INTRODUCTION:

The economic environment of developing countries, particularly emerging economies like India, has been significantly shaped by foreign direct investment (FDI). India's market size, demographic potential, and policy-driven growth initiatives have made it a popular destination for international investors, since it is among the fastest-growing and largest economies in the world. India needs foreign direct investment (FDI) because it creates jobs, improved technology, managerial skills, and additional cash to support the country's needs. Evaluating India's overall economic progress and strategic placement in the international market requires a thorough examination of FDI inflows.

The purpose of this study is to compare FDI inflows to India before and after the Make in India campaign was introduced. The project, which was unveiled by the Indian government in September 2014, aimed to encourage both domestic and foreign companies to produce goods in India, thereby transforming the country into a worldwide manufacturing hub. Made in India promised improved infrastructure, easier business procedures, and more welcoming policies for international investors. It concentrated on industries including defence manufacturing, electronics, autos, pharmaceuticals, and textiles (Basu, 2021). With an emphasis on raising the manufacturing sector's GDP contribution and promoting India as a top destination for foreign direct investment, the campaign signalled a dramatic change in India's economic policy.

India has liberalised its FDI laws through a number of reforms prior to the launch of the Made in India initiative, especially after the economic reforms of 1991. The aforementioned reforms facilitated India's further integration into the global economy by opening up industries like banking, insurance, and telecommunications to foreign investment (Singh, 2019a). In contrast to other developing nations like China and Brazil, India's portion of global foreign direct investment (FDI) remains small despite these efforts. India's capacity to draw in more foreign direct investment has been hampered by a number of systemic issues, including bureaucratic inefficiency, poor infrastructure, and a complicated regulatory framework (World Bank, 2020).

In order to address these problems, the "Make in India" program introduced structural reforms in domains such as land acquisition, taxation, and labour legislation. Additionally, it highlighted raising India's standing in the Doing Business rankings—a target it successfully pursued, rising from 142nd in 2014 to 63rd in the 2020 edition (World Bank, 2020). In order to provide foreign investors with more chances, the government also increased sectoral caps on foreign investments in important industries like defence, insurance, and railroads (DPIIT, 2021).

There has been discussion about the Made in India initiative's efficacy, especially with regard to FDI. Supporters claim that India is now one of the top FDI destinations in the world because to the program. For example, during 2019–2020 fiscal year, India brought in $74.39 billion in foreign direct investment (FDI) as opposed to $45.15 billion in 2014–2015 (DPIIT, 2021). Critics counter that while the manufacturing sector was the campaign's main target, a large portion of this investment went towards services like e-commerce and telecommunications (Agarwal, 2020). Furthermore, several industries continued to encounter legislative barriers that discouraged foreign investment, particularly those that required labour-intensive operations and large-scale land acquisition (Banerji, 2017).

This study offers a thorough examination of foreign direct investment (FDI) inflows into India both before and after the Make in India campaign, with a particular emphasis on shifts in investment trends, the industries drawing FDI, and the geographic origins of these inflows. This study will investigate whether the campaign has been successful in increasing foreign direct investment (FDI) inflows to India.
This study attempts to contribute to the continuing discourse on the efficacy of government-led initiatives in generating foreign investment by drawing comparisons between the two separate periods, pre- and post-Make in India. The results of this study will also include policy recommendations for augmenting India's appeal as a destination for foreign direct investment (FDI), particularly in light of the intensifying global competition for FDI.

REVIEW OF LITERATURE:

In India, FDI has long been a major factor in economic growth and development in a number of different areas. Scholars have repeatedly emphasised how crucial foreign direct investment (FDI) is to improving India's economic performance, especially in the post-liberalization period. According to Basu (2021), after economic reforms in the 1990s, India saw a considerable growth in foreign direct investment (FDI). Policy initiatives created an atmosphere that was conducive to investment, but issues with regulatory frameworks and bureaucratic inefficiencies remained.

India's FDI landscape changed after the "Make in India" campaign was introduced in 2014, drawing interest from international investors. Sarkar (2019) asserts that the campaign played a significant role in boosting FDI inflows, particularly in industries other than manufacturing like IT and services. The idea that policy initiatives can have a favourable effect on foreign investment is reinforced by the Department for Promotion of Industry and Internal Trade's (DPIIT) observation of a notable increase in the amount of investments subsequent to the initiative.

