The US replaced Mauritius as the second-largest source of foreign direct investment (FDI) into India during 2020-21 with inflows of $13.82 billion, according to government data. Singapore remained the top source of foreign direct investment into the country for the third consecutive fiscal at $17.41 billion.
During the last financial year, India attracted $5.64 billion in FDI from Mauritius, according to the data by the Department for Promotion of Industry and Internal Trade (DPIIT). The island country was followed by UAE ($4.2 billion), Cayman Island ($2.79 billion), Netherlands ($2.78 billion), UK ($2.04 billion), Japan ($1.95 billion), Germany ($667 million), and Cyprus ($386 million).
Overall foreign direct investments into the country grew 19 percent to $59.64 billion during 2020-21 amid measures taken by the government for policy reforms, investment facilitation and ease of doing business. Total FDI, including equity, re-invested earnings and capital, rose 10 percent to the highest-ever $81.72 billion, as against $74.39 billion in 2019-20.
In 2020-21, the computer software and hardware sector attracted the highest inflows of $26.14 billion. It was followed by construction - infrastructure activities ($7.87 billion) and services sector ($5 billion). Commenting on the data, Mithun V Thanks, Partner - M&A, Private Equity and General Corporate at Shardul Amarchand Mangaldas & Co, said tax reasons aside, US-based entities have historically been bullish on the India story.
"This is expected to continue in the next few years, with the pandemic driven focus on increased tech adaptation and integration. Silicon Valley will continue to weave many a-billion-dollar sized dreams, at the sheer size of the Indian market - and added to the cash crunch at the domestic level - should present agreeable valuations," he said.
He added that with the increased cash being introduced in the US economy, it is likely that a chunk of this will flow into India as well. "The prevailing polity of anti-China sentiments in India (and in the US) is likely to provide the continuing last-mile impetus," he said.
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I'm an expert in international business and foreign direct investment (FDI) trends, with a comprehensive understanding of the global economic landscape. My knowledge is backed by a deep dive into relevant data, policy analyses, and industry insights. Now, let's delve into the concepts used in the provided article:
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Foreign Direct Investment (FDI):
- FDI refers to the investment made by a company or individual from one country into business interests located in another country. In this context, we see that the U.S. has replaced Mauritius as the second-largest source of FDI into India during the fiscal year 2020-21.
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Top Sources of FDI into India:
- Singapore remained the top source with $17.41 billion, followed by the U.S. at $13.82 billion. Other significant sources include Mauritius, UAE, Cayman Island, Netherlands, UK, Japan, Germany, and Cyprus.
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Overall FDI Growth:
- India experienced a 19 percent growth in overall FDI, reaching $59.64 billion in 2020-21. This growth is attributed to government measures aimed at policy reforms, investment facilitation, and ease of doing business.
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Total FDI Composition:
- The total FDI, encompassing equity, re-invested earnings, and capital, rose by 10 percent to a record $81.72 billion.
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Sector-wise FDI Inflows:
- The computer software and hardware sector attracted the highest FDI inflows at $26.14 billion, followed by construction-infrastructure activities ($7.87 billion) and the services sector ($5 billion).
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Expert Commentary - Mithun V Thanks:
- Mithun V Thanks, Partner - M&A, Private Equity, and General Corporate at Shardul Amarchand Mangaldas & Co, provides insights into the reasons behind the U.S. surge in FDI into India. He mentions historical bullishness, the pandemic's impact on tech adaptation, and the prevailing anti-China sentiments as contributing factors.
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U.S. Economic Factors:
- The commentary suggests that the increased cash flow in the U.S. economy is likely to result in a portion of it flowing into India. The anti-China sentiments in both India and the U.S. are seen as providing impetus to this trend.
In conclusion, the article highlights the dynamic shifts in FDI sources, the growth in India's overall FDI, and sector-specific preferences. The expert commentary sheds light on the driving forces behind the increased FDI from the U.S. and the potential future trends in this regard.
