Record foreign direct investment (FDI) into India has not contributed proportionately to the country’s capital formation and GDP. “While foreign investment inflows into India have been consistently rising over the past five years, they have not contributed proportionately to the country’s capital formation and GDP,” a report by Deloitte has pointed out.

The report titled India’s FDI Opportunity Through An Investor’s Lens notes that only a fraction of total foreign capital inflows was creating fresh assets in India. “Over the last five years, net capital inflows contributed about 4 per cent to the total gross capital formation, which suggests that domestic investments, funded by domestic savings, accounted for the remaining 96 per cent.”

In FY21, FDI inflows, including equity, re-invested earnings and capital, amounted to a record $81.72 billion, 10 per cent higher than the previous financial year’s FDI. According to the United Nations Conference on Trade and Development (UNCTAD), the Indian information and communication technology and construction sectors were large recipients of FDI. It made India the fifth-largest recipient in the world in the past year. 

Deloitte’s report, which is based on a survey of 1,200 business leaders of multinational corporations in the US, the UK, Japan and Singapore, reveals that India remains an attractive destination for investments. The country has scored highly for its skilled workforce and prospects for economic growth. 

The report has identified seven capital-intensive sectors which India can target to attract greater FDI – textile and apparel, food processing, electronics, pharmaceutical, vehicles and parts and chemicals and capital goods. These sectors collectively contributed $181 billion of merchandise exports in 2020-21. 

The survey has found that these seven sectors have the necessary potential, opportunity and capability to show quick results and set a global precedent. It has said that more business leaders, especially in Japan, are making investments in India for access to the domestic market rather than using India as a springboard for exports. 

The survey has also said that India has the strongest positive perception in the US when compared to markets such as China, Brazil, Mexico and Vietnam. “The US and the UK business leaders expressed greater confidence in India’s stability,” it has added.