Trading places: India topples China as leading global FDI destination

Thanks to the strong government push for Make-in-India and a number of mega investment initiatives throughout the year, India has finally replaced long-time rival China as the world’s top-most greenfield investment destination. The Financial Times reported this development as per the findings from the latest report from fDi Intelligence, a data division of the business daily.

With FDI investments of $63 billion announced in 2015, India overtook China which saw investments of $56.6 billion during the year. China reported a 23 percent decline in capital investment and a 16 percent drop in FDI projects due to plateauing economic growth and rising costs, the report said.

Auto sector drives FDI inflows

With 100% FDI allowed under the automatic route in the auto sector, India has become the foremost destination for global automotive OEMs and component suppliers. In order to keep up with the growing demand in India and for exports, several auto makers have invested heavily in various segments of the industry during the last few months.

The industry has attracted FDI worth $14.32 billion (Rs 95,000 crore) during the period April 2000 to December 2015, according to data released by Department of Industrial Policy and Promotion (DIPP). In the first three quarters of 2015-16, the FDI in the automobile industry stood at $1.8 billion and contribute to 5% of the total influx in the country.

Investments

Some of the major investments and developments in the automobile sector in India in the recent past:

-  German luxury carmaker Mercedes-Benz invested $170 million (Rs 1,150 crore) in its Pune plant and now manufactures the bulk of its model range in India.          

-  Japanese two-wheeler manufacturer Honda Motorcycle & Scooter India (HMSI) opened its fourth and world’s largest scooter plant in Gujarat, set up to initially produce 600,000 scooters per annum to be scaled up to 1.2 million scooters per annum by mid-2016.

-  In 2015, American carmaker Ford hiked its investments in India by $750 million (Rs 5,000 crore) for the expansion of its Chennai facility. This fresh investment announcement is over and above the $2 billion already invested by the company to set up shop in the country. 

-  The world’s largest airbag suppliers Autoliv Inc, Takata Corp, TRW Automotive Inc and Toyoda Gosei Co are setting up plants and increasing capacity in India.

-  General Motors plans to invest $1 billion (Rs 6,637 crore) in India by 2020, mainly to increase the capacity at the Talegaon plant in Maharashtra from 130,000 units a year to 220,000 by 2025.

-  US-based carmaker Chrysler has planned to invest $280 million (Rs 1,768 crore) in Maharashtra, to manufacture the Jeep Grand Cherokee model.

As per the Automotive Mission Plan 2016-2026 prepared jointly by the Society of Indian Automobile Manufacturers (SIAM) and the government, the Indian automotive sector has the potential to generate up to $300 billion in annual revenue by 2026, and contribute to over 12 percent to India’s GDP. With most global manufacturers ramping up investments through the FDI route in India, the country is set to be a future platform for the growth of the global automotive industry.