No country can stay in isolation. In the contemporary world, countries need each other more than ever for trade and cooperation on various issues. But, business is the most significant area of cooperation among nations to increase employment and flourish economies.  

Looking back at history, the 80s and 90s witnessed countries opening up their economies for the world. Countries that did not keep up with the change ended up hampering their economic growth.  

However, companies look for marketplaces that offer beneficial regulations and simple policies to Ease their work. For this reason, countries like India, intending to attract foreign investors, have tried to lure them with conductive policies.  

In this article, we will understand how the initiative for Ease of development has boosted FDI in India.

Status for Ease of Doing Business in India

The Indian economy faced a severe crunch in 1991 when it made a historic decision to open its economy. Since then, the government has been trying to implement conductive policies for simplifying regulations and guidelines for foreign companies. Mainly, in recent years the Indian government has seriously made decisions for ease of doing business.  

Despite having a massive marketplace for foreign companies, India was only a station for assembling parts by them. So, the ‘Make in India’ Program was a serious flagship program to attract foreign companies to set up manufacturing units in India. The government tried to work on promoting innovation, skills development, world-class manufacturing, and modern infrastructure.  

In terms of reforms, the government made several legal amendments to regulations. It included favoring the liberalization of guidelines and simplifying rules. More than 39,000 compliances were reduced. Moreover, 3,400 legal provisions were decriminalized. All these actions were attempts to improve the ease of business in India. At the same time, digitalization and labor reforms made hiring more versatile.  

It is one of the effective programs with the ‘digital India’ campaign to transform the country and make it the new ‘factory of the world.’ It included organizing investor summits and several global programs around the country. For it, invitations were sent to the top global brands to participate in them and for the making of a ‘new India.’  

As a result, India jumped 79 positions from 142nd rank in 2014 to 63rd rank in 2019 for WB’s Ease of doing business rankings.  

All these decisions promoted ease of doing business in the country. After this, let’s understand the increase in FDI in India.

Increased Inflows of FDI In India

When India Ranked 63rd in the Ease of doing business by the World Bank, its result was reflected in 2022 with a rise in FDI. As a massive implication, India received the highest-ever FDI inflows of $84.8 bn for FY22. Alongside this, the government reports that FDI inflows in the country can exceed $100 billion in 2023-24.  

A total of $84.8 billion in FY22 came from 101 countries. On the other hand, the investment was made in 31 states and the US in India, reaching every corner of the country. At the same time, 57 sectors across the country received its benefits. The industries that received the maximum benefit were computer software/hardware, the Service sector, R&D, Construction, and Automobile, among others. Nowadays, India is a part of the 100 clubs of Ease of Doing Business.  

In the post-covid era, India is becoming the preferred destination for foreign sectors. The equity inflows in the manufacturing industry have increased by 76% in comparison to the previous year, which represents massive growth.

How have strategies for Ease of Doing Business Increased FDI in India?

In the rapidly growing digitalized world, the ability to attract FDI is highly significant. It is an important aspect that impacts the growth of a country’s economy. India, as the fastest-growing economy in the world, is on its path to becoming the fourth biggest economy. Consequently, it has a lot to offer foreign investors for its growth. At the same time, India’s young population, with a skilled workforce and investment incentives, is a golden opportunity for foreign companies.  

The initiatives for ‘Ease of doing business’ by the Indian government attracted its highest foreign direct investments from Singapore with US$ 14.67 billion. Apart from that, Mauritius (US$ 8.24 billion), the Netherlands (US$ 6.50 billion), USA (US$ 4.22 billion) brought reasonable amounts of investments. Moreover, the top global brands like Google, Foxconn, Amazon, and Facebook were on the list of investors. Some Indian companies that benefited from the FDI include Byju, which received US$ 500 million from US-based private equity company Silver Lake. Similarly, SoftBank Group blended US$ 150 million into the ed-tech platform Unacademy. 

If we look at ‘Construction Permits’ in India, it moved from 184th rank in 2014 to 27th in 2019. This was primarily a result of easy procedures for companies that decreased their time to get permits in the country. Similarly, the country’s rank improved in ‘Getting Electricity’ from 137th rank in 2014 to 22nd position in 2019.

Summing up

The Indian government has taken active steps since 1991 to open its economy to the world. Also, it has emphasized the ‘Ease of Doing Business”, aspect by easing regulations, introducing the ‘Make in India’ initiative, promoting skill development, and organizing summits to invite investors from around the world. In turn, it increased Foreign Direct Investment in India to a record high, benefiting the Indian economy.


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