India, FDI, and Davos

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India is planning on investing almost 100 billion dollars in foreign direct investment (FDI) annually, according to the Indian IT minister. The Prime Minister, Narendra Modi, is seeking to attract different investors ahead of a reelection bid. 

Foreign direct investment (FDI) is when an investor, company, or government from another country has an ownership stake in a foreign company or project. Usually, this term is used when a business decides to acquire a stake in a foreign one or to expand its operations to a new region. FDI allows for international economic integration because it creates stable and long-lasting links within different economies and countries. 

When a country is considering an FDI, it usually considers multiple firms or economic projects that offer a skilled workforce for the investor. FDI doesn’t just provide capital investment; it also can include looking over technology, management, and equipment. FDI establishes control over that business and influences the majority of the decisions it makes. 

Even though $100 billion is a great sum of money, the net amount of money involved in foreign direct investment is substantially more. In 2021, more than 1.8 trillion dollars of FDI were made. Usually, the top FDI destinations are China, Canada, Brazil, and India. However, India is now experiencing an FDI outflow, which is usually held by countries like Germany, Japan, and the United Kingdom. As of April 2023, India attracted over $33 billion of FDI inflows. In the 2022 to 2023 financial year, the recorded FDI was $71 billion. 

"We see a 6-8% consistent growth rate over the next full decade, and this is based on a very clearly thought-out strategy. This strategy has four major engines," Information Technology Minister Ashwini Vaishnaw also told Reuters in an interview at the World Economic Forum in Davos.

The World Economic Forum in Davos brings together about 3,000 participants, usually investors, business leaders, journalists, and economists. The event lasts for five days and is meant to discuss global issues across 500 sessions. Though meant to be for issues such as the climate crisis, technology, and health, many also discuss trade between countries for a positive global economy. Through events such as Davos, countries can indicate their wants of FDI in other countries, just as India has. 

Vaishnaw stated that the four major engines he references are investment in infrastructure, lifting those in poverty in India, increasing manufacturing, and simplifying the business process. All these topics, which fall under the umbrella of health, technology, and management, are  issues spoken about in Davos. 

"If you look at how India has conducted its foreign policy, its economic policy, the way it has conducted itself - the entire world has developed a very big amount of trust in India. That trust is what is our biggest capital. That trust gels the entire world in a very harmonious way. For eg, we have signed an MoU with the US, Europe, and Japan on semiconductors, we are working with South Korean govt & and South Korean companies. It's like every possible company wants to collaborate with India in one way or the other. So, we don't think that it's a battle, we think that there is enough for everybody. It's a question of how much importance we give and how much talent we put into it and how much focussed we are on it..." the Minister said.