China missing among countries driving India’s foreign fund inflows

Foreign direct investment (FDI) into India stood at $58.8 billion in 2021-22 with Singapore and the US being the top two major contributors among the list of 15 nations.

However, China is a notable absentee in the list and what is all the more interesting is that it has not been there in the list of main contributors to India’s foreign inflows since 2017-18, according to Reserve Bank of India (RBI) data.

In the list of country-wise FDI inflows into India in 2021-22, Singapore was the leading contributor with $15.9 billion worth of inflows, followed by the US at $10.5 billion and Mauritius at $9.4 billion.

However, it is the inflows from tax haven Cayman Islands amounting to $3.8 billion — trumping even major economic powers like the UK, Germany, the UAE, Japan and France — that stood out in the list of country-wise contributors to India’s FDI in 2021-22. Experts say that even if inflows from such tax havens could be pure investments by foreign entities, these can turn volatile in the long run.

In fact, Singapore has been the leading contributor to India in terms of country-wise foreign inflows for the past five years, starting from 2017-18. The island nation contributed $12.2 bn in 2017-18, $16.2 billion in 2018-19, $14.7 billion in 2019-20 and $17.4 billion in 2020-21 to India’s foreign inflows. The US and Mauritius have been the other major contributors to India in terms of foreign inflows in the past five years after Singapore.

China, though, has been a notable absentee from the list of country-wise contributors to India’s FDI inflows.

Experts, however, attribute China’s absence to the fact that India approves company-wise FDI proposals from China.

In July, out of 382 FDI proposals received by the Centre from Chinese firms, only 80 were approved, according to media reports. Meanwhile, as per country-wise data of foreign inflows into India, another interesting aspect that has emerged is that major countries like Germany, Canada, France and Denmark contributed less than $1 billion of inflows in 2021-22.