FDI inflows have steadily increased in the last few months. In May 2021, FDI inflows touched the highest level at $9,140 million since September 2020. FDI inflows have steadily increased after February 2021 which recorded outflows of $2,881 million. March 2021 recorded FDI inflows of $1,971 million. April 2021 and May 2021 witnessed month-on-month increases of 1.4x and 3.2x respectively.
Increased FDI inflow in spite of a very severe 2nd wave of COVID is very positive for the economy and will help in boosting foreign currency reserves.
The government continues to take measures to attract more foreign investment in the country. In its most recent move on 23rd July 2021, the Indian government has granted 100% FDI in PSU refineries through the automatic route. Before that, 49% foreign shareholding was permitted. Under the automatic route, the foreign investor or Indian company is not required to take prior approval from RBI or the Indian government.
This move will not only aid increased funds inflow into the domestic market but also the privatization of Bharat Petroleum Corporation Limited (BPCL). This is because the government owns a 52.98% stake in BPCL which now due to the relaxed norms can also be sold to a foreign investor.
Benefits of increased FDI inflows into India are manifold:
- Increased privatization possibilities in different sectors, one example being the oil and gas sector.
- Increased employment opportunities
- Stimulates economic growth
- Exchange rate stability
- Availability of capital and technology for businesses