FDI inflows are likely to be disrupted in the current financial year

- Cautious attitude adopted by global investors in the face of epidemic adversity in countries around the world

In the last financial year 2020-21, India set a new record by sending સી 21.5 billion in foreign direct investment (FDI). At a time when FDI inflows to countries around the world were stagnant, the 10 per cent increase in FDI inflows to India was a significant factor. This increase was due to the improvement in FDI policy, as well as the reform in the Ease of Doing Business policy, which increased the flow of FDI in the country. Due to these reforms, India emerged as a 'preferred destination' for foreign investors.

According to a study conducted on record foreign investment in the country, the inflow of FDI is likely to slow down in the current financial year after huge foreign investment in the country in the last financial year. Of the total FDI inflows to India in the last financial year, about 5 per cent was in Reliance Group companies alone. Reliance Group sold an estimated 3 billion worth of shares in seven of its companies.

In the current financial year, it is unlikely that any such group will make such a new investment. In addition, the epidemic has adversely affected the economies of many countries in the world. Other measures, including a relief package, have been announced by the world's superpowers, including the United States, European countries, Japan and Australia, to boost the economy once again.

However, the second phase of the epidemic in India proved fatal with its rapid spread. With the implementation of lockdowns in most of the states of the country to control this adversity, economic activities have once again come to a standstill. However, despite the current easing, it will take four to six months for economic activity to fully recover.

Under these circumstances, foreign investors will think ten times before making a new investment in India. According to the recently released Foreign Direct Investment Confidence Index report, post-epidemic developed economies are in the doldrums. But as emerging economies continue to face the epidemic, large global investors will stay away from emerging economies for the next three years. Thus, new investment inflows into emerging economies are likely to stall for the next three years. India is also one of the emerging economies.

According to the report, the epidemic has weakened India's economy as well as its health infrastructure. Apart from this, the issue of vaccination has also created an unfavorable situation in India. There are reports of complete vaccination in developed countries. While the emerging countries, including India, are facing adversity over these two issues, the economies of these countries are clouded by uncertainty. Thus, this issue will also have an impact on new investments.

It may be mentioned here that India has consistently slipped in the list of top 5 countries in the FDI Confidence Index. In 2016, it was ranked 9th, in 2012 it was ranked 8th, in 2013 it was ranked 11th and in 2014, India was ranked 13th. However, the recent FDI inflows by the government, among other favorable factors, led to a record FDI inflow in the fiscal year 2020-21.