Government Identifies Key Manufacturing Sectors to Attract FDI

• Govt targets electronics, EVs, toys, chemicals, medical devices, and footwear for FDI push.
• Sectors supported by automatic 100% FDI policies and PLI-linked ecosystem.
• Strategy includes roadshows across focus states and regulatory easing under Jan Vishwas Bill.

In the midst of global uncertainty and slow net FDI into India (only US$3.9 billion in April–May), the government, through Invest India, has identified six key sectors to bring in foreign investments: electronics system design and manufacturing (ESDM), non-leather footwear, chemicals, medical devices, toys and electric vehicles (EVs). These sectors are receiving priority through Production Linked Incentive (PLI) plans and coordination with state governments to encourage diversity to reduce reliance on China.

India now provides 100% FDI via automatic route in several vital manufacturing sectors, including auto-components, pharmaceutical greenfield, renewable energy, telecom, textiles, construction, and others. This permissive framework supports India’s aspiration to reach a US $100 billion in annual foreign direct investment on a global scale.

Electronics manufacturing and EVs are central to this strategy. Recent investments, including Foxconn's and brands wanting to make EVs, express confidence in India’s ability to scale up and shift to localized value chains. Toy manufacturing is also picking up as Indian manufacturers want to shift from an 88% share of the domestic market into exporters.

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The government is working with seven priority states, or manufacturing hubs - Maharashtra, Tamil Nadu, Andhra Pradesh, Gujarat, Karnataka, Uttar Pradesh, and Odisha - in terms of strengthening investment facilitation, aligning incentives under the PLI scheme, and planning global roadshows. To support its industrial strategy, key policy initiatives like the Jan Vishwas Bill 2.0 emphasize the need to simplify regulatory norms, thus promoting the ease of doing business for foreign investors.

Foreign direct investment (FDI) rose by 14% during FY2024–25 to US $81 billion, aided by developments in sectors like services (financial and IT) and computer software or hardware and trading. Services will remain the leading sector, but the manufacturing strategy orientates India towards rebalancing, by way of encouragement of industrial growth across priority sectors.