Decline in FDI temporary, India’s long term growth story strong: DPIIT Secretary

NEW DELHI : Tweaking of PLI tenure on the table; Incentives for white goods PLI will start flowing in the last quarter of FY24: Secretary 

The recent drop in foreign direct investment (FDI) in India was triggered by a combination of geo-politocal challenges and monetary tightening in the developed countries that are the key investors across the globe but does not pose a long term challenge, DPIIT Secretary Rajesh Kumar Singh said in the interview.

 FDI into India registered a sharp slip by 24 per cent to $20.48 billion in April-September 2023-24 largely led by decline in the inflows in sectors such as computer hardware and software, telecom, auto and pharma. 

Concerned by the decline, the government had invited fund managers and start-up founders among other stakeholders for a crucial meeting to find out ways to weed out operational challenges impeding investments.  

 “The combination of strong growth, improving infrastructure will certainly ensure that long term investment flows into India will not get affected by these blips that may happen in a particular year due to a combination of geopolitical issues and economic setbacks in some of the developed countries. Those factors may lead to a dip, but we don’t see this as a long term challenge at all. India remains one of the  most preferred investment  destinations in the world,” Singh said  in an  interview  on  the sidelines of  the  WAIPA World Investment Conference (WIC). 

On  India’s  ability to attract investments  from  global companies looking  for  alternatives to  China, Singh said  India’s capital  inflows  have  not  declined  as much as  China’s  and  capital inflows  from China  is  much higher than  capital flows  from India.  

 “China has built up significant  production capacity. A significant  portion of the global supply chain,  up to  30%,  is  concentrated there. This happened  for  decades,  starting in  the  1990s. This  is not something that  will  disappear overnight,  nor will it disappear  overnight  in  India.  But  you can  get  the ball rolling. We can see changes in certain sectors, mobile  being a specific  example,” Singh said.

The  minister  said  there  will  not  be  a complete replacement,  but  in the future, suppliers  of large American and European companies will  move  to India, not only in the mobile  sector but  also in  other  sectors. other areas  such as  footwear.  

 “We are  incorporating  PLI schemes to  encourage production capacity at the local level,  including  manufacturing, ensuring  that  some  component manufacturing under  the  PLI  scheme is  supported. And combined with more aggressive approaches  to signing  new  FTAs,  we  are sure to gain  significant  momentum,”  he said.  

Responding to former RBI governor Raghuram  Rajan’s  comments on  low value addition under  the production-linked  incentive scheme, the  Minister  said  value addition in  some  sectors under the PLI scheme has crossed the  50 per cent  threshold.  

 “Rajan  is talking  specifically  about mobile  device  manufacturing. In other  sectors, such as  the  auto industry,  PLI  has  imposed  a  value-added threshold of 50%. Therefore, you do not benefit from any incentives until  50%  of national added  value  is reached. On mobile it’s a little different, this  threshold  is  linked  to incremental sales.  But  even their  national  value  added  has  reached  nearly  20%  in three years. China  accounted for  about 38% in 20 odd years. So  that’s pretty  good progress. In the next  two or three years, this number  will  increase even more.  Some PLI schemes already have  strict  domestic value addition  provisions,”  the  Minister  said.  

Singh said  the government is not considering any new PLI  scheme.  and  strive  to ensure that  existing PLIs are fully  registered  and that many  PLIs  are still in  the  gestation  stage.  

 “We want to see them  in action.  We want to see  results.  Currently,  no new PLI  system is planned. It is always possible to modify these systems  to increase  registrations.  And  it’s  an ongoing process,” he said. 

Singh said  investments  in white goods  are  coming  and  incentives will start flowing  in  from the last quarter of this financial year. This comes after the  Union  government in October  amended  the PLI for white goods,  especially  air conditioners and light-emitting  diodes, to “simplify  the  operation  of  the  scheme”  and  promote Make business operations easier.