three States alone accounted for 68 per cent of the FDI equity inflows (in dollar terms) into the country between October 2019 and December 2022.
The number of demat account holders in India continues to skyrocket, with 11 crore accounts in January 2023, compared to only 8.4 crores as reported in 2022. Even with these massive figures, it is estimated that only 3% of Indian households are actively investing in stock market.
What is the GDP of India FDI? ›
India received the highest annual FDI inflows of $84,835 million in FY 21-22 overtaking last year's FDI by $2.87 billion. Also, FDI equity inflow in FY 2021-22 were $ 59,825 million.
What is negative inflow of FDI? ›
Negative FDI positions largely result when the loans from the affiliate to its parent exceed the loans and equity capital given by the parent to the affiliate. This is most likely to occur when FDI statistics are presented by partner country.
How does FDI affect exchange rate in India? ›
Foreign investment adds to supply of foreign exchange. Demand remaining unchanged, it brings downward influence on the exchange rate.
What are the potential risks of FDI? ›
- Country Risk in exports is derived from the capacity of payment and the losses that insolvency can cause to the creditors. Instead, the country risk in foreign direct investment is related to breach of contract, deprivation of property rights, damage to assets or cessation of activities.
Who is India's largest FDI investor? ›
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.
Which are the successful FDI companies in India? ›
FDI Examples
- Byju's, an online Ed-Tech firm, raised USD 500 million in a Silver Lake-led funding round in September 2020. ...
- Also, in September 2020, Unacademy- a competitor of Byju's in the same niche - raised a total of USD 150 million.
India continues to be an attractive destination for foreign investment, ranking as the world's seventh-largest recipient of FDI in 2021. FDI is regulated primarily by India's Department of Promotion of Industry and International Trade (DPIIT), under its Foreign Exchange Management Act regime (FEMA Regime).
What are the benefits of FDI in India? ›
Goods produced through FDI may be marketed domestically and also exported abroad, creating another essential revenue stream. FDI also improves a country's exchange rate stability, capital inflow and creates a competitive market. Finally it helps smoothen international relations.
Is India an investor friendly economy? ›
The Government has propagated an investor-friendly FDI policy, in which most sectors are open for 100% FDI under the automatic route. India's FDI policy is also reviewed on an ongoing basis to ensure that India remains an attractive and investor-friendly destination.
The 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 is the FDI of the United States? ›
According to BEA, FDI in the United States is defined as the ownership or control, directly or indirectly, by one foreign person, or entity, of 10 percent or more of the voting securities of an incorporated U.S. business enterprise or an equivalent interest in an unincorporated U.S. business enterprise.
What is China's FDI ranking? ›
The country is ranking 50th amongst 82 countries reviewed in the latest Economist Intelligence Unit business environment rankings for 2022-26.
Is USA good for FDI? ›
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.
Why is FDI high in the US? ›
The U.S. has the largest consumer market in the world, with a GDP of $20 trillion and 325 million people. Free-trade agreements with 20 other countries provide access to hundreds of millions of additional consumers. A strong and robust consumer market is a key reason the U.S. ranks top in the world for FDI.
What states are ranked by FDI? ›
By U.S. state, California received the most investment, totaling $64.1 billion, followed by Massachusetts ($53.8 billion) and New York ($34.2 billion). Greenfield investment expenditures—expenditures to either establish a new U.S. business or to expand an existing foreign-owned U.S. business—were $3.4 billion in 2021.
Who are the biggest foreign investors in the US? ›
Historically, the United Kingdom had been the largest cumulative overseas investor in the United States. But because of weak FDIUS flows in 2019 and divestments in 2020, Britain dropped in ranking to fourth place, behind Japan, Germany, and Canada, respectively.
Who has the highest FDI in history? ›
List of countries by received FDI
| Rank | Country | Stock of FDI at home (millions of USD) |
|---|
| — | European Union | 20,000,000 |
| 1 | Netherlands | 4,888,000 |
| 2 | United States | 4,084,000 |
| 3 | United Kingdom | 2,027,000 |
114 more rowsIn 2021, net FDI outflows (% of GDP) for India was 0.5 %. Though India net FDI outflows (% of GDP) fluctuated substantially in recent years, it tended to decrease through 2002 - 2021 period ending at 0.5 % in 2021. The description is composed by our digital data assistant. What is net FDI outflows (% of GDP)?
What is the FDI percentage of GDP in India? ›
India Foreign Direct Investment (FDI) registered a growth equal to 0.9 % of the country's Nominal GDP in Dec 2022, compared with a growth equal to 1.1 % in the previous quarter. India Foreign Direct Investment: % of Nominal GDP data is updated quarterly, available from Jun 2004 to Dec 2022.
India received the highest annual FDI inflows of $84,835 million in FY 21-22 overtaking last year's FDI by $2.87 billion. Also, FDI equity inflow in FY 2021-22 were $ 59,825 million.
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 difference between FDI and FDI inflow? ›
FDI net inflows are the value of inward direct investment made by non-resident investors in the reporting economy. FDI net outflows are the value of outward direct investment made by the residents of the reporting economy to external economies.
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.
What is the FDI to GDP ratio In USA? ›
United States Foreign Direct Investment (FDI) registered a growth equal to 0.6 % of the country's Nominal GDP in Dec 2022, compared with a growth equal to 1.8 % in the previous quarter. US Foreign Direct Investment: % of Nominal GDP data is updated quarterly, available from Mar 1960 to Dec 2022.
Is FDI good for India? ›
FDI Creates Imbalance
FDI is often concentrated either in the richer states of India or in the high skill sectors. This imbalance leads to a probable increase in the economic gap between the rich and the poor.
