Analysis of FDI Investments and it’s Impacts on Indian economy

Table of Content Page No

Introduction 2
Historical Background 3
July 2023 worldwide FDI updates 4
What is Eclectic Paradigm 8
Three key factors of Eclectic Paradigm 8
Analysis of Impacts of FDI projects on Indian economy 9
Investments and Developments 10
Government Initiatives 13
Analysis of effects on Indian stock market by FDI projects 15

Unlocking the Potential of FDI in India 16

Introduction
A foreign direct investment (FDI) refers to purchase of an asset in another country, such that it gives direct
control to the purchaser over the asset (e.g. purchase of land and building). In other words, it is an
investment in the form of a controlling ownership in a business, in real estate or in productive assets such as
factories in one country by an entity based in another country. It is thus distinguished from a foreign
portfolio investment or foreign indirect investment by a notion of direct control.
The origin of the investment does not impact the definition, as an FDI: the investment may be made either
"inorganically" by buying a company in the target country or "organically" by expanding the operations of
an existing business in that country.
Broadly, foreign direct investment includes mergers and acquisitions, building new facilities,
reinvesting profits earned from overseas operations, and intra company loans. In a narrow sense, foreign
direct investment refers just to building new facility, and a lasting management interest (10 percent or more
of voting stock) in an enterprise operating in an economy other than that of the investor.[2] FDI is the sum
of equity capital, long-term capital, and short-term capital as shown in the balance of payments. FDI usually
involves participation in management, joint-venture, transfer of technology and expertise. Stock of FDI is
the net (i.e., outward FDI minus inward FDI) cumulative FDI for any given period. Direct investment
excludes investment through purchase of shares (if that purchase results in an investor controlling less than
10% of the shares of the company).
FDI, a subset of international factor movements, is characterized by controlling ownership of a business
enterprise in one country by an entity based in another country. Foreign direct investment is distinguished
from foreign portfolio investment, a passive investment in the securities of another country such as
public stocks and bonds, by the element of "control". According to the Financial Times, "Standard
definitions of control use the internationally agreed 10 percent threshold of voting shares, but this is a grey
area as often a smaller block of shares will give control in widely held companies. Moreover, control of
technology, management, even crucial inputs can confer de facto control."

Historical Background
Before Stephen Hymer's landmark work on FDI in 1960, no theory existed that dealt specifically with FDI.
However, there are theories that dealt generally with foreign investments. Both Eli Heckscher (1919) and
Bertil Ohlin (1933) developed the theory of foreign investments by using neoclassical economics and
macroeconomic theory. Based on this principle, the differences in the costs of production of goods between
two countries cause specialisation of jobs and trade between countries. Reasons for differences in costs of
production can be explained by factor proportions theory. For example, countries with a greater proportion
of labour will engage in labor-intensive industries while countries that have a greater proportion of capital
will engage in capital-intensive industries. However, such a theory makes the assumption that there is
perfect competition, there is no movement of labour across country borders,and the multinational companies
assumes risk neutral preferences. In 1967, Weintraub tested this hypothesis by collecting United States data
on rate of return and flow of capital. However, the data failed to support this hypothesis. Data from surveys
on the motivation of FDI also failed to support this hypothesis.
Intrigued by the motivations behind large foreign investments made by corporations from the United States of
America, Hymer developed a framework that went beyond the existing theories, explaining why this
phenomenon occurred, since he considered that the previously mentioned theories could not explain foreign
investment and its [Link] the challenges of his predecessors, Hymer focused his theory on
filling the gaps regarding international investment. The theory proposed by the author approaches
international investment from a different and more firm-specific point of view. As opposed to traditional
macroeconomics-based theories of investment, Hymer states that there is a difference between mere capital
investment, otherwise known as portfolio investment, and direct investment. The difference between the
two, which will become the cornerstone of his whole theoretical framework, is the issue of control, meaning
that with direct investment firms are able to obtain a greater level of control than with portfolio investment.
Furthermore, Hymer proceeds to criticize the neoclassical theories, stating that the theory of capital
movements cannot explain international production. Moreover, he clarifies that FDI is not necessarily a
movement of funds from a home country to a host country, and that it is concentrated on particular
industries within many countries. In contrast, if interest rates were the main motive for international
investment, FDI would include many industries within fewer countries.
Another observation made by Hymer went against what was maintained by the neoclassical theories: foreign
direct investment is not limited to investment of excess profits abroad. In fact, foreign direct investment can
be financed through loans obtained in the host country, payments in exchange for equity (patents,
technology, machinery etc.), and other methods.

