Modi@8: How Narendra Modi government rewrote the FDI rules in favour of India

Foreign direct investment is an indicator of global (and investor) interest in a country. When the world wants to do business with a country, it enmeshes itself deeper in the affairs of that country, becoming a stakeholder, in a sense, in its security and sustainability.

From 2000 onwards, which is around when foreign direct investment (FDI) started flowing into India in numbers worth considering, to 2021, if one studies the cumulative amount of FDI has received, one striking fact emerges — India has received more than 50 per cent (in fact around 60 per cent to be absolutely accurate) of the total amount of FDI between 2000-2021 in the last eight years.

In a 20-year period, more than half of the FDI has come since 2014. This in itself is worth analysis but there is more. For the last couple of years, we also have data showing not only which sectors and states where this investment is going, but also districts. We can see which districts in the country are receiving FDI, and in what quantities.

Even at the most fundamental level to anyone who has worked on Indian economic statistics for as long as I have, it is exciting to see the name of places like Bhagalpur, Jabalpur, Seoni, Chitrakoot, Ujjain, East Khasi Hills, Mirzapur, and Burdwan on an FDI list. Naturally, the numbers for many of these places are quite small but the overall pie of FDI is rising with each passing year (now at a historic high of $83.57 billion) and that parts of this large pie is moving to, even if in small quantities, to districts which have not been discussed in economic terms for a long time, if ever, is thrilling.

It is pertinent to add that it is still early days for this kind of analysis not least because 2020 and 2021 were aberration years in every sense because of the COVID-19 pandemic.

Therefore, it is only in the coming years as more numbers arrive on a district-wise division of FDI that we would be able to draw more conclusions — including something that personally excites me as an economic researcher, how much FDI is starting to go to ‘aspirational districts’ and to areas within a 100-kilometre radius from aspirational districts?

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What could such a study show us? It will show us what FDI can do in districts that require the most economic and developmental assistance. My educated speculation/assessment is that in the years to come, we would be able to see that investments in the country have a qualitative aspect directly linked to SDGs (sustainable development goals) in many regions. This is especially true as investments in technology and green energy expands.

For now, what we can say with confidence is this — the FDI story of India and deepened considerably in the last eight years. As confidence about the longevity of the India opportunity has grown, and policy and political certainty in the country has deepened, investments have gone deeper, undoubtedly taking what is known in the world of investments as a ‘long view’ about the country.

It is important to note that India has consistently crossed new milestones in FDI levels through the pandemic years – each year has been a bigger landmark than the previous ($62 billion in 2018-19, more than $74 billion in 2019-20, more than $81 billion in 2020-21, and more than $83 billion in 2021-22). In 2014-15, India received only around $45 billion in FDI in 2014-15.

The country is within striking distance of getting to $100 billion in FDI. What strengthens this confidence is that despite significant turbulence, not only from the pandemic but also from the war in Ukraine, India has continued to hit new FDI records.

As supply chains continue to get disrupted around the world, and energy prices fluctuate, India represents one of the rare relatively stable and safe havens for capital around the world. That it is democratically governed, has policy stability and increasing openness to trade, as evidenced by its recent trade deals, and continuing negotiations.

Expect more announcements of landmarks crossed.

The writer is a multiple award-winning historian and author. The views expressed are personal.

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