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Foreign Direct Investment is an investment of funds or finance provided by an organization from one country into another to get a lasting interest out of it. It also includes re-investment of profits and intra- organizational borrowings, provided as FDI to another country. It includes the movement of capital investment that also includes skills, technology as well as management. FDI benefits India in many ways.

JOB CREATION: A total advantage and help to curb the unemployment issues in India

It helps our country to attract new job opportunities for their citizens as FDI helps in boosting and grow various industrial sectors. It is beneficial for both skilled and unskilled labor, as India still deals with a good amount of unskilled labor and hence it helps in providing them with an opportunity to earn and raise their standard of living.

Development of village and backward areas of India

Foreign direct investment is easy to access to develop rural and backward areas of India. It helps in setting up industries of various sectors and fields that also aids the Indian government by generating more taxes leading to the overall development of an area, that lacks components of development.

Export Earning through FDI, indirect increase in market earnings of India

The products created through FDI have the potential of being sold in global markets. FDI helps the Indian economy and market to earn more by having special areas developed for the cause such as SPECIAL ECONOMIC ZONES that have 100% export-oriented units and assist FDI assisted Indian industries in boosting exports to other countries.

Economic Development of India, as a whole

FDI helps India to grow capital and revenues. A lot of factories are built, and many sectors get a boost in different ways such as materials getting sold, the need for more employees as well as equipment being utilized. All these people get to spend more money, more infrastructure is built for more projects. It adds to the taxes that are received by the government. It creates a cycle of increasing economic growth in our county which eventually leads to the overall economic development of India in its entirety

Competition increasing in Indian markets, helping consumer welfare

FDI helps in creating a competitive market. The penetration of foreign institutions into the domestic areas of India creates a very competitive environment helping Indian industries to create an edge over foreign entities. It encourages Indian people to put their best skills to work and also gives a boost to innovation. Consumers get the advantage of competition as there is a sustainable price model for the products to survive competition and variety in choosing a particular product gets increased. It is widely helping India to get an idea of how international industries and firms operate and it makes them learn more about the change needed for surviving in a particular market.

5 reasons why India is a preferred destination for overseas investment

  • Huge market and size of expansion

Currently, India stands to be the 5th largest economy in the world and has an estimated population of 140 crores. It is almost surpassing China in terms of population with an estimated 40 crore population belonging to the middle class, which stands to be the main concentration in terms of consumption expenditure (FMCG goods). All these facts just come to one conclusion, boom in the sales of products and services and getting an overall advantage of a wider market area as India’s market access is associated with countries like Bangladesh, Nepal, Pakistan, Sri Lanka, and Myanmar

  • Ease in running a business

India has successfully tried to maintain its mark in many aspects all around the world which could be seen in its increasing rank in many world indices. The ease of doing business reports has also improved drastically with India ranking at 63 in 2022. The FDI inflow in India was highest at USD 83.57 Billion in FY 2021-22. It is also a result of transparent liberal and flexible FDI policy. The present government’s focus on initiating policies that focuses majorly on ease of doing business can be seen as an added advantage to investing in India as a foreign investor. 

  • Digital Revolution

India’s significant decisions majorly count the digital revolution policy as one of the major changing factors to attract foreign investors. Technology is the needed change in the transactions as it opens a lot of areas for practice as a professional or a business person as well as proves to simplify the process. It develops India and makes foreign-based transactions come into effect with ease. Digital Technology has expanded in various fields which include money, banking, taxation, e-commerce, and rural development. India stood at 37 in the World Competitiveness Index Ranking having the sharpest economic growth. The World Competitiveness Ranking is done by IMD business schools situated in Switzerland and Singapore and asses 63 economies of economic well-being with hard data and surveys.

  • Hub of Innovation and Startup

The Global Innovation Index published by the World Intellectual Property Organisation has placed India at 46th rank which is a climb of 35 notches, being at 81st rank in 2015-16. The number of patents granted has leveled to 28,391 in 2020-21that outplaces even multinational corporations. There has been an unexpected surge in startups in recent years and making India more welcome to foreign investments in growing startups having great potential to even mark as a unicorn in a short period. In Global Startup Ecosystem Report, prepared by the California-based Startup Genome, ranks India’s two cities, Bengaluru and Delhi, under the top 40 as the world’s most favorable areas for building and setting up a startup.

  • Political Stability and Cordial International Relations

The major reason which favors international investment is the country’s political stability and good relations with every potential international country. India was elected as a non-permanent member of the United Nations Security Council eight times. India also got to host G-20, the world’s most effective and essential multilateral economic forum. More than 6700 troops and police have been transferred to UN peacekeeping missions which makes it 4th highest among the troop-contributing countries. India has signed a lot of treaties and agreements with international countries, all favoring the development and upliftment of India towards becoming the most powerful economy in the world.

Author(s) Name: Krishnaa Brahmbhatt (Jitendra Chauhan College of Law Mumbai University)