WHAT IS FOREIGN DIRECT INVESTMENT (FDI)

FDI
Foreign direct investment (FDI) is when a company takes controlling ownership in a business entity in another country. With FDI, foreign companies are directly involved with day-to-day operations in the other country. This means they aren’t just bringing money with them, but also knowledge, skills and technology.
Generally, FDI takes place when an investor establishes foreign business operations or acquires foreign business assets, including establishing ownership or controlling interest in a foreign company.
Where is FDI made?
Foreign Direct Investments are commonly made in open economies that have skilled workforce and growth prospect. FDIs not only bring money with them but also skills, technology and knowledge.
FDI in India
FDI is an important monetary source for India's economic development. Economic liberalisation started in India in the wake of the 1991 crisis and since then, FDI has steadily increased in the country. India, today is a part of top 100-club on Ease of Doing Business (EoDB) and globally ranks number 1 in the greenfield FDI ranking.
Routes through which India gets FDI
Automatic route: The non-resident or Indian company does not require prior nod of the RBI or government of India for FDI.
Govt route: The government's approval is mandatory. The company will have to file an application through Foreign Investment Facilitation Portal, which facilitates single-window clearance. The application is then forwarded to the respective ministry, which will approve/reject the application in consultation with the Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce. DPIIT will issue the Standard Operating Procedure (SOP) for processing of applications under the existing FDI policy.
Sectors which come under the ' 100% Automatic Route' category are
Agriculture & Animal Husbandry, Air-Transport Services (non-scheduled and other services under civil aviation sector), Airports (Greenfield + Brownfield), Asset Reconstruction Companies, Auto-components, Automobiles, Biotechnology (Greenfield), Broadcast Content Services (Up-linking & down-linking of TV channels, Broadcasting Carriage Services, Capital Goods, Cash & Carry Wholesale Trading (including sourcing from MSEs), Chemicals, Coal & Lignite, Construction Development, Construction of Hospitals, Credit Information Companies, Duty Free Shops, E-commerce Activities, Electronic Systems, Food Processing, Gems & Jewellery, Healthcare, Industrial Parks, IT & BPM, Leather, Manufacturing, Mining & Exploration of metals & non-metal ores, Other Financial Services, Services under Civil Aviation Services such as Maintenance & Repair Organizations, Petroleum & Natural gas, Pharmaceuticals, Plantation sector, Ports & Shipping, Railway Infrastructure, Renewable Energy, Roads & Highways, Single Brand Retail Trading, Textiles & Garments, Thermal Power, Tourism & Hospitality and White Label ATM Operations.
Sectors which come under up to 100% Automatic Route' category are
- Infrastructure Company in the Securities Market: 49%
- Insurance: up to 49%
- Medical Devices:up to 100%
- Pension: 49%
- Petroleum Refining (By PSUs): 49%
- Power Exchanges: 49%
Government route
Sectors which come under the 'up to 100% Government Route' category are
- Banking & Public sector: 20%
- Broadcasting Content Services: 49%
- Core Investment Company: 100%
- Food Products Retail Trading: 100%
- Mining & Minerals separations of titanium bearing minerals and ores: 100%
- Multi-Brand Retail Trading: 51%
- Print Media (publications/ printing of scientific and technical magazines/ specialty journals/ periodicals and facsimile edition of foreign newspapers): 100%
- Print Media (publishing of newspaper, periodicals and Indian editions of foreign magazines dealing with news & current affairs): 26%
- Satellite (Establishment and operations): 100%
FDI prohibition
There are a few industries where FDI is strictly prohibited under any route. These industries are
- Atomic Energy Generation
- Any Gambling or Betting businesses
- Lotteries (online, private, government, etc)
- Investment in Chit Funds
- Nidhi Company
- Agricultural or Plantation Activities (although there are many exceptions like horticulture, fisheries, tea plantations, Pisciculture, animal husbandry, etc)
- Housing and Real Estate (except townships, commercial projects, etc)
- Trading in TDR’s
- Cigars, Cigarettes, or any related tobacco industry
FDI inflow
During the fiscal ended March 2019, India received the highest-ever FDI inflow of $64.37 billion. The FDI inflows were $45.14 billion during 2014-15 and $55.55 billion in the following year.
FDI NEWS
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DCO, WEF launch new initiative to boost digital FDI flows globally
The Digital Cooperation Organization (DCO) and the World Economic Forum (WEF) on Tuesday announced a new initiative to boost ...| May 24, 2022, Tuesday -
LIVE: Apple looks to boost production outside China, says report
Live news updates: A decision in April last year by President Gotabaya Rajapaksa to ban all chemical fertilisers drastically cut ...| May 21, 2022, Saturday -
Outward FDI nearly halves to $3.39 billion in April, says RBI data
On sequential basis too, the outward investment from India in April was lower compared to USD 3.44 billion in March 2022| May 11, 2022, Wednesday -
Disclosure norms on investments from neighbour nations tightened
This is alignment with the tweaked FDI policy of 2020 under the approval route to curb hostile takeovers| May 07, 2022, Saturday -
Govt amends FEMA rules to allow 20% foreign direct investment in LIC
The government has amended rules of the Foreign Exchange Management Act (FEMA), paving the way for up to 20 per cent foreign ...| April 17, 2022, Sunday -
FDI likely to touch $100 billion in 2022-23: Industry chamber PHDCCI
India is expected to attract $100 billion foreign direct investment (FDI) in 2022-23 on the back of economic reforms and ease of ...| April 15, 2022, Friday -
India conducive for FDI, is a critical market for us: CPP Investments CEO
The pension fund has invested in Byju's, Flipