NEW DELHI: In a bid to boost foreign direct investment (FDI) amid a cautious global investment climate, the Indian government, in collaboration with Invest India, has identified several strategic sectors to attract global capital. These include Electronics System Design and Manufacturing (ESDM), non-leather footwear, chemicals, medical devices, toys, and electric vehicles (EVs).
With global investors adopting a wait-and-watch approach and some pulling out funds through public listings, India’s net FDI inflows have remained stagnant. During April-May, net FDI held steady at $3.9 billion, despite a rise in gross inflows from $15.1 billion to $15.9 billion. In 2024–25, net inflows stood at just $949 million, a sharp drop from $10 billion the previous year.
To counter this trend, the government is shifting its focus to facilitation and targeted promotion. “We are focusing on our requirements by systematically identifying the value chains where companies can invest,” a senior official said.
One area gaining significant traction is electronics manufacturing, especially under schemes aimed at developing a resilient supply chain and reducing reliance on China. The Production-Linked Incentive (PLI) scheme for mobile phones has attracted major players like Foxconn, along with their supplier networks.
Officials also noted that other industries, such as air conditioners, are seeing increased domestic manufacturing of key components like compressors, motors, and copper tubes—again spurred by government incentives. Similarly, the PLI scheme has supported local production of pharmaceuticals and medical devices.
“We are discussing how to take this forward,” the official added, pointing to the success of current policies and ongoing consultations to expand their impact.
In the EV space, global players like Vietnam’s VinFast have entered the Indian market, responding to rising local demand. However, some companies are reportedly delaying investments amid ongoing trade negotiations around import duty reductions. Despite the government’s special three-year scheme that allows imports at lower tariffs in exchange for future manufacturing commitments, hesitation persists.
Meanwhile, interest from Chinese firms such as BYD has been met with regulatory scrutiny, as the Indian government maintains strict checks on investments from China.
With a strategic push towards high-potential sectors and an emphasis on building self-reliant supply chains, the government hopes to reverse the FDI slowdown and position India as a manufacturing hub for global investors.