The main determinants of FDI is side as well as growth prospectus of the economy of the country when FDI
is made. Hymer proposed some more determinants of FDI due to criticisms, along with assuming market
and imperfections. These are as follows:

Firm-specific advantages: Once domestic investment was exhausted, a firm could exploit its advantages
linked to market imperfections, which could provide the firm with market power and competitive advantage.
Further studies attempted to explain how firms could monetize these advantages in the form of licenses.
Removal of conflicts: conflict arises if a firm is already operating in foreign market or looking to expand its
operations within the same market. He proposes that the solution for this hurdle arose in the form of
collusion, sharing the market with rivals or attempting to acquire a direct control of production. However, it
must be taken into account that a reduction in conflict through acquisition of control of operations will
increase the market imperfections.
Propensity to formulate an internationalization strategy to mitigate risk: According to his position, firms are
characterized with 3 levels of decision making: the day to day supervision, management decision
coordination and long-term strategy planning and decision making. The extent to which a company can
mitigate risk depends on how well a firm can formulate an internationalization strategy taking these levels of
decision into account.
Hymer's importance in the field of international business and foreign direct investment stems from him being
the first to theorize about the existence of multinational enterprises (MNE) and the reasons behind FDI
beyond macroeconomic principles, his influence on later scholars and theories in international business,
such as the OLI (ownership, location and internationalization) theory by John Dunning and Christos Pitelis
which focuses more on transaction costs. Moreover, "the efficiency-value creation component of FDI and
MNE activity was further strengthened by two other major scholarly developments in the 1990s: the
resource-based (RBV) and evolutionary theories". In addition, some of his predictions later materialized, for
example the power of supranational bodies such as IMF or the World Bank that increases inequalities
(Dunning & Piletis, 2008). A phenomenon the United Nations Sustainable Development Goal 10 aims to
address.

FDI in the first quarter of 2023

July 2023 update:

Preliminary estimates in Q1 2023 show global FDI flows tripled from very low levels recorded in Q4
2022, reaching USD 440 billion. However, on a year-on-year basis, global FDI flows remained 25% below
the level recorded in Q1 2022.
Global FDI flows remained 25% below their level recorded in Q1 2022 (USD bn)
Top recipients of FDI inflows worldwide in the first quarter of 2023 were the United States (USD 109
billion), Brazil (USD 21 billion), and China (USD 21 billion).
Top sources of FDI outflows worldwide were the United States (USD 110 billion), Germany (USD 57 billion)
and China (USD 50 billion).
OECD FDI inflows reached USD 185 billion in Q1 2023, up from negative levels recorded in Q4
2022.2 However, they were 38% below their level recorded in Q1 2022.
OECD FDI outflows increased seven-fold in Q1 2023, to USD 359 billion, compared to historically low
levels recorded in Q4 2022.2 However, on a year-on-year basis, OECD FDI outflows decreased by 25%
compared to Q1 2022.
● International
investment in SDG sectors in developing countries increased in 2022, with project
numbers growing in infrastructure, energy, water and sanitation, agrifood systems, health and
education.

● Butthe increase since the SDGs were adopted in 2015 is relatively modest due to weak growth in the
early years and the sharp decline in investment during the COVID-19 pandemic.

● Thereport shows that, despite the growth, the annual SDG investment gap in developing countries
has widened from $2.5 trillion in 2015 to an alarming $4 trillion. The increase stems from both
inadequate investment and additional needs.

● Developing countries’ energy investment needs, estimated at $2.2 per year – make up more than half
the gap. This refers to investment in energy generation, energy efficiency and low-carbon transition
technologies and sources. Large gaps also exist for water and transport infrastructure.

● The widening SDG investment gap in developing countries stands in contrast to positive trends
observed in sustainability investment in global capital markets. The sustainable finance market grew
10% to $5.8 trillion in 2022.
● Although renewable energy investments have nearly tripled since the adoption of the Paris
Agreement in 2015, most of the money has gone to developed countries.

● While developing countries need about $1.7 trillion each year in renewable energy investments –
including for power grids, transmission lines and storage – they only attracted about $544 billion in
2022.

● Thereport shows that more than 30 developing countries still haven’t registered a large international
investment project in renewables.