Make in India was a success, but the distribution of FDI across industries and geographical areas remained unequal. While FDI increased overall, Agarwal (2020) contends that some states and industries continued to lead FDI inflows, leaving others with little foreign investment, therefore exacerbating regional inequities.

Singh (2019) examined how well India's foreign direct investment (FDI) performed after the "Make in India" campaign in comparison to other BRICS countries. He discovered that although India drew significant foreign direct investment, the country's growth was slower than China's, which had a more strong and varied investment portfolio.

It has also been determined that political and macroeconomic stability play a crucial role in FDI. According to Srinivasan and Sen (2020), FDI inflows were significantly influenced by investors' assessments of India's political stability and how it affected the country's ease of doing business. Furthermore, Kumar and Mishra (2019) emphasised the need of infrastructure enhancements in maintaining foreign direct investment development beyond 2014 (Manchanda and Gaur, 2016).

India has been named among the world's top recipients of foreign direct investment (FDI) in World Bank Report (2020), with improvements in tax laws, deregulation, and enhanced investor safeguards being credited for this ranking. However, worries over tax policies, legal obstacles, and regulatory restrictions continue to limit India's potential for further foreign direct investment. Joshi and Sharma (2021) concluded by talking about labour market reforms and how they affect FDI choices. They came to the conclusion that even while the Make in India campaign brought about a number of reforms aimed at loosening limits on employment and industrial relations, labour regulations still pose a serious threat to investors. Although there are numerous studies on FDI inflows to India but there is a considerable lack of studies focused on the comparison of FDI inflows before and after the Make in India Campaign was launched. This study attempts to fill this gap by analysing the inflows of FDI to India between 2001 to 2023.

DATA AND METHODOLOGY:

The data used in this study includes Foreign Direct Investment (FDI) net inflows, which are presented in Indian rupees (crores), and FDI as a percentage of GDP. The data on FDI inflows in crores was extracted from the Reserve Bank of India's (RBI) Handbook of Statistics on the Indian Economy. Additionally, the data on FDI as a percentage of GDP was sourced from the World Bank's World Development Indicators. The time frame for the analysis spans from the fiscal year 2001-2002 to 2022-2023. The study employs descriptive statistics, primarily showing trends in FDI inflows over the years. These trends and amounts are presented through graphs generated using Microsoft Excel, offering a visual representation of the growth and fluctuations in FDI over the period. The study is of descriptive nature, we have analysed the inflows of FDI before the implementation of Make in India Scheme and after its implementation.

RESULTS AND DISCUSSION:

The Make in India Campaign:

Prime Minister Narendra Modi introduced the "Make in India" campaign on September 25, 2014, with the goal of increasing India's manufacturing output share and turning the country into a worldwide manufacturing hub. The initiative's main goals are to increase the investment climate and support the expansion of the manufacturing sector, which will greatly boost the economy and create jobs. Increasing the manufacturing sector's GDP contribution from approximately 15% in 2014 to 25% by 2025 is one of the campaign's lofty goals. The Goods and Services Tax (GST), which was implemented in July 2017 and streamlined the taxation process, and the Made in India 2.0 initiative, which was launched in 2020 to promote self-reliance and adapt to global changes, are just two of the measures the government has put in place to help with this transformation.

Figure 1: Source: https://www.indiamart.com/proddetail/make-in-india-registration-2850426335291.html?mTd=1

The Make in India campaign also places a strong emphasis on technology developments and talent development, both of which are essential for raising competitiveness and productivity. By 2022, initiatives like the July 2015-launched Skill India Mission want to have trained over 400 million people in a variety of skills (Babu and Vinitha, 2019). Automobiles, electronics, textiles, and medicines are the campaign's key areas. The automotive sector, which grew to become the fourth largest in the world with a projected market value of $118 billion in 2021, is one example of a remarkable success. Furthermore, the May 2020 announcement of the Atmanirbhar Bharat Abhiyan (Self-Reliant India Movement) enhances the Made in India campaign by encouraging domestic manufacture and lowering reliance on imports, especially in vital industries like electronics and medical devices.

In March 2020, the government also introduced the Production-Linked Incentive (PLI) program, which aims to encourage domestic manufacturing in a number of industries. This multidimensional approach intends to establish India as a global leader in manufacturing, thereby enhancing economic growth and employment opportunities in the coming years.

