India replaces China as top FDI destination in 2015: FDI Intelligence Report

Comments (0)

According to FDI Intelligence Report India has replaced China as top destination for foreign direct investment (FDI) by attracting $63 billion (nearly Rs 4.19 lakh crore)  projects in 2015. Also there was an 8% increase in project numbers to 697. FDI Intelligence is a division of The Financial Times Ltd.

India replaces China as top FDI destination in 2015: Report

— EconomicTimes (@EconomicTimes) April 21, 2016

China suffered a 23 per cent decline in capital investment and a 16 per cent drop in FDI projects. In 2015, India was for the first time the leading country in the world for FDI, overtaking the US (which had $59.6 billion of greenfield FDI) and China ($56.6 billion). Major companies such as Foxconn and SunEdison have agreed to invest in projects valued at $5 billion and $4 billion, respectively, in India in 2015.

Fact check

Among the emerging economies, greenfield FDI inflow in India and China was followed by Indonesia (USD 38.5 billion), Mexico (USD 24.3 billion) and Brazil (USD 17.3 billion). 

Top destination states for FDI in 2015 in India: Five Indian states were among the top 10 destination states for FDI in 2015. Gujarat was on top which had attracted $12.4 billion. Maharashtra was second attracting $8.3 billion respectively in 2015.

Make in India campaign has boosted the FDI, which has resulted in a whopping increase in FDI job creation from 1.16 lakh new jobs in 2013 to 2.25 lakh in 2015 which is the highest number in the world. 

Source of FDI : Investments in sectors that are not under the automatic route require FIPB approval. Currently 98% FDI into India comes through automatic route.

FDI in renewable energy projects

  • India is emerging as a key destination for renewable energy projects, helped by a wider government policy of incentives, infrastructure and programmes designed to attract investment. Chinese companies Sany Group and Chint Group are also planning to invest a total of USD 5 billion in the India's renewable energy sector. 
  • India topped the rankings in 2015 with USD 11.8 billion of announced FDI in the renewable energy sector which includes Lightsource Renewable Energy's plans to invest USD 3 billion to design, install and manage more than 3 gigawatts of solar power within the country.

What is FDI ?

In layman's term Foreign Direct Investment (FDI) means investment made by a resident in one economy  in an enterprise in another economy, with the objective of establishing a lasting interest  in  the investee economy.  

FDI usually involves participation in management, joint-venture, transfer of technology and expertise which is done by either  buying a company in the target country or by expanding operations of an existing business in that country.

Types of FDI

Green-field investments : Green-field investments occur when a parent company begins a new venture by constructing new facilities in a country outside of where the company is headquartered. 

Brown-field investments : Brown-field investments occur when a company or government purchases an existing facility to begin new production.

Procedure for receiving Foreign Direct Investment

Automatic Route : FDI is allowed under the automatic route without prior approval either of the Government or the Reserve Bank of India in all activities/sectors as specified in the consolidated FDI Policy, issued by the Government of India from time to time.

Government Route : FDI in activities not covered under the automatic route requires prior approval of the Government which are considered by the Foreign Investment Promotion Board (FIPB), Department of Economic Affairs, Ministry of Finance.

Why a country needs FDI ? 

Exports and FDI have been the two key ingredients for rapid economic growth as countries with limited amounts of capital can receive finance beyond national borders from wealthier countries for purpose of economic growth. FDI also brings other scarce productive factors like technical know how,  business expertise and knowledge.

What are the major benefits of FDI ?

  • Resource transfer, in terms of  new technologies, management skills, intellectual property. 
  • Improves forex position of the country.
  • Employment generation and increase in production .
  • Increment in Income, jobs and production.
  • Increases tax revenues of the country.



Practice Questions