● Andin most of the 10 developing countries with the highest levels of international investment in
renewable energy, investment in renewables represents between one tenth and one third of total FDI

● The cost of capital is a key barrier to energy investments in developing countries, which are seen as
riskier. Partnerships between international investors, the public sector and multilateral financial
institutions can greatly reduce the cost of capital.

● Bringing in international investors, for example, lowers the spread on debt finance by 8%. Adding
multilateral development banks (MDBs) lowers it by 10%. And combining the two with
governments in public-private partnerships reduces it by 40%.

● Although most developing countries have set targets for transitioning to sustainable energy sources,
only one third of them have turned the targets into information on investment requirements.

● Thereport highlights the importance of lowering the cost of capital for clean energy investments in
developing countries and supporting them more in their investment planning and project preparation.
● Thevalue of the sustainable finance market – which includes bonds, funds and voluntary carbon
markets – grew more than 10% to $5.8 trillion in 2022, despite a turbulent economic environment of
high inflation, rising interest rates and the looming risk of a recession.

● Notably,
sustainable bond issuance has grown fivefold over the past five years. The sustainable bond
market was worth $3.3 trillion in 2022.

● In2022, the top 100 sovereign wealth and public pension funds monitored by UNCTAD improved
their disclosure of climate actions, including investment in sustainable energy and divestment from
fossil fuels. Also, two thirds of reporting funds have committed to achieving net zero in their
investment portfolios by 2050.

● The report highlights that institutional investors, pension funds and sovereign wealth funds are
ideally placed to help finance clean energy in developing countries.

● Butthey often lack access to investment opportunities in developing countries because they are
prevented from financing non-investment-grade projects.

● Also, while sustainable funds outperform their conventional peers on environmental, social and
governance criteria, greenwashing remains a challenge. At least a quarter of funds fail to live up to
their sustainability credentials.

● Enhancing exposure to developing countries and addressing concerns surrounding greenwashing are
key priorities for the sustainable finance market.
● Investmentpolicymaking activity surged in 2022 as many countries adopted measures to counter an
expected economic downturn.

● Measures favourable to investment reached 102, nearly doubling from the previous year and
regaining their pre-pandemic share of total measures.

● Investment facilitation measures featured prominently in developing countries and, for the first time
since the pandemic, also in developed nations. They included new initiatives to promote renewable
energy and other climate-related investments.

● Work to reform the international investment agreement (IIA) regime continued in 2022. This
included new types of investment-related agreements, the termination of existing bilateral investment
treaties and ongoing multilateral discussions on reforming investor–State dispute settlement
mechanisms.

● Forthe third consecutive year, treaty terminations exceeded new IIAs. This brought the IIA universe
to 3,265 treaties, of which 2,584 are in force.

● Butthe landscape is still dominated by old-generation IIAs, which are characterized by

inconsistencies with the global sustainability imperative and can hinder governments’ policy space to
implement measures needed for the energy transition.

● This makes reforming the IIA regime even more urgent.

Data

Singapor Japa
Year United States United Kingdom e Mauritius n Sensex index
200
2 0.5 0.2 0.1 0.1 0 3,834.90
200
3 3 0.4 0.2 0.1 0.1 6,264.82
200
4 9.1 1.3 0.5 0.2 0.1 5,825.45
200
5 15.9 1.6 0.6 0.3 0.1 9,594.60
200
6 22.6 2.7 0.8 0.4 0.2 12,020.01
200
7 35.6 5.6 1.5 0.7 0.3 19,249.99
200
8 17.3 4.9 1 0.5 0.2 9,086.90
200
9 15.7 4.3 0.9 0.4 0.2 16,153.81
201
0 26.7 2.5 1.4 0.6 0.3 19,504.78
201
1 30.5 2.1 1.6 0.7 0.3 17,655.25
201
2 18.2 5.4 2.7 1.2 0.7 19,107.08
201
3 15.7 3.7 2.2 0.9 0.6 21,006.33
201
4 16.2 3.9 2.5 1.1 0.7 28,065.02
201
5 24 6.4 4.2 1.9 0.9 26,627.99
201
6 26.6 7 4.6 2.1 1 26,897.62
201
7 21.1 5.7 3.8 1.6 0.8 33,540.21
201
8 38.7 7.6 5.2 2.2 1.1 36,444.94
201
9 21.4 6.2 4.1 1.8 0.9 40,305.85
202
0 34.1 8.1 5.5 2.3 1.2 47,765.05
202
1 71.9 10.5 6.9 2.9 1.5 58,847.01
202
2 17.4 5.3 3.6 1.9 1 59,363.97

What Is an Eclectic Paradigm?

