Positive ringtones for private and foreign investor participation in Budget 2022

Prime Minister Narendra Modi said in his virtual address to the World Economic Forum’s Davos Agenda 2022 that now is the perfect moment to invest in India. When the Finance Minister (FM) stood up to announce the Budget Proposals 2022, she repeated this ethos.

Global foreign direct investment (FDI) flows showed a strong return in 2021, up 77 percent to an anticipated $1.65 trillion from $929 billion in 2020, surpassing their pre-COVID-19 level, according to a recent UNCTAD paper on “Global Investment Trends.” Global FDI is expected to increase in 2022. Increased FDI inflows into the country have stemmed from measures implemented by the government on the fronts of FDI policy changes, investment facilitation, and ease of doing business. The following FDI trends in India confirm the country’s standing as a favoured investment location for international investors.

During the fiscal year FY 2020-21, India received the largest ever total FDI inflow of US$ 81.72 billion. Singapore is the top investment country with 29 percent, followed by the United States (23 percent) and Mauritius (9 percent) for FY 2020-21. During FY 2020-21, Computer Software & Hardware was the most popular sector, accounting for roughly 44% of total FDI Equity inflow, followed by Construction (Infrastructure) Activities (13%), and Services Sector (8%).

India’s GDP growth is expected to be the greatest among all global economies in 2021-22, because of a rapid rate of immunisation. With India’s rapid and consistent improvement in the ease of doing business, it gains an advantage in attracting private and foreign investors. In the infrastructure sector, investor confidence is high, thanks to favourable long-term financing conditions, recovery stimulus packages, and overseas investment programs.

Deep reforms such as PM GatiShakti, a National Master Plan for Multi-Modal Connectivity, which is essentially a digital platform that brings 16 ministries together, including railways and roads, for integrated planning and coordinated implementation of infrastructure connectivity projects, will undoubtedly attract foreign investors. GatiShakti strives to rectify past shortcomings by instituting holistic planning for big infrastructure projects for all stakeholders. It will combine several Ministries’ and State Governments’ infrastructure schemes, such as Bharatmala, Sagarmala, inland waterways, dry/land ports, UDAN, and so on. To strengthen connectivity and make Indian enterprises more competitive, economic zones such as textile clusters, pharmaceutical clusters, defence corridors, electronic parks, industrial corridors, fisheries clusters, and agri-zones would be covered.

PM’s Gati Shakti scheme has generated a USD 26 billion production-linked opportunity, allowing for successful partnerships and ventures with domestic and foreign investors to enhance liquidity in India and provide a positive return on investment.

In her speech, the FM stated that, in order to encourage exports, it is recommended to repeal the Special Economic Zones Act and replace it with new legislation that will allow states to collaborate on the “Development of Enterprise and Service Hubs.” This will apply to all big current and new industrial enclaves in order to maximise the use of available infrastructure and improve export competitiveness.

This is a significant step because SEZ exports climbed from $3 billion in 2005-06 to $102 billion in 2020-21. Investment in SEZs expanded from US$0.54 billion in 2005-06 to US$83 billion by 2020-21, providing jobs for a total of 2,358,136 people. With roughly 40% of approved SEZs yet to open, this will undoubtedly provide a boost to stakeholders’ willingness to invest, export, and create jobs.

The government has granted infrastructure status to Data Centres and Energy Storage Systems in the country, including dense charging infrastructure and grid-scale battery systems. The government’s decision to grant status is a significant step that recognizes the growing reliance on Data Centres for the success of technology-enabled industries. This would aid in the development of a world-class data centre ecosystem by attracting domestic and international investment, as well as fostering the localization of the data centre industry. Companies that operate data centres will now be able to obtain cash at a lower cost, which will assist the economy in the long run.

With 25% of the defence R&D budget set aside, it is suggested to open up Defense R&D to business, start-ups, and academics. Through the SPV model, private industry will be encouraged to design and produce military platforms and equipment in conjunction with DRDO and other organisations. To address a wide range of testing and certification requirements, an independent nodal umbrella agency will be established. Private players will be able to enter new markets as a result of this.

In her budget speech, the FM highlighted Sunrise Opportunities such as Artificial Intelligence, Geospatial Systems and Drones, Semiconductor and its ecosystem, Space Economy, Genomics and Pharmaceuticals, Green Energy, and Clean Mobility Systems, all of which have enormous potential to help the country develop sustainably and modernise.

The FM’s suggested policy changes, along with characteristics such as strong Indian markets, a trained workforce, and a stable political climate, will undoubtedly be seen favourably by investors, making India a desirable investment destination.