Indian markets saw an increase in Foreign Direct Investment (FDI), Foreign Institutional Investment (FII), or Foreign Portfolio Investment (FPI), these things are similar but not the same. Foreign Direct Investment is generally seen as a long-term relationship, whereas, Foreign Institutional Investment is like a deal that can be called off at any point in time.
Foreign Direct Investment (FDI) saw a jump of around 19% to USD 59.64 billion in FY21. Last year the net FDI investment accounted for $49.98 billion.
- According to Government, the major reasons for this massive flow is due to:
- Policy Reforms
- Investment Facilitation
- Ease of Doing Business
- But the major credit should be given to Mr. Mukesh Ambani, Chairman of Reliance Industries for inviting huge Foreign Investment in Reliance Retail and Jio. In FY21 Reliance Industries saw a continuous flow of Foreign Direct Investment (FDI) which primarily contributed to the cumulative figure.
- The FDI amount including Equity, Reinvested Earnings, and Capital in the net figure is $81.72 billion. In the previous year (FY20), that number accumulated to $74.39 billion.
- In terms of top investor countries, Singapore is at the top with a share of 29%, followed by the United States at 23% and Mauritius at 9% during the last fiscal year.
- The computer software and hardware sector bags the highest share with 44% of total FDI inflows, followed by the construction/infra sector with 13% share and the services sector which is 8%.
- If we talk about state-specific data, the majority of the inflow has gone to Gujrat with a share of 37%, followed by Maharashtra at 27% and Karnataka at 13% during the last fiscal year. This shows that around 77% of the Foreign Direct Investments has been allocated to these 3 states.
The increased FDI will give a boost to the economy as well as to the shareholders of the particular company in which they are invested. This will emerge the risk of concentration in the economy. We can see backwardness in the view of diversification within the country. To tackle this situation, State Governments need to increase their appealing power to attract Foreign Investments.