An eclectic paradigm, also known as the ownership, location, internalization (OLI) model or OLI framework,
is a three-tiered evaluation framework that companies can follow when attempting to determine if it is
beneficial to pursue foreign direct investment (FDI). This paradigm assumes that institutions will avoid
transactions in the open market if the cost of completing the same actions internally, or in-house, carries a
lower price. It is based on internalization theory and was first expounded upon in 1979 by the scholar John
H. Dunning.

Understanding Eclectic Paradigms

The eclectic paradigm takes a holistic approach to examining entire relationships and interactions of the
various components of a business. The paradigm provides a strategy for operation expansion through FDI.
The goal is to determine if a particular approach provides greater overall value than other available national
or international choices for the production of goods or services.

Since businesses seek the most cost-effective options while still maintaining quality, they may use the eclectic
paradigm to evaluate any scenario which exhibits potential.

Three Key Factors of the Eclectic Paradigm

For FDI to be beneficial, the following advantages must be evident:

The first consideration, ownership advantages, include proprietary information and various ownership
rights of a company. These may consist of branding, copyright, trademark or patent rights, plus the use and
management of internally-available skills. Ownership advantages are typically considered to be intangible.
They include that which gives a competitive advantage, such as a reputation for reliability.

Location advantage is the second necessary good. Companies must assess whether there is a comparative
advantage to performing specific functions within a particular nation. Often fixed in nature, these
considerations apply to the availability and costs of resources, when functioning in one location compared
to another. Location advantage can refer to natural or created resources, but either way, they are generally
immobile, requiring a partnership with a foreign investor in that location to be utilized to full advantage.

Finally, internalization advantages, signal when it is better for an organization to produce a particular
product in-house, versus contracting with a third-party. At times, it may be more cost-effective for an
organization to operate from a different market location while they keep doing the work in-house. If the
business decides to outsource the production, it may require negotiating partnerships with local producers.
However, taking an outsourcing route only makes financial sense if the contracting company can meet the
organization’s needs and quality standards at a lower cost. Perhaps the foreign company can also offer a
greater degree of local market knowledge, or even more skilled employees who can make a better product.

Real World Example

According to Research Methodology, an independent research and analyst firm, the eclectic paradigm were
applied by Shanghai Vision Technology Company, in its decision to export its 3D printers and other
innovative tech offerings. While their choice strongly considered the disadvantage of higher tariffs and
transportation costs, their internationalization strategy ultimately allowed them to flourish in new markets.
Impact of FDI Projects on Indian Economy

Foreign Direct Investment (FDI), being a key driver of economic growth, has been a significant non-debt
financial resource for India's economic development. Foreign corporations invest in India to benefit from the
country's particular investment privileges such as tax breaks and comparatively lower salaries. This helps
India develop technological know-how and create jobs as well as other benefits. These investments have
been coming into India because of the government's supportive policy framework, vibrant business climate,
rising global competitiveness and economic influence.

The government has recently made numerous efforts, including easing FDI regulations in various industries,
PSUs, oil refineries, telecom and defence. India's FDI inflows reached record levels during 2021-22. The
total FDI inflows stood at US$ 46.03 billion in the current financial year. Information and technology,
telecommunication and automobile were the major receivers of FDI in FY22. With the help of significant
transactions in the technology and health sectors, Multinational companies (MNCs) have pursued strategic
collaborations with top domestic business groups, fuelling an increase in cross-border M&A of 83% to US$
27 billion. India emerges as the FDI powerhouse and secures the third-highest foreign investment in 2022.
The total amount of FDI inflows received during the last nine years (April 2014-March 2023) was US$
596.07 billion. This FDI has come from more than 101 countries that have invested across 31 UTs and
States and 57 sectors in the country.

