India is one of the most favored FDI destinations in the world. India’s attractive demographic dividend and large consumer market coupled with improvement in the business climate, makes the country an ideal ground for starting and running businesses. Major sources of FDIs in India include Singapore, USA, UK, UAE, Japan, Netherlands, etc.
Meanwhile, along with regular favorites, new FDI sources are also emerging. Lured by India’s inherent potential, new FDI inflow is visible in the country. In recent times, countries such as Spain, Canada, and France have expanded their footprint in the Indian market. Another factor that is benefiting India is the growing trend of diversifying from China. In the post-covid-world, many countries are adopting a China+1 strategy to reduce dependence on China. In such circumstances, India becomes a natural alternative.
Spain: The southern European country is steadily rising the curve to become one of the emerging FDI source countries of India. In FY 21, the Spanish FDI to India soared to USD 425 million, growing at a CAGR of 13% since FY 14, when the annual FDI from Spain to India amounted to a modest USD 181 million. India is one of the fastest-growing emerging economies in the world with a strong focus on infrastructure, sustainable development, cleaner technologies, etc. Going forward in India, economic growth will be linked to urban development, infrastructure upliftment, and improving the living standards of households through policy impetus. The South Asian country has implemented a wide range of ambitious projects including Smart City Mission in over 100 cities, rolling out suburban transit systems in both metros as well as tier-2 cities, and increase in the percentage of clean energy.
This makes Spain a natural partner in India’s ambitious growth plans. The South European economy is a market leader in infrastructure technologies, clean tech, sustainable engineering, water purification & desalination, etc. Already Spanish companies are increasing their footprint in railway, water desalination, rolling stock manufacturing, etc. There is tremendous future scope for growth for Spanish FDI in India. India’s growing middle-income households will further unlock opportunities for Spanish retail and consumer durable brands.
Canada: The total Canadian FDI into India amounted to USD 3.2 billion between 2000- 22. India and Canada’s thriving relationship is based on a large Indian diaspora living in Canada. Unofficial estimates suggest that close to 1.2 million PIOs stay in Canada.
Despite steady growth in Canadian FDI in India, which has shown a clear sign of acceleration 2016 onwards, the overall Canadian involvement in India is just the tip of the iceberg. The Canadian investments can grow multifold in the times to come, which will also be backed by India’s growing consumer class alongside an abundance of affordable labor and cheaper land prices.
India will also be instrumental in Canada’s marked geopolitical objective of increasing its influence in the Indo-pacific region.
Already there is visible Canadian FDI in a host of segments such as solar energy & equipment, telecommunication, semiconductor, IT, digital technologies, etc. Besides between 2000- 20, around USD 411 million has been directed towards R&D activities in the healthcare and pharma sectors. Going forward with India becoming the 3rd largest start-up ecosystem and growing impetus on digital payment ecosystem, the Indian fintech sector is expected to see a pick-up in Canadian investments. Canadian interest in India is also underscored by the strong interest shown by Canadian pension funds in Indian infrastructure.
France: The EU nation is aggressively increasing its stake in the Indian market. Since 2000 onwards, France has poured over USD 10.5 billion into India via the FDI route. Out of this close to USD 4 billion has been invested after 2018. There are around 1000 French companies operational in India creating ~ 300,000 employments. Meanwhile, there are 150 Indian companies with ground presence in France. The French investments in India encompass a wide range of sectors including IT & telecommunication, automobile, defense, aviation, etc.
Most of the major French companies have a presence in India. Many of them have formed JVs or have entered strategic partnerships with prominent Indian companies such as Tata, Mahindra, L&T, Reliance, etc. France also has dedicated trade promotion offices in numerous Indian cities. The country is also playing a pivotal role in Infrastructure development in India via soft loans. It has recently pledged a soft loan of USD 110 million to fund infrastructure development and smart cities in India.
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