Status Of FDI In India

Context

Latest data released by the Reserve Bank of India (RBI) says that while the FDI to India in FY21 stood at $54.665 billion, FDI by India amounted to $11.299 billion, hence a net FDI of $43.336 billion.

More about the latest data

Source: Indian Express

Indian received the maximum net FDI Inflow in 2020-21 worth $43.3 billion. The total FDI inflow was around $54.6 billion and FDI outflow was around $11.3 billion.

The RIL group sold stake in Jio Platforms and Reliance Retail to Facebook, Google and a number of other global investors. and raised over $35 billion during the year, thereby contributing to more than 64 per cent of the total FDI received by India during the year.
Beside the FDI, even the foreign portfolio investments jumped significantly. In the year ended March 2021, the FPI inflows into debt and equities amounted to $36.18 billion.
4 states — Maharashtra, Gujarat, Karnataka and NCT of Delhi — got almost 90 % of the FDI inflows received. Maharashtra received nearly over 46.67 per cent of the flows, followed by Gujarat at 24.38 per cent.

FDI

The FDI outflow consists of the profits which the FDI investors take back from India OR it can also include the sale of investments/business from India.
FDI means what foreign companies are investing in India (through shares). It happens mainly through three routes. First is acquisition/purchase of shares of Indian companies, second is through joint venture route (a foreign firm establishing a JV company in India with an Indian partner) and third is through subsidiary route when a foreign firm creates a (100%) subsidiary company in India.
When an Indian companies invest abroad then there is another term for it and this is called "Overseas Direct Investment" (ODI). It is basically the opposite of FDI in India. The ODI is quite less as compared to FDI.

Sectors where FDI is prohibited

Lottery Business: Government/private lottery, online lotteries, etc.
Gambling and Betting
Chit funds and Nidhi company
Trading in Transferable Development Rights (TDRs)
Manufacturing cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes
Atomic Energy and Railway operations.

Difference between FDI and FPI

Reasons behind rise of FDI in India

growth in sectors of the Indian economy like digital economy, disinvestment plan of Govt. of India
PLI scheme is being offered by the government for several sunrise sectors,
The huge liquidity pumped by the foreign Central bankers in other countries due to covid-19. This extra liquidity is chasing the attractive investments all over the world like India.
sectors which attracted most of the flows are IT, Pharma telecom and digital economy.

3) Due to strong FDI and FPI inflow, our foreign exchange reserves has also increased to $576 billion by end of March 2021. Actually when foreign investors bring dollars this is ultimately/indirectly taken by RBI and RBI provides them rupee. So, RBI forex reserves increases and it also increases rupee liquidity in the economy.

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