One of the narratives of the Bharatiya Janata Party on the eve of the general election in May-June this year was that India, under the Narendra Modi government, was beginning to claim her rightful place in the world. It was growing at 7 per cent, was the fastest-growing major economy, was poised to become the world's third-largest economy by 2027 and, with policies aimed at improving the ease of doing business, was attracting the best of investment from overseas. Becoming a manufacturing hub for the world for at least some goods also seemed well within sight.
But the ground situation is not so rosy. While India has been growing at a robust pace, it has not translated into more foreign direct investment (FDI), a barometer for investors' appetite in the India growth story. On the contrary, FDI has been on a downward trajectory. Total (or gross) FDI inflows into India fell over 16 per cent to $70.9 billion (Rs 6 lakh crore) in FY24, from $84.8 billion (Rs 7.2 lakh crore) in FY22. It was $71.4 billion (Rs 6.02 lakh crore) in FY23. As a percentage of the GDP, net inflows of FDI fell from 2.4 per cent in 2020 to 1.4 per cent in 2021. It rose marginally to 1.5 per cent of the GDP in 2022, only to fall precipitously to 0.8 per cent in 2023. Just ahead of the global financial crisis in 2008, FDI had touched an all-time high of 3.6 per cent of the GDP.
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