Singapore top source for FDI inflows into India

City-state Singapore has emerged as the top source nation in terms of foreign direct investment (FDI) equity flows into India for the financial year 2021-22.

India received 27.01% of its overall FDI inflows from Singapore, followed by 17.94% from the US in FY22. Mauritius ranked third on the list with 15.98% share in the country's FDI inflows, followed by The Netherlands (7.86%) and Switzerland (7.31%), according to the Ministry of Commerce & Industry.

Despite the ongoing pandemic and global headwinds, India received the highest annual FDI inflows of $84.83 billion in FY22, overtaking last year's FDI by $2.87 billion. Earlier, FDI inflows increased from $74.39 billion in FY20 to $81.97 billion in FY21.

The top five states receiving the highest FDI equity inflows during FY22 are Karnataka (37.55%), Maharashtra (26.26%), Delhi (13.93%), Tamil Nadu (5.10%) and Haryana (4.76%).

At 24.60%, the computer software and hardware sector bagged the highest FDI equity inflows in the previous fiscal, followed by the services sector – which includes finance, banking, insurance and tech among others – at 12.13%. The automobile industry's share in FDI inflows stood at 11.89%.

India is rapidly emerging as a preferred country for foreign investments in the manufacturing sector, the ministry says. FDI equity flows into the manufacturing sector have increased by 76% to $21.34 billion in FY22 compared with $12.09 billion in FY21.

In FY22, FDI was received from 101 countries, whereas, it was reported from 97 countries during FY21.

In India, foreign investments up to 100% is allowed in non-critical sectors through the automatic route, not requiring security clearance from the Ministry of Home Affairs (MHA).

Prior government approval or security clearance from MHA is required for investments in sensitive sectors such as defence, media, telecommunication, satellites, private security agencies, civil aviation and mining, besides any investment from Pakistan and Bangladesh.

The government says it continues to liberalise investment restrictions, eliminate regulatory barriers, nurture international relations and improve business environment. Changes are made in the FDI policy after having consultations with stakeholders including apex industry chambers, associations, representatives of industries and other organisations.

The government has also implemented several reforms under the FDI policy regime across sectors such as insurance, defence, telecom, financial services, pharmaceuticals, retail trading, e-commerce, construction & development, civil aviation, manufacturing etc.

Fortune India last month reported that FDI flows to India declined by 30% from its record level in 2020 to $45 billion in 2021, as per the United Nations Conference on Trade and Development (UNCTAD). However, a flurry of 108 new international project finance deals were announced in the country, compared with an average of 20 in the last 10 years, the trade body said in its World Investment Report 2022.