How best to attract FDI: Four pointers for an ‘investment-friendly charter’
livemint.comPrime Minister Narendra Modi called for the creation of an “investment-friendly charter’ during the ninth Governing Council Meeting of the Niti Aayog on 27 July. This charter will outline policies, programmes and processes to attract more investments. Despite India’s potential, foreign direct investment (FDI) data shows that the country has not fully capitalized on its opportunities.
Strategic reforms are needed to enhance India’s appeal among global investors. Drawing from successful investment models in China and Vietnam and feedback from various firms, we propose that an ‘investment-friendly charter’ should consider a four-step plan to make India a top global investment destination. Use FDI data insights: India attracted $44.4 billion of FDI in 2023-24, only 1.1% of its GDP.
In 2022, India was the world’s seventh largest FDI recipient with $49.4 billion, but it lagged significantly behind countries like China ($189.1 billion), Brazil ($86.1 billion), Australia ($61.6 billion) and Canada ($52.6 billion). Data reveals that India’s FDI predominantly comes from Singapore and Mauritius, which accounted for 49% of cumulative FDI from April 2001 to March 2024. Most of this was disproportionately directed at trading, services, malls and real estate development.
This raises the concern that a chunk of FDI inflows might have been merely to exploit India’s double tax avoidance agreements (DTAAs) and reduce tax liabilities. While manufacturing attracted an estimated 30% of India’s FDI, significant sectors like electronics and technology remain underfunded, with telecom receiving only $713 million in 2022-23 and $282 million in 2023-24. Foreign investments in food processing are also disappointing from the perspective of what
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