India Plans Enhanced Production-Linked Incentives to Attract FDI


In response to a 13% decline in foreign direct investment (FDI) inflows between April and December 2023, the Indian government is gearing up to revamp its production-linked incentives (PLI) scheme to bolster investor confidence and attract more overseas capital. This initiative was highlighted by Rajesh Kumar Singh, Secretary of the Department for Promotion of Industry and Internal Trade (DPIIT).

India currently boasts 14 PLI schemes across various sectors, including bulk drugs, medical devices, pharmaceuticals, telecom, white goods, food processing, textiles, and drones. Despite the recent dip in FDI inflows, Singh emphasised India’s resilience, noting that the country ranks eighth globally in terms of FDI inflows, underscoring its attractiveness to foreign investors.

Recent data revealed that India received ₹1.03 lakh crore in investments, both domestic and foreign, attributed to the PLI scheme across the 14 sectors. The government has disbursed ₹44,150 crore in incentives thus far and anticipates an additional ₹11,000 crore in incentives by the end of the current financial year.

To further streamline investment processes and foster a conducive business environment, India has implemented several key reforms:

  1. Relaxation of FDI norms in satellite manufacturing, allowing foreign investors to hold up to 74% stake without government approval.
  2. Permission for foreign investors to acquire up to 49% stake in manufacturing satellite launch vehicles.
  3. Facilitation of 100% FDI through the automatic route for satellite component manufacturers.
    Increase of FDI limit in insurance and defence sectors from 49% to 74% under the automatic route.
  4. Elevation of FDI cap in telecommunications to 100% from 49% under the automatic route.
  5. Provision for 100% FDI in state-owned oil and gas companies during government stake sales.

Under the automatic route, foreign companies investing in India are not required to seek government approval, fostering a more streamlined investment process. Sectors such as airports, construction, industrial parks, mining, manufacturing, and information technology fall under this category. However, sectors like insurance, pharmaceuticals, defence, and banking have specified limits, necessitating government approval for investments exceeding certain thresholds.

India’s proactive approach to enhancing FDI regulations and expanding investment opportunities underscores its commitment to fostering economic growth and attracting global investors. With ongoing reforms and a conducive investment climate, India aims to position itself as a preferred destination for foreign capital, driving sustainable development and prosperity for its citizens.