India, currently the fastest-growing large global economy, is gearing up to become the third-largest economy within the next three years, with a GDP projected to reach $5 trillion by FY27-28. However, facing a significant 62% decline in net foreign direct investment (FDI) in FY24 and a looming crisis in financing infrastructure projects, the Indian government is rolling out a multi-pronged action plan to attract an additional $50 billion per year in foreign capital.
The plan involves initiating discussions with various countries, including the US and key European nations, to tap into financial capital reserves. Additionally, the government aims to establish funds under the National Investment and Infrastructure Fund (NIIF) to pool investments in specific infrastructure projects, addressing concerns about project bankability.
Key sectors targeted for foreign investment include national highways, railways, and green energy ventures such as solar, wind, and green hydrogen. To facilitate this, multiple government departments, including the Department of Economic Affairs, the Department for Promotion of Industry and Internal Trade (DPIIT), and the Ministry of New and Renewable Energy (MNRE), are collaborating to ensure the availability of investible project pipelines.
Despite the decline in net FDI to $10.6 billion in FY24, gross inward FDI remained stable at $71 billion, with countries like Singapore, Mauritius, the US, the Netherlands, Japan, and the UAE contributing significantly. The government is particularly focusing on attracting investment in sustainable infrastructure projects, with talks underway with various countries to channel their patient capital.
NIIF, with its various funds, is expected to play a crucial role in attracting foreign investors, including sovereign wealth funds. Currently managing over $4.9 billion of equity capital commitments, NIIF is committed to supporting India’s growth needs across different investment strategies.
As India aims to bridge the funding gap for infrastructure projects, estimated at nearly $2 trillion between now and 2030, the government is doubling down on efforts to create an investor-friendly environment and ensure the bankability of projects. With these initiatives, India seeks to accelerate economic growth and maintain its trajectory towards becoming a global economic powerhouse.
