FDI into India
India’s stated policies on Free Trade Agreements (FTAs).
Having signed one with Australia and the UAE, New Delhi has been trying to finalise similar trade pacts with the EU, the UK, and the US.
This, analysts say, would give companies in those countries access to Indian markets without them having to invest here.
A bigger concern is the rise in the share of reinvested earnings in net FDI inflows.
This means the economy is struggling to attract newer investments as FDI in new equity grew by just 2.5 percent year-on-year in FY13-23 while reinvested earnings increased by 7 percent.
while FDI in services in India grew relatively strongly over the last decade, inflows into the manufacturing sector, led by sectors like automobiles and metallurgy, contracted.
major reason for India’s tepid FDI flows over the last decade has to do with India’s termination of the majority of its Bilateral Investment Treaties (BITs) — agreements between two countries that provide various protections to companies from one country investing in the other.
One of these protections is that any arbitration or court case involving the company would take place in a third country, to eliminate any bias.
India had entered into BITs with 74 countries as of 2015, Minister of State (MoS) for External Affairs Rajkumar Ranjan Singh informed the Rajya Sabha in March 2023.
Of these 74, the government sent notices of termination to 68 countries and regions with a request to re-negotiate, while six BITs remain in force.
After 2015, the Indian government signed four BITs, of which two are in force.
India’s share in global FDI inflows has been largely increasing over the years, but it also shows that this share fell to just 2.8 percent in 2022-23, the lowest it has been since 2017.
US investors are trying to shift away from China, but their preferred destinations are still Vietnam and South Korea and to some extent India, but here it’s only in some specific sectors of the economy
