Due to weak global economic conditions, foreign direct investment (FDI) inflows declined by 16% to $71 billion during the fiscal year ending March 2021, according to the Department for Promotion of Industry and Internal Trade. The drop in FDI inflows is largely attributed to the pandemic-induced slowdown in business activities, fluctuations in global equity markets, and economic downturns in countries worldwide.
The major sectors that received FDI include services, chemicals, computer hardware & software and telecommunications. The highest FDI inflows were reported from Mauritius, the United States, Singapore, the United Kingdom and Japan. India offers several attractive benefits to motivate foreign investors, such as single window clearance, tax holiday, and Aadhaar/PAN-based registrations.
The government has taken several steps to attract foreign investors, such as liberalizing investment policies, liberalizing the FDI regime, and providing incentives and tax breaks. The government has also launched several initiatives to make India an attractive investment destination, such as Make in India, Digital India and Start-up India. It is expected that the government’s plans and initiatives will improve foreign investment inflows and accelerate economic growth in India in the long run.