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CLSA data on FPI inflows during December 2019 to November 2020. The numbers are in billion.
CLSA data on FPI inflows during December 2019 to November 2020. The numbers are in billion.

Opinion | How pursuit of good governance is driving investments in India

  • While foreign portfolio investments (FPI) across emerging economies witnessed a decline due to the coronavirus pandemic, India saw a surge to $13.5 billion - a testimony to investor confidence in India's growth story

The saying goes, "The pessimist complains about the wind. The optimist expects it to change."

India as a country has always strived upon hope and optimism and keeping with that spirit, it has taken the pandemic as an opportunity to drive structural reforms across sectors which has resulted in global acknowledgment of its efforts to lay the foundation of a new country.

The trust that India has built as a country in terms of ease of doing business, being a safe and secure destination for global investors is evident from the amount of foreign direct investments (FDI) the country has received over the last few years. To put it in numbers, in the September quarter, FDI doubled year-on-year to $28.1 billion dollars. This surge in foreign funds amid the pandemic has been possible because of the continuous effort of the government, businesses, and agencies to make India a sought-after destination over the last six years. While foreign portfolio investor (FPI) inflows across emerging economies witnessed a decline due to the pandemic, India recorded a surge to $13.5 billion - a testimony to investor confidence in India's growth story.

I will argue this was a result of a calibrated strategy undertaken by the government since it came into power in 2014.

The National Infrastructure Pipeline, a 13 trillion project, is one of the examples of how Prime Minister Narendra Modi's National Democratic Alliance government has tried to open up avenues for infrastructure investment for global investors and at the same time built world class infrastructure that will facilitate businesses to expand their presence in the country.

Various other steps such as allowing NRI’s to acquire up to 100% stake in Air India, 26% FDI in digital sector, permitting 100% FDI through automatic route in the coal mining sector, and 100% FDI for insurance intermediaries signal the government’s intention to open up the economy to investments.

Similarly, the more recent Production Linked Incentive (PLI) scheme worth an estimated 1.5 lakh crore to boost demand and help manufacturing in the country is also a testimony to the government’s intention to encourage entrepreneurship and investment in the country. Steps to skill-train 3 lakh migrant workers the country to realign the rural youth towards industry-relevant jobs is also a step in the right direction.

As a result India is among preferred investment destinations in recent times. The urgency the Indian government has shown to reduce dependency on China as a hub of global supply chain, while providing a enabling alternative environment has struck the right chord with the world as we see global biggies contemplating a move to India.

Indian agencies have also been very active in pursuing global investors. Be it the presence of Invest India, the National Investment Promotion Agency, at the World Economic Forum or winning the 2020 United Nations Investment Promotion Award, the efforts are telling.

FDI equity inflows into India crossed the $500 billion milestone during April 2000 to September 2020.

(Rouhin Deb is a senior researcher at Invest India.)

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