Push for direct investment of US$100b a year by wooing Chinese investors

India aims to attract at least US$100 billion a year in gross foreign direct investment (FDI), a top official has said, as the nation courts investors looking to diversify away from China.

“Our target is that we will average at least US$100 billion over the next five years. The trend is very positive and upwards,” Rajesh Kumar Singh, secretary in the Department for Promotion of Industry and Internal Trade, said in an interview in New Delhi.

The ambitious target compares with an annual average of more than US$70 billion in FDI in the five years through March 2023 and would be a reversal in trend after last year’s decline. Singh said the figure for this financial year would be “closer to” the US$100 billion target.

The world’s fastest-growing major economy is appealing to businesses that want to hedge against geopolitical tensions by spreading their operations more broadly – sometimes called a “China plus one” strategy. Companies such as Apple and Samsung Electronics have boosted manufacturing in India, taking advantage of incentives offered by Prime Minister Narendra Modi’s government.

Still, foreign investment has not matched the pickup in local manufacturing. Singh attributed that to higher inflation and interest rates in developed nations, as well as geopolitical conflicts and risk perception about emerging markets.

India had “unmatched market growth opportunity in a variety of sectors such as electric vehicles, electronic goods or general consumer goods, where penetration levels in our population is far lower than the global average,” he said. He vowed that the government would take more steps to ease FDI rules.

Boosting the share of manufacturing in India’s economy has been one of the key promises made by Modi, who is seeking a third term in elections that start on April 19. The government’s production-linked incentive programme had already helped boost manufacturing and reduce India’s dependence on imports for products such as telecommunications and auto components, Singh said. He cited export growth that has been driven by new industries. “We have at least 39 new medical devices being made in India that were never made,” he said.

The administration had plans for several new industrial corridors that would possibly get approval within the first 100 days of a new government, Singh said. He acknowledged that the incentive programme had made slow progress in the steel and textile industries, and cited plans to expand the list of items covered under it.

The government was also working to address delays in granting visas to Chinese vendors and professionals who were needed to install machinery, an issue that had been raised by businesses, Singh said.