FDI : The Win-Win-Win Formula

Foreign Direct Investment has been pouring into India ever since the Government liberalized and streamlined its policies to attract investments in various sectors.

Amongst the key factors that attract foreign investors to India are the low wage rate, skilled human resources, young and dedicated workforce, an abundance of natural resources, liberal Government policies and support from State Governments. What also makes the investment attractive is the market size and the huge customer base with good buying power. It is however essential to market new products at a reasonable price to create the space and get high returns on investment.

The investments could be made through the automatic route, where no government approvals are required in certain sectors and the government route, where approvals and permissions are needed to make investments by submitting proposals to the respective administrative ministry.

The FDI equity inflow in India was the US $469.99 billion during April 2000 and March 2020, according to the Department of Promotion of Industry and Internal Trade.

The main aim of government initiatives taken for FDI in India is to bring ease of doing business and for the promotion of foreign investments in various sectors of the economy. In recent months, the government has given the allowance of 100% FDI in various sectors and is in talks for giving 100% FDI in more sectors.

Foreign investors have the opportunity of expanding their business into India through the means of foreign direct investment. This also could be an opportunity to lower manufacturing costs and to capture new markets. FDI could be achieved through mergers and acquisitions, joint ventures, starting subsidiaries or by getting voting stock.