New Delhi [India], December 20 : With nearly 90 per cent of FDI inflows facilitated through the automatic route, India has made significant strides in creating an environment conducive to investment and economic growth.
According to the Ministry of Commerce and Industry, India has emerged as a leading destination for global capital, driven by its investor-friendly Foreign Direct Investment (FDI) policy.
India's FDI trajectory showcases a robust growth pattern, with cumulative inflows of USD 991 billion recorded between 2000 and 2024.
Impressively, 67 per cent of this amount (USD 667 billion) was received in the last decade alone (2014-2024). The manufacturing sector has particularly benefited, witnessing a 69 per cent surge in FDI equity inflows, which rose from USD 98 billion during 2004-2014 to USD 165 billion in 2014-2024.
In FY 2024-25, FDI inflows continued their upward momentum, reaching USD 22.5 billion in the first quarter, a 26 per cent increase compared to USD 17.8 billion during the same period in FY 2023-24.
The Indian Government's FDI policy allows 100 per cent foreign investment in most sectors under the automatic route, requiring no prior approval from the government.
However, strategically sensitive sectors, such as defence, require regulatory oversight. The Department for Promotion of Industry and Internal Trade (DPIIT) oversees the formulation of these policies, which are enforced under the Foreign Exchange Management Act (FEMA), 1999.
Implementation is carried out by the Department of Economic Affairs (DEA) and regulated by the Reserve Bank of India (RBI).
To facilitate investments requiring government approval, the Foreign Investment Facilitation Portal (FIFP) streamlines proposals and coordinates with the relevant ministries.
FDI inflows into India are permitted through two routes. Automatic route accounts for over 98 per cent of FDI inflows, with most sectors open for 100 per cent investment without requiring prior approval from the government or the RBI.
Under the government route, investments in specific sectors or from countries sharing land borders with India need approval from sectoral ministries via the FIFP.
Certain sectors remain closed to FDI, including gambling, lottery businesses, real estate (excluding development projects), atomic energy, and manufacturing of tobacco products, reflecting the government's emphasis on public interest and strategic priorities.
India has progressively liberalized its FDI policies over the years to align with global economic trends and domestic growth objectives. In 2019, 100 per cent FDI under the automatic route was allowed in coal and contract manufacturing, while 26 per cent FDI in digital media was introduced under the government route.
In 2020, insurance intermediaries were fully opened to FDI under the automatic route, with updated limits for air transport and defence. In 2021, the insurance sector's FDI cap increased to 74 per cent, and telecom was included under the automatic route.
Public Sector Undertakings (PSUs) in the petroleum and natural gas sectors were also opened to foreign investment.
In 2022, the government allowed 20 per cent FDI in LIC under the automatic route. In 2024, the space sector was liberalized, highlighting India's commitment to high-growth industries.
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