India's FDI inflows have increased 20 times from 2000-01 to 2021-22. According to the Department for
Promotion of Industry and Internal Trade (DPIIT), India's cumulative FDI inflow stood at US$ 919.633
billion between April 2000- March 2023, mainly due to the government's efforts to improve the ease of doing
business and relax FDI norms. The total FDI inflow into India from January to March 2023 stood at US$
15.49 billion. From April 2000– March 2023, India's service sector attracted the highest FDI equity inflow of
16% amounting to US$ 102.85 billion, followed by the computer software and hardware industry at 15%,
amounting to US$ 94.91 billion, trading at 6%, US$ 39.53 billion, telecommunications at 6%, US$ 39.04
billion and automobile industry at 5%, US$ 34.74 billion. India also had major FDI inflows during April
2000- March 2023, coming from Mauritius at US$ 163.87 billion with a total share of 26%, followed by
Singapore at 23% (US$ 148.16 billion), the USA at 9%, (US$ 60.19 billion), Netherlands at 7%, (US$ 43.75
billion) and Japan at 6%, (US$ 38.74 billion). The state that received the highest FDI during this period was
Maharashtra (US$ 53.97 billion), followed by Karnataka (US$ 44.46 billion), Gujarat (US$ 31.90 billion),
Delhi (US$ 25.19 billion), and Tamil Nadu (US$ 8.50 billion). In 2022 (until August 2022) India received
811 Industrial Investment Proposals which were valued at Rs. 352,697 crore (US$ 42.78 billion).
Cumulatively, the total amount of Industrial investment proposals for 2022 increased to US$ 298 billion (Rs.
23.6 lakh crore) as compared to US$ 169.5 billion (Rs. 13.8 lakh core) in the previous year.

INVESTMENTS AND DEVELOPMENTS

Foreign direct investment (FDI) in India has played an important role in the development of the Indian
economy. It has in lot of ways facilitated India to achieve a certain degree of financial stability, growth and
development. The objective of the paper is to analyse the trends of Inflows during 1991-2011(study period)
in India and to know about the global scenario and to examine the relationship of liberalised regime pursued
by the countries with the level of FDI stock. To empirically test this relationship, Regression analysis was
carried out between FDI Restrictiveness Index (FDI Index) and level of FDI stock and the results reveal a
significant relationship between this index and the level of FDI stock. This index measures statutory
restriction, all discriminatory measures affecting foreign investors, including market, access restrictions and
departures from national treatment and gives scores to the respective countries in this endeavour. This study
will give more insights about the policy framework to be followed by the countries to increase the flow of
FDI inflows especially in the developing countries as for them this is the engine for economic growth.
India has become an attractive destination for FDI in recent years, influenced by various factors which have
boosted FDI. India ranked 37th in the World Competitive Index 2022 jumping 6 positions from the 43rd
rank in 2021. India was also named as the 48th most innovative country among the top 50 countries,
securing 40th position in the Global Innovation Index 2022. These factors have boosted FDI investments in
India. Some of the recent investments are as follows:

● InJuly 2023, Walt Disney is considering options for its Star India business, including a joint venture
or sale, as it looks to help the India business grow and reduce costs.

● In
July 2023, French advertising and public relations company Havas’s India arm has announced the
acquisition of PivotRoots.

● In
June 2023, Allcargo Logistics completes acquisition of 30% stake in Gati-Kintetsu Express
(GKEPL) for US$ 49.48 million (Rs. 406.71 crore).

● InJune 2023, BPEA EQT group (formerly Baring Private Equity Asia), in partnership with
ChrysCapital, is set to acquire around 90% stake in Housing Development Finance Corporation's
wholly-owned education financial subsidiary HDFC Credila Financial Services Ltd (HDFC Credila)
for US$ 1.10 billion (Rs. 9,060.5 crore).

● In
June 2023, Private equity (PE) investors Blackstone Inc., BPEA EQT ((formerly Baring Private
Equity Asia), CVC Capital Partners, and General Atlantic Service Company are competing to
acquire Mumbai-based Indira IVF Hospital Pvt. Ltd.

● InApril 2023, Sheares Healthcare, a subsidiary of Singapore-based Temasek, has agreed to purchase
a majority position in Manipal Health Enterprises, increasing its holding from 18% to nearly 59% for
around US$ 2 billion (Rs. 16,400 crore).

● In
February 2023, Singapore Airlines acquired 25.1% share in the Air India group after investing
US$ 267 million.

● VilCart,
the rural economy-focused technology startup bagged US$ 18 million in January 2023 from
Asia Impact SA, Nabventures Fund and Texterity Pvt Ltd in order to expand their operations.

● Data
Science and AI Solutions company, Tredence raised US$ 175 million in series B funding from
Advent International in December 2022.

● InDecember 2022, a portfolio company of Edelweiss Alternative Asset Advisors Ltd.'s

Infrastructure Yield Plus Strategy, Epic Concesiones Pvt Ltd., acquired a 100% equity stake in L&T
Infrastructure Development Projects Limited (L&T IDPL) for an enterprise value of approximately
US$ 734.57 million (Rs. 6,000 crore).

