GS-3: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.
FDI Inflows
Context: India has attracted highest ever total FDI inflow of U.S.$81.72 billion during the financial year 2020-21 (10% above FY2019-20). RBI reported that equity component of inflows was over U.S.$61.4 billion.
Positive
Rising FDI inflows into India is at times where Global FDI inflows in 2020 had declined by 42% over the level in 2019, and inflows to developing countries had fallen by 12%
Concerns
Jio Deal: Data shows that three Reliance Group companies together received U.S.$27.8 billion or, 54.1% of the total equity inflows during the three quarters of FY2020-21.
Concentration in distribution: Without the top five FDI deals, FDI inflows during 2020-21 would have declined by about a third of their level a year ago.
Lacks Creation of Productive assets: The nature of the bulk of the “investments” involved a mere transfer of shares without creating productive assets in the country. Thus, FDI can’t contribute much to the revival of economy.
Inadequate Investment in Manufacturing sector: This sector received just 17.4% of the total inflows during 2020-21 in contrast to Service sector attracting 80% of total inflows.
Conclusion
Going forward, the pipeline of FDI for 2021-22 could be supported by the thrust given to PLI and domestic growth prospects.
