Amid global concerns, India looks set for more foreign investments in 2023
- IBJ Bureau
- Dec 26, 2022
India may attract eyes of overseas investors in 2023 as well on account of measures such as rollout of the Production-Linked Incentive (PLI) Scheme and projection of healthy economic growth. The optimistic investment outlook appears to defy global economic uncertainties due to monetary policy tightening in the US and ongoing Russia-Ukraine war.
Steps to promote ease of doing business, skilled manpower, presence of natural resources, liberal foreign direct investment (FDI) policies, huge domestic market and prospects of healthy GDP growth are the reasons for optimism on the foreign inflows front for India in 2023. But issues such as delay in enforcement of contracts, cumbersome procedures and high interest rates are still sore points.
According to the latest World Investment Report 2022 of UNCTAD, the recovery of greenfield investment in industry remains fragile, especially in developing countries.
It has also stated that the fallout of the war in Ukraine with the triple crises of food, fuel and finance, along with the ongoing COVID-19 pandemic and climate disruption, are adding stress, particularly in developing countries.
India has so far received healthy FDI in 2022. According to the latest figures of the government, India has received foreign investments worth $42.5 billion during January-September 2022. It had stood at $51.3 billion in 2021.
The country had registered its highest-ever total FDI inflows of $84.84 billion in 2021-22.
FDI equity inflows into India, however, contracted by 14 per cent to $26.9 billion during the April-September period of this financial year. The total FDI inflows (which include equity inflows, reinvested earnings and other capital) too has declined to $39 billion during the first half of this financial year as against $42.86 billion in the year-ago period.
Anurag Jain, the secretary in the Department for Promotion of Industry and Internal Trade (DPIIT), asserts that India is the preferred investment destination due to a series of measures such as liberalisation in the FDI policy, steps to further promote ease of doing business, reducing of compliance burden for industry, rollout of the PLI Scheme and the PM GatiShakti National Master Plan for integrated infrastructure development.
He adds that players worldwide are keen to avail themselves of the benefits of the PLI Scheme, and several global companies are looking to shift their manufacturing bases to India.
Experts have also exuded confidence that reform measures taken by the government will help India attract robust FDI inflows in 2023.
Rumki Majumdar, an economist at Deloitte India, notes that going forward, the country’s relatively-better performance and strong growth outlook will help it stand out as an investment destination.
Kartik Ganapathy, a senior founding partner of Induslaw, too points out that India’s growth appears to be driven by a positive increase in domestic consumption, growth of services and the digital economy and increased infrastructure spending.