The Indian government is currently discussing the establishment of a foreign investment regulatory mechanism to monitor and review foreign direct investment (FDI) post-investment, according to insider sources. Although the concept is still in the discussion phase, the proposed oversight would ensure that FDI entering the country benefits the economy and originates from legitimate sources.
Many countries already conduct oversight on FDI inflows, and there is growing sentiment that India should implement a similar mechanism. One source explained, “It’s a form of oversight on the capital entering the country, which could help ensure that the incoming FDI is beneficial for the economy.”
India remains a prime destination for FDI, thanks to its 1.4 billion-strong market, stable policies, and skilled workforce. To attract more foreign investment, the government has implemented measures to simplify business procedures, reduce the compliance burden, and ease FDI norms in various sectors such as space, e-commerce, pharmaceuticals, civil aviation, and digital media. The government also launched the Production-Linked Incentive (PLI) scheme across 14 sectors, including electronics and white goods, to further boost investment.
The “Make in India” initiative, launched in September 2014, continues to drive foreign and domestic investments by fostering innovation and creating world-class infrastructure. Over the last decade, FDI inflows increased by 119%, reaching $667 billion compared to $304 billion in the previous decade. The majority of FDI (over 90%) was received through the automatic route.
In the April-June quarter of the current fiscal year, FDI inflows surged by 47.8% to $16.17 billion, with significant investments in sectors such as services, computer software, telecom, and pharmaceuticals. Countries like Mauritius, Singapore, the U.S., the Netherlands, and Japan continue to be major sources of FDI into India.
The government is also developing industrial townships with world-class infrastructure to boost domestic manufacturing and attract more foreign investors.
On the matter of national security risks from FDI, experts like Saurav Kumar, Partner at IndusLaw, suggested that a dedicated law to manage these risks could enhance India’s international legal standing and offer greater transparency and predictability. Rudra Kumar Pandey, Partner at Shardul Amarchand Mangaldas & Co, echoed this sentiment, advocating for a clear domestic law that outlines guidelines for processing foreign investment applications and addresses concerns regarding national security risks. Such a law would promote transparency and increase investor confidence in India’s FDI approval process.