● Indian
beer startup Bira 91, raised US$ 70 million from Japanese beverage conglomerate Kirin
Holdings in November 2022.

●A business-to-business (B2B) e-commerce startup, Udaan bagged an investment of US$ 120 million
in October 2022, from existing shareholders and another US$ 35 million from EvolutionX, started by
DBS and Temasek via convertible notes and debt in November 2022.

●A Software-as-a-service (SaaS) company, Icertis bagged a funding of US$ 150 million on 31st
October 2022 from Silicon Valley Bank.
● In
October 2022, Byju’s raised US$ 250 million from the existing lead investor Qatar Investment
Authority (QIA).

● upGrad,an ed-tech unicorn recently raised US$ 210 million in a funding round led by ETS Global,
Singapore's Kaizen Management Advisors and Bodhi Tree at a valuation of US$ 2.25 billion in
August 2022.

● Novo Holdings, a leading international investor in healthcare and life sciences invested US$ 50
million in MedGenome, a health tech startup in August 2022.

● In
July 2022, OneCard, a mobile-first credit card company, raised US$100 million backed by
Temasek, making it the 104th unicorn in India.

● G.O.A.T Brand Labs raised US$ 50 million led by Winter Capital, 9Unicorns, Venture Catalysts,
Vivriti Capital and Oxyzo on June 16th, 2020.

● In
April- September 2022, India received FDI investments of US$ 3.21 million in the defence
manufacturing sector.

● In
May 2022, Italian financial services major Generali completed the acquisition of a 25% stake in
Future Generali India Insurance from Future Enterprises for Rs. 1,252.96 crore (US$ 161.92
million).

● InMay 2022, GenWorks Health secured a second round of funding worth Rs. 135 crore (US$ 17.44
million) from a consortium of investors, including Somerset Indus Capital Partners, Morgan Stanley,
through its funding arm Grand Vista, Evolvence and Wipro GE.

● InMay 2022, Toplyne, a Software-as-a-Service (SaaS) start-up, raised US$ 15 million in a funding
round led by Tiger Global and Sequoia Capital India.

● In
May 2022, Kiranakart Technologies Pvt. Ltd, which runs the 10-minute grocery delivery platform
Zepto, raised US$ 200 million in a Series D funding round led by Y Combinator's Continuity Fund,
which valued it at US$ 900 million.

● InMay 2022, KoinBasket, a thematic crypto investment start-up, raised US$ 2 million in a pre-seed
funding round.

● In
May 2022, Invictus Insurance Broking Services Pvt. Ltd, which runs the insurtech platform
Turtlemint Insurance Services Pvt. Ltd. raised US$ 120 million in a Series E funding round led by
Amansa Capital, Jungle Ventures and Nexus Venture Partners.

● InMay 2022, Jaipur-based online furniture and home decor platform [Link] raised
around US$ 30 million in a Series B funding round led by WestBridge Capital.

● InMay 2022, B2B cross-border tech platform Geniemode received US$ 28 million in a Series B
funding round led by Tiger Global and Info Edge Ventures.

● InJanuary 2022, Google announced a US$ 1 billion investment in Indian telecom Bharti Airtel,
which includes an equity investment of US$ 700 million for a 1.28% stake in the company, and US$
300 million for a potential future investment in areas such as smartphone access, networks and the
cloud.
 ● In 2021, India received R&D investments of Rs. 343.64 million (US$ 4.35 million); this was 516%
higher compared to the previous calendar year.

● Canada's pension fund investment board invested Rs. 1,200 crore (US$ 160.49 million) as an anchor
investor in the IPO of multiple Indian companies: One97 Communications (Paytm), Zomato, FSN E-
Commerce Ventures (Nykaa) and PB Fintech.

● The FDI in India's renewable energy sector stood at US$ 949.45 million for the first quarter of FY23.
The cumulative FDI inflow in the renewable sector from April 2010 to June 2022 stood at US$ 11.75
billion.

● In the textile sector, the amount of investment raised through FDI inflows during 2017-2022 was
US$ 1,522.23 million.

● Singapore’s investors, during the four-day presentation, have committed investment worth US$ 200
billion (Rs. 20,000 crores) in Uttar Pradesh, distributed in a range of fields like data centres, logistics
services and education, etc. The four-day presentation was concluded by the UP Global Investment
Summit (UPGIS) delegation, which was led by Mr. Swatantra Dev Singh, State Minister of Jal
Shakti and Flood Control. UPGIS is to be held from February 10-12, 2023, in Lucknow.

