New Delhi, May 2 (KNN) Despite ambitious government initiatives like ‘Make in India’ and the Production-Linked Incentive (PLI) scheme, India witnessed a significant drop in foreign manufacturing investments during the fiscal year 2024-25.

According to the Ministry of Corporate Affairs, only three foreign manufacturing companies established operations in the country during this period, all within the machinery and equipment sector.

This figure marks the second-lowest in six years, a stark contrast to the 10 foreign industrial firms that set up in 2020-21. In comparison, the services sector attracted 53 foreign companies in FY25, although this too reflects a decline from 91 in 2019-20.

The overall share of the industrial sector among newly established foreign companies in India has dwindled to 10.2 per cent in FY25 from 26 per cent in 2019-20.

This trend raises concerns about India’s appeal as a manufacturing hub, especially when neighbouring countries like Vietnam are attracting substantial foreign investments due to streamlined regulations and robust infrastructure.

While India’s manufacturing sector has seen a 69 per cent increase in FDI equity inflow over the past decade, reaching USD 165 billion, the recent decline in new foreign manufacturing entrants suggests that policy incentives alone may not suffice.

Challenges such as bureaucratic hurdles, inconsistent regulations, and infrastructure deficits continue to deter potential investors.

To address these issues, the government has announced the establishment of a National Manufacturing Mission aimed at enhancing ease of doing business, workforce readiness, and technology availability.

However, the effectiveness of these measures in reversing the current trend remains to be seen.

As India aspires to become a global manufacturing powerhouse, it must not only offer financial incentives but also create a conducive environment that addresses the operational challenges faced by foreign investors.

(KNN Bureau)