India is actively pursuing a target to draw at least $100 billion in gross foreign direct investment (FDI) annually, with many investors and multinational corporations showing interest in diversifying their investments away from China. Rajesh Kumar Singh, secretary in the Department for Promotion of Industry and Internal Trade, spoke about the country's goal, which is a significant increase from the average annual FDI of over $70 billion in the past five years leading up to March 2023. Singh expressed optimism about India's ability to meet the target despite facing a dip in FDI last year due to various external factors.
With India being recognized as the world's fastest-growing major economy, it has been focusing on attracting businesses looking to spread their operations to mitigate risks related to geopolitical tensions, a strategy known as "China plus one." High-profile companies like Apple Inc. and Samsung Electronics Co. have expanded their manufacturing activities in India, capitalizing on incentives provided by Prime Minister Narendra Modi's administration. However, despite these efforts, India's share of global FDI inflows decreased from 3.5% in the first nine months of 2022 to 2.19% in the same period in 2023, indicating the need for further improvements in attracting foreign investments.
While some sectors such as electricity, electronics, IT, and communication continue to generate significant interest for investment globally, there is a noted lag in actual investments compared to earlier announcements. On the domestic front, software services, BFSI, and trading companies are witnessing the highest FDI inflows within India. Even though initiatives and reforms have been implemented to attract FDI, a report by Kotak Institutional Equities pointed out the need for India to focus on sunrise sectors for increased investment acceleration in the future. The report highlighted the importance of realigning India's focus towards the domestic market and producing higher value-added goods for export to enhance competitiveness in established value chains.