● The US$ 200 billion investments will be in infrastructure, data centres, inland waterways, logistics
and warehousing, food and agro-processing, educational institutions, skilling centres, waste
management, and so on.

● In FY 2023, Singapore accounted for maximum inward FDI in India at US$17.20 billion, followed
by Mauritius (US$6.13 billion), the US (US$6.04 billion), UAE (US$3.35 billion), and
the Netherlands (US$2.49 billion).
● Other top countries in terms of FDI equity inflow in India during the first three quarters of FY 2023
include UK, Japan, Cyprus, Cayman Islands, and Germany.
●

GOVERNMENT INITIATIVES

In recent years, India has become an attractive destination for FDI because of favourable government policies.
India has developed various schemes and policies that have helped boost India's FDI. These schemes have
prompted India's FDI investment, especially in upcoming sectors such as defence manufacturing, real estate,
and research and development. Some of the major government initiatives are:

● The Reserve Bank of India has taken a number of actions to increase foreign exchange inflows.
These actions consist of:

o Exempting additional Foreign Currency Non-Resident (Bank) [FCNR(B)] and Non-Resident

(External) Rupee (NRE) deposits from Cash Reserve Ratio (CRR) and Statutory Liquidity
Ratio (SLR).

o Authorization for banks to accept new FCNR(B) and NRE deposits without regard to current
interest rate regulations until the end of October 2022.

o Inclusion
of all new issuances of 7-year and 14-year G-Secs under the Fully Accessible Route
(FAR) for FPls.
 o Exemption from the short-term limit for FPls' investments in G-Secs and corporate debt made
until October 31, 2022.

o PermittingFPI in commercial paper and non-convertible debentures with an original maturity

of up to one year.

o A temporaryincrease in the limit for external commercial borrowings (ECBs) under the
automated route from US$ 750 million or its equivalent per fiscal year to US$ 1.5 billion.

o Increasein the all-in cost ceiling under the ECB framework by 100 basis points, subject to
the borrower having an investment grade rating.

o Permission for AD Cat-I banks to use foreign currency borrowings made abroad to fund
foreign currency loans to organisations for a variety of end uses other than exports.

● TheGovernment of India increased FDI in the defence sector by liberalizing it to 74% through the
automatic route and 100% through the government route.

● TheForeign Investment Facilitation Portal (FIFP) is a new online single-point interface of the
government for investors to facilitate Foreign Direct Investment proposals to evaluate and further
authorise them under the Government approval route.

● The
sectoral cap for the pharmaceutical industry has been lowered, 74% of FDI is permitted in the
Brownfield pharma sector via the automatic method, and 100% is permitted via the approved route.

● Inthe civil aviation sector, 100% FDI is allowed under automatic routes in brownfield airport
projects.

● For
single brand retail trading, local sourcing norms have been relaxed for up to 3 years and 100%
FDI is allowed under automatic route.

● The
government has amended the Foreign Exchange Management Act (FEMA) rules, allowing up to
20% FDI in insurance company LIC through the automatic route.

● Thegovernment is considering easing scrutiny on certain FDIs from countries that share a border
with India.

● Theimplementation of measures such as PM Gati Shakti, single window clearance and GIS-mapped
land bank is expected to push FDI inflows in 2022.

● Thegovernment is likely to introduce at least three policies as part of the Space Activity Bill in
2022. This bill is expected to clearly define the scope of FDI in the Indian space sector.

● InSeptember 2021, India and the UK agreed for an investment boost to strengthen bilateral ties for
an 'enhanced trade partnership'.

● In
September 2021, the Union Cabinet announced that to boost the telecom sector, it will allow
100% FDI via the automatic route, up from the previous 49%.

● InAugust 2021, the government amended the Foreign Exchange Management (non-debt
instruments) Rules, 2019, to allow a 74% increase in FDI limit in the insurance sector.
 ● Many reforms like National Technical Textiles, Silk Samagra-2 scheme, Seven PradhanMantri Mega
Integrated Textile Region and Apparel (PM MITRA) Parks, Production Linked Incentive (PLI)
Scheme for Textiles to promote the production of Man-Made Fibre (MMF) Apparel, MMF Fabrics
and Products of Technical Textiles, and more initiatives are taken by the government to enhance
export and to promote FDI in the textile sector.

