Union Budget 2025 | India must pull out all the stops to attract FDI: Economic Survey

New Delhi: India must "pull out all the stops" and improve tax certainty and stability to attract more foreign direct investments (FDI) into the country, the Economic Survey said on Friday.

It said that despite the short-term volatility in global markets, triggered by factors such as inflationary pressures, rising interest rates in developed economies, and geopolitical tensions, the long-term outlook for FDI in India remains favourable.

The country's robust economic fundamentals, ongoing structural reforms, and growing consumer market position make it a key destination for foreign investments.

"One, we must pull out all the stops wooing FDI and making itself more attractive for foreign investors. India has been doing so," the survey said.

It added that most sectors in the country are open for foreign investors under the automatic route.

"However, there is room to improve tax certainty and tax stability in matters such as APA (Advance Pricing Agreement)," it added.

India has simplified many of its laws, rules and regulations over the years leading to a regime shift in terms of the ease of doing business.

"At the same time, all statutory and regulatory authorities must bear in mind that international investors benchmark countries cross-sectionally and not longitudinally. That will determine the success of the government’s goal to make global companies produce in India for the world, making India a part of the global supply chain," it added.

Foreign direct investment (FDI) inflows into India have crossed the USD one trillion milestone in the April 2000-September 2024 period, firmly establishing the country's reputation as a safe and key investment destination globally.

About 25 per cent of the FDI came through the Mauritius route. It was followed by Singapore (24 per cent), the US (10 per cent), the Netherlands (7 per cent), Japan (6 per cent), the UK (5 per cent), UAE (3 per cent) and Cayman Islands, Germany and Cyprus accounted for 2 per cent each.

The key sectors attracting the maximum of these inflows include the services segment, computer software and hardware, telecommunications, trading, construction development, automobile, chemicals, and pharmaceuticals.

The Survey added that India remains a strong destination for FDI, ranking high in greenfield project announcements and international project finance deals.

"However, the country has to pay heed to numbers," it said.

As per the data published by RBI, net FDI to India during the first eight months of FY25 stood at $0.48 billion compared to $8.5 billion in the corresponding period of FY24.

It added that India runs a CAD, and its investment needs are much larger considering the size of its economy.

Union Budget 2025 | Nirmala Sitharaman, who continues to be Finance Minister, will present her record 8th Union Budget this time. While inflation has burnt a hole in the pockets of 'aam janata', reports suggest there might be a tax relief for those making up to Rs 15 lakh per year. Track the latest coverage, live news, in-depth opinions, and analysis only on Deccan Herald. Also follow us on WhatsApp, LinkedIn, X, Facebook, YouTube, and Instagram.