Trend of FDI in India:

The gross domestic product (GDP) of India as a percentage of FDI inflows from 1990 to 2023 is shown in Figure 1. The red line displays a linear trend over the same time period, whereas the blue line displays the actual annual proportion of FDI inflows relative to GDP.
FDI as a share of GDP was comparatively low in the early 1990s, at less than 0.5%. Nonetheless, there has been a discernible rising tendency with notable variations across time (Udandrao and Kuchibhotla, 2016). Interestingly, FDI as a share of GDP peaked in 2008, hitting a high of about 3.5%. There was a steep fall after this high, but levels continued to fluctuate and there was some rebound in the years that followed. The percentage varied between 1% and 2% from 2012 and 2023, with some significant declines and rises.

Figure 2: Source: Author’s own representation using the data from World Development Indicators

Despite occasional fluctuation, the red linear trend line shows a generally increasing trajectory in foreign direct investment (FDI) as a proportion of GDP over the observed period, indicating a long-term increase in India's potential to draw in foreign investment. The general growth pattern of FDI inflows in relation to the GDP of the nation during the previous three decades is represented by this trend line. This graphic illustrates the annual FDI inflow changes as well as the consistent long-term increase, highlighting India's growing importance as a destination for FDI over time.

FDI Inflows before Make in India:

The Figure 3, illustrates the trend of Foreign Direct Investment (FDI) inflows from the financial year 2001-02 to 2013-14. The solid blue line represents the actual FDI inflows, while the dotted red line indicates the linear trend over this period. The data reveals fluctuations in FDI inflows, with a general upward trend, peaking around the financial year 2008-09. This period saw significant economic reforms and liberalization policies aimed at attracting foreign investments, contributing to the observed increase in FDI inflows (Nagarjuna, 2022).

The linear trend line, depicted by the dotted red line, shows a steady upward trajectory, indicating a consistent growth in FDI inflows over the years (Govindan, 2019). This trend suggests that despite the fluctuations, the overall investment climate in India was becoming increasingly favourable for foreign investors. The graph provides a clear visual representation of the impact of pre-Make in India policies on FDI inflows, highlighting the importance of sustained economic reforms and policy measures in attracting foreign investments.

Figure 3: Source: Author’s own representation using the data from World Development Indicators

Figure 4: Source: Author’s own representation using the data from World Development Indicators

Comparing the trends in Foreign Direct Investment (FDI) inflows in absolute terms (Figure 3) with FDI as a percentage of Gross Domestic Product (GDP) (Figure 4) in India before the implementation of the ‘Make in India’ initiative reveals significant insights into economic patterns. Specifically in Figure 4, it is observed that while there are fluctuations, there is an overall trend indicating an increase over time. This suggests that despite yearly variations, FDI’s proportion relative to the country’s GDP has been growing. However, when comparing this trend with that of FDI equity inflows depicted on both graphs, it becomes evident that although there are increases in absolute FDI equity inflows reaching up to approximately 35000 million dollars by 2014 from around 4000 million dollars in 2000, these do not always translate into proportional increases relative to GDP growth. This discrepancy highlights that while foreign investments have been rising nominally (Srivastava, 2019), their impact relative to the size of India’s economy presents a more complex narrative requiring careful analysis beyond mere surface-level numbers (Mandal, 2016). This comparison is relevant as it provides insight into how foreign investments have interacted with India’s economic growth before a major policy shift aimed at increasing manufacturing within the country. Understanding these dynamics can inform assessments about policy effectiveness and broader economic health.

FDI Inflows after Make in India:

Figure 5: Source: Author’s own representation using the data from World Development Indicators

The two graphs (Figure 3 and Figure 5) illustrate the net inflows of Foreign Direct Investment (FDI) to India before and after the launch of the ‘Make in India’ campaign. The first graph, covering the period from 2002-02 to 2013-14, shows a steady increase in FDI inflows with some fluctuations. The trend line indicates a gradual upward trajectory, reflecting India’s growing attractiveness as an investment destination. However, the second graph (Figure 5), spanning from 2014-15 to 2022-23, reveals a more pronounced increase in FDI inflows post the ‘Make in India’ initiative. This campaign, launched in 2014, aimed to transform India into a global manufacturing hub by encouraging both multinational and domestic companies to manufacture their products within the country (Gaur and Padiya, 2017; Singh, 2019b). The significant rise in FDI inflows post-2014 suggests that the campaign has been successful in boosting investor confidence and attracting more foreign investments. The trend line in the second graph shows a sharper upward slope compared to the first, indicating a more robust growth in FDI inflows. This comparison highlights the positive impact of the ‘Make in India’ campaign on foreign investment, underscoring its role in enhancing India’s economic landscape. The Make in India initiative has greatly increased Foreign Direct Investment (FDI) inflows into the country. By simplifying FDI regulations, minimizing compliance requirements, and implementing production-linked incentive (PLI) schemes, the initiative has fostered a more appealing environment for foreign investors. Over the past ten years, FDI inflows have surged by 119%, climbing to $667 billion compared to $304 billion in the previous decade. This influx of investment has played a crucial role in enhancing India's manufacturing capabilities, increasing exports, and fortifying the overall economy.