Analysis of effects on Indian stock market by FDI projects

The amount of FDI inflows into India in terms of US$ million, the BSE, and the NSE during the periods
shown in table 1 are shown below. The below table.1, clearly shows the funds that had come to India during
2014 was 28,784 US$ million and then it had increased to $39,300 million in the year 2015. And the rise in
the FDI inflow to India had continued in the year 2016 with 46,400 US$ Million had entered into Indian
markets. But there is a decrease in the FDI inflow in the years 2017 that is $ 43,575 million and there is a
further decrease in the FDI in the year 2018 as well and the amount is $ 42,409 million. In the year 2019,
there is a rise in FDI inflow when compared to the previous year which is considered to be in the declining
stage the amount that had entered Indian stock markets is $ 47,634 million. This rising trend had increased
further in the year 2020 where it had reached high compare to all other years that is $ 64,680 million had
flooded into Indian markets. As we can observe that there is a fluctuating trend during the study period with
shows a huge rise in the year 2020 as compared to 2014.

Unlocking the Potential of FDI in India

Foreign Direct Investment (FDI) has emerged as a pivotal driver of India's economic growth and
development. Over the years, India has actively pursued policies to attract FDI across various sectors, and
the results have been promising. The benefits of FDI to India are multifaceted, touching upon economic,
social, and technological dimensions.

[Link] Growth : FDI has played a significant role in boosting India's GDP and contributing to its
economic expansion. It has led to increased investment, job creation, and enhanced productivity across
industries.

2. Job Creation : FDI inflows have led to the creation of millions of jobs in various sectors, ranging from
manufacturing to services. This has not only reduced unemployment but also improved the standard of
living for many.

3. Infrastructure Development : FDI has been instrumental in developing critical infrastructure, such as
highways, ports, and telecommunications. This has not only improved connectivity but also facilitated
business operations.
4. Technological Advancement : Foreign investors bring advanced technologies and management practices,
which have a spillover effect on the domestic industries. This helps in enhancing competitiveness and
innovation.

5. Export Growth : FDI often leads to the expansion of export-oriented industries, contributing to a favorable
balance of trade and strengthening India's position in the global market.

6. Balanced Regional Development : FDI has not been confined to metropolitan areas; it has also spurred
development in tier-II and tier-III cities, promoting more balanced regional growth.

7. Diversification of Industries : FDI has encouraged diversification of industries, reducing dependence on a

few sectors, and making the Indian economy more resilient.

8. Foreign Exchange Reserves : Steady FDI inflows contribute to bolstering India's foreign exchange reserves,
providing stability in times of economic volatility.

9. Policy Reforms : To attract more FDI, India has consistently undertaken policy reforms, making the
investment environment more investor-friendly.

10. Global Integration : FDI has integrated India into the global economy, fostering trade relations, and
positioning the country as an attractive destination for investment.

In conclusion, FDI has been a driving force behind India's economic transformation. However, it's crucial to
strike a balance between attracting foreign investment and safeguarding national interests. By continuing to
welcome FDI while ensuring robust regulatory mechanisms, India can harness its potential as a global
economic powerhouse.

India's journey with FDI is ongoing, and as it navigates the complexities of the global economy, the nation
stands poised to reap even greater benefits in the years ahead.

pip install statsmodels

import numpy as np
import pandas as pd
from [Link] import grangercausalitytests

# Generate some sample data

[Link](42)
n_obs = 100
time_series_1 = [Link](n_obs)
time_series_2 = 0.5 * time_series_1 + [Link](n_obs)

# Create a DataFrame
data = [Link]({'TimeSeries1': time_series_1, 'TimeSeries2': time_series_2})

# Perform Granger causality test

max_lag = 3 # You can adjust the maximum lag order as needed
test_result = grangercausalitytests(data, max_lag, verbose=True)

# Access the test results

for lag in range(1, max_lag + 1):
print(f"Granger causality test at lag {lag}:")
print("F-statistic:", test_result[lag][0]['ssr_ftest'][0])
print("P-value:", test_result[lag][0]['ssr_ftest'][1])
 print("Null hypothesis (H0): TimeSeries1 does not Granger cause TimeSeries2")
print("Alternate hypothesis (H1): TimeSeries1 Granger causes TimeSeries2")
print("=" * results)

Result:
Actual P value – 0.4
Tabulated P value – 0.67

Hence we accept null Hypothesis