Home/ Politics / Policy/  FDI inflows rise 40% on Make in India initiative: Economic Survey

New Delhi: Foreign direct investment (FDI) in India has received a dramatic boost from the launch of the Make in India initiative, according to the latest Economic Survey.

After the September 2014 launch of the initiative, which seeks to promote manufacturing and attract foreign investment, there was an almost 40% increase in FDI inflows from October 2014 to June 2015 over the year-ago period.

Under the programme, the government has awarded 56 defence manufacturing permits to private sector entities in the past one year, after allowing 49% FDI in the defence sector in August 2014, compared with 47 granted in the preceding three years.

Entities from several countries such as Japan, China, France and South Korea announced their intention to invest in India in various industrial and infrastructure projects.

“The concept of Make in India has really succeeded as it added more employment. With this, India has now become a vibrant market for manufacturers. For the products that are made out of the initiative, we have a strong domestic market with increasing demand. I believe that infrastructure sector is where foreign investments can come in a big way," said Dipankar Dasgupta, former professor of economics at the Indian Statistical Institute.

The major objectives behind the Make in India initiative are job creation and skill enhancement in 25 sectors of the economy, including automobiles, aviation, biotechnology, chemicals, construction, defence manufacturing, electrical machinery, electronic systems and mining.

According to the Department of Industrial Policy and Promotion, FDI inflows under the approval route (which requires prior government permission) increased by 87% during 2014-15 with an inflow of $2.22 billion. More than 90% of FDI was through the automatic route.

Also in 2014-15, foreign institutional investment rose by an unprecedented 717% to $40.92 billion.

A state-wise analysis of FDI inflows by the economic survey shows that Delhi, Haryana, Maharashtra, Karnataka, Tamil Nadu, Gujarat and Andhra Pradesh together attracted more than 70% of total FDI inflows to India during the last 15 years.

States with vast natural resources like Jharkhand, Bihar, Madhya Pradesh, Chhattisgarh and Odisha have lagged behind.

“To make the recently launched Make in India initiative a success, the states will have a critical role in facilitating FDI in different sectors," the survey said.

Singapore, Mauritius, the Netherlands and the US account for the major share of FDI inflows into India. Out of FDI equity inflows of $24.8 billion during 2015-16 (April-November), more than 60% came from two geographically small countries—Singapore and Mauritius.

“These inflows need perhaps to be examined more closely to determine whether they constitute actual investment or are diversions from other sources to avail of tax benefits under the Double Tax Avoidance Agreement that these countries have with India," the economic survey said.

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Updated: 27 Feb 2016, 01:50 AM IST
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