Foreign direct investment (equity) inflows into manufacturing surged 78% until February last fiscal to $20 billion, far exceeding the pace of rise in overall FDI, despite the pandemic blues, Department for the Promotion of Industry and Internal Trade (DPIIT) secretary Anurag Jain told FE.
Gross foreign direct investment (FDI) — which includes FDI equity, reinvested earnings, equity capital of unincorporated bodies and other capital — stood at $76.9 billion until February last fiscal, Jain said in an interview.
Analysts expect the total inflows in FY22 to have exceeded the record level of $82 billion in FY21, but by marginally, albeit on a high base. Investments, both foreign and domestic, remain critical to India’s economic resurgence, as private consumption has maintained a roller-coaster ride in the aftermath of the pandemic.
The rise in FDI in manufacturing largely agrees with the performance of the sector in gross value added (GVA) in FY22. After two successive years of contraction, the GVA, according to the second advance estimate, is seen to grow at 10.5% in FY22. Manufacturing GVA contracted 0.5% in the previous year and by 2.9% in the pre-pandemic year of FY20.
The purchasing managers’ index suggests manufacturing activity gathered steam in the second half of FY22. The long-elusive private capex, too, has started to pick up, especially in sectors like metals, mining, chemicals and electronics, Confederation of Indian Industry (CII) president TV Narendran told FE recently.
Asked if the FDI regime will be liberalised further, the secretary said that most sectors of the economy have already been opened up and nearly all inflows are allowed under the automatic route.
“India’s FDI regime is one of the most liberalised in the world. There is no proposal under consideration now to open up any sector further, apart from what has been announced in the Budget,” Jain said.
A task force has been set up to suggest ways to boost domestic capacity in the animation, visual effects, gaming and comics sector, in sync with the FY23 Budget announcement. It will recommend steps to boost FDI inflows into the sector as well. Last year, the government raised the FDI limit in insurance firms from 49% to 74% under the automatic route, subject to certain conditions. Similarly, up to 100% foreign investment in the telecom sector was allowed under the automatic route in October 2021.
The Modi government has liberalised dozens of sectors in recent years. Gross FDI inflows in the seven years through FY21 jumped to $440.3 billion, having recorded a 65% surge over the previous seven years (2007-14), Jain said.
To reduce the burden of India Inc, more than 30,000 compliance requirements have been abolished across ministries and states, Jain said.
“Decriminalisation of minor offences is another important pillar of the exercise, wherein the objective is to ensure that businesses can operate without fear and anxiety of imprisonment for minor violations,” he added.
Asked about the roll-out of the national e-commerce policy, the secretary said that it was a “work in progress” and deliberations are going on.
Commenting on the Open Network for Digital Commerce (ONDC), which was launched on a pilot basis on Friday, Jain said he expected the network “to attract a lot of private players in areas of their specialisation”. Given its open network, the ONDC will substantially remove entry barriers (in terms of the need for huge upfront investment in creating a platform) for budding entrepreneurs and other stakeholders. “Suppose, a person is good at seller-side management, he creates a seller app, plugs into (the ONDC) network and starts onboarding sellers. He doesn’t have to worry about other aspects (like buyers, logistics, payment system, etc),” Jain said. The ONDC, thus, goes beyond the current platform-centric e-commerce model, where buyers and sellers have to use the same platform or application to conduct a business transaction.