Figure 6: Source: Author’s own representation using the data from World Development Indicators

The two graphs (Figure 5 and Figure 6) illustrate the net inflows of Foreign Direct Investment (FDI) to India after the Make in India campaign, with the Figure 5 depicting the inflows in million USD from 2014 to 2018, and the Figure 6 showing the inflows as a percentage of GDP for the same period. Both graphs indicate a general upward trend in FDI, with some fluctuations. Figure 6 reveals a peak in FDI inflows around 2016-17, followed by a decline and subsequent stabilization. The linear trendline indicates a slight overall decline in FDI as a percentage of GDP over the period. This trend suggests that while the Make in India campaign initially boosted investor confidence, sustaining high levels of FDI inflows has been challenging. The graph provides valuable insights into the economic impact of the campaign and the evolving investor sentiment towards India’s market. While FDI inflows to India have increased in absolute terms after the Make in India Campaign, the FDI inflows measured in terms of percentage of GDP have declined.

CONCLUSION:

India's economic growth has been significantly fuelled by foreign direct investment (FDI), especially in recent years. Examining the patterns of foreign direct investment inflows prior to and following the introduction of the Make in India campaign in 2014 indicates a noteworthy shift in the nation's investment environment. Before the Make in India initiative, foreign direct investment (FDI) into India was erratic and beset by a number of difficulties. Due in large part to regulatory obstacles, intricate compliance requirements, and a general perception of difficulty in conducting business, India had a small increase in foreign direct investment (FDI) from the early 2000s to 2013. Cumulative FDI inflows between 2000 and 2013 came to almost $276 billion. The amount of foreign capital that came in was restricted by things like bureaucratic red tape, rules that restricted certain industries, and poor infrastructure. These challenges were made worse by the 2008 financial crisis, which momentarily reduced investment. Foreign investors remained wary despite efforts to liberalise FDI norms because of economic volatility and implementation concerns in policy.

The country's approach to FDI underwent a significant change with the September 2014 announcement of the Make in India initiative. The objective of the government was to establish India as a worldwide centre for manufacturing by facilitating economic transactions and drawing in foreign capital. Significant FDI policy liberalisation across a number of industries, including retail, aviation, and defence, was one of the main reforms that allowed foreign businesses to invest more freely in India. Furthermore, the implementation of Production-Linked Incentives (PLI) was designed to increase domestic manufacturing and draw in international corporations by offering financial incentives. This plan has shown to be especially successful in industries like electronics, drugs, and autos. In addition, the government has worked hard to improve regulatory process clarity and streamline compliance procedures, which will facilitate international investors' navigation of the Indian market.

Furthermore, it is anticipated that the emphasis on innovation and skill development would produce a workforce that is competitive and able to satisfy the needs of foreign investors. Partnerships between businesses and academic institutions can increase the supply of trained workers. To sum up, the patterns of foreign direct investment (FDI) into India both before and after the Make in India campaign highlight the revolutionary power of proactive political changes and policies. Given its favourable climate, strategic location, and unwavering dedication to progress, India is poised to become a major destination for international investment in the years to come. India can maintain its position as a top global investment destination and promote sustainable economic growth and development by capitalising on its advantages and resolving its problems.

ACKNOWLEDGEMENT:

The author Adarsh Patel wishes to gratefully acknowledge the financial assistance of the University Grants Commission in the form of Junior Research Fellowship.

DECLARATION OF CONFLICTING INTEREST:

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

FUNDING STATEMENT:

The author(s) received no financial support for the research, authorship, and/or publication of this article.

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Received on 28.09.2024 Revised on 16.10.2024

Accepted on 01.11.2024 Published on 05.12.2024

Available online on December 31, 2024

Res. J. of Humanities and Social Sciences. 2024;15(4):277-282.

DOI: 10.52711/2321-5828.2024.00042