Ans28.) Net fdi in India has fallen from $23 billion in 2023 to 0.8 billion in 2024, recovering to above 5 billion in last two financial years. Net fdi is gross fdi - repatriation of profit by foreign firms and outflow of investment by Indian firms. It has fallen due to
- Tight global liquidity conditions have forced foreign firms to repatriate more profit as they needed liquidity
- Uncertainty of global markets played a role in seeking safer markets.
- Higher return on dollar denominated assets.
- Indian market was giving higher return value on investment in start ups so with IPO of those start ups the foreign investors booked their profit.
- Poor profit earning by firms also played a role in retraction.
However the confidence in Indian economy is high as seen by record inflow of gross fdi which has increased from $71 billion in 2024 to 94 billion by 2026.
Ti assure better inflow of Fdi, policy should focus on
- Better ease of doing business at state government level.
- Improved infrastructure support to create cluster based manufacturing
- Development of new urban infrastructure and industrial township
- Promoting procedural ease in getting permission
- Input market reforms at a faster pace.
Thus it will help in keeping productivity high and macro economy stable along with stable currency value.
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