Finance Concept with Stack of Coins – 100 percent FDI or Foreign Direct Investment on wooden blocks
| Photo Credit: lakshmiprasad S

Magnifying glass with the letters FDI on the background of stacks of coins. Business concept
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New Delhi:

A nearly 26 per cent rise in FDI to USD 42.1 billion during the first half of the current fiscal year 2024-25 helped India’s gross foreign direct investment (FDI) inflows reach an impressive USD 1 trillion since the start of this century.

India has achieved a remarkable milestone in its economic journey, with gross foreign direct investment (FDI) inflows reaching an impressive USD 1 trillion since April 2000.

This landmark achievement was helped by a nearly 26 per cent rise in FDI during the first half of 2024-25.

Ministry of Commerce and Industry in a statement asserted that such growth reflects India’s growing appeal as a global investment destination.

“FDI has played a transformative role in India’s development by providing substantial non-debt financial resources, fostering technology transfers, and creating employment opportunities.”

“Initiatives like ‘Make in India’, liberalised sectoral policies, and the Goods and Services Tax (GST) have enhanced investor confidence, while competitive labour costs and strategic incentives continue to attract multinational corporations,” the Commerce Ministry said.

Over the last decade (April 2014 to September 2024), total FDI inflows amounted to USD 709.84 billion, accounting for 68.69 per cent of the overall FDI inflow in the past 24 years.

To promote FDI, the government has put in place an investor-friendly policy, wherein most sectors, except certain strategically important sectors, are open for 100 per cent FDI under the automatic route.

Further, to simplify tax compliance for startups and foreign investors, the Income Tax Act, 1961 was amended in 2024 to abolish angel tax and to reduce the income tax rate chargeable on the income of a foreign company.

As India continues to align with global economic trends, the government believes it is well-positioned to further strengthen its role on the global stage, fostering sustainable growth and development.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

India received the highest foreign direct investment (FDI) from Singapore in 2023-24 even as overseas capital inflows into the country contracted by about 3.5% due to global economic uncertainties, according to the latest government data.

Though FDI from Singapore has dipped by 31.55% to $11.77 billion in 2023-24, India has attracted the maximum inflows from that country, the data showed.

During the last fiscal, FDI equity inflows decreased from major countries, including Mauritius, Singapore, the U.S., the U.K., UAE, Cayman Islands, Germany, and Cyprus.

However, investments increased from the Netherlands and Japan.

Since 2018-19, Singapore has been the largest source of such investments for India. In 2017-18, India attracted the maximum FDI from Mauritius.

According to experts, after the India-Mauritius tax treaty amendment, Singapore has emerged as the preferred jurisdiction for investment in India.

Rumki Majumdar, Economist, Deloitte India, said that as one of the world’s prominent financial hubs, Singapore attracts global investors who want to invest in Asia.

“Recently, India’s initiatives such as amendments by the SEBI to the REIT Regulations 2014 have created new opportunities for Singapore-based investors, which is why India is likely seeing high FDI from Singapore,” Ms. Majumdar said.

She also hoped that FDI into India would pick up in the latter half of 2024-25.

Sanjiv Malhotra, Senior Advisor, Shardul Amarchand Mangaldas & Co, said that Singapore and Mauritius are jurisdictions used by global investors to route their money into developing economies such as India.

“While there are many geo-economic and political factors why Singapore has gained more prominence in the recent past, the primary reason for it topping the FDI charts for India is tax,” Mr. Malhotra said, adding Singapore has a very competitive domestic tax regime and efficient regulatory set-up.

Historically, the double tax avoidance agreement between India and Singapore provided for many beneficial provisions including capital gains exemption in India for investments made from Singapore and even though this provision has been amended, Singapore still is a credible place to create operations with substance to invest further in South-East Asia (including India), he added.

Mr. Malhotra added that in 2023-24, India witnessed a drop in FDI primarily due to the global uncertainty on account of the disturbances in the Middle-East and Europe.

“Hopefully FDI inflows to India may improve in 2024-25 (from 2023-24) but they may still remain below 2022-23 levels. A stable government post elections surely will help the cause of more FDI into India but I see the global headwinds to be too strong as of now,” he said.

Anindya Ghosh, Partner, INDUSLAW, too said that prior to 2016, Mauritius was a preferred jurisdiction for foreign investment in India due to the significant tax advantage it offered as a low-tax jurisdiction for routing investments.

However, in 2016, India amended its tax treaty with Mauritius to introduce a source-based taxation regime for capital gains, eliminating the tax advantage and reducing the attractiveness of Mauritius as an investment hub for India.

After the India-Mauritius tax treaty amendment, Singapore has emerged as the preferred jurisdiction for foreign investment in India due to various factors, Ms. Ghosh said.

She added that many multinational companies have their regional headquarters or holding companies based in Singapore, making it a convenient location for channelling investments into India.

She added that global economic conditions, geopolitical tensions, and domestic policy developments may influence the overall FDI inflows in 2024-25.

FDI equity inflows in India declined 3.49% to $44.42 billion in 2023-24 as against $46.03 billion in 2022-23.

The total FDI — which includes equity inflows, reinvested earnings and other capital — declined marginally by one per cent to $70.95 billion during 2023-24 from $71.35 billion in 2022-23.

In 2021-22, the country received the highest ever FDI inflows of $84.83 billion.

Sectorally, inflows contracted in services, computer software and hardware, trading, telecommunication, automobile, pharma and chemicals.

In contrast, construction (infrastructure) activities, development and power sectors registered a healthy growth in inflows during the period under review.

FDI from Mauritius dipped to $7.97 billion in the last fiscal from $6.13 billion in 2022-23.

The U.S. is the third largest investor in India in 2023-24 with $4.99 billion foreign investments, though it is down from $6 billion in 2022-23.

It was followed by the Netherlands ($4.93 billion), Japan ($3.17 billion), the UAE ($2.9 billion), U.K. ($1.2 billion), Cyprus ($806 million), Germany ($505 million), and Cayman Islands ($342 million).

As per the data, Mauritius accounts for 25% of the total FDI which India has received during April 2000 to March 2024 ($171.84 billion), while Singapore’s share is 24% ($159.94 billion). The U.S. accounted for 10% of total overseas investments with $65.19 billion during the period.

Foreign investments are crucial for India to overhaul its infrastructure such as ports, airports and highways to push growth.

FDI also helps improve the country’s balance of payments situation and strengthen the rupee value against other global currencies, especially the U.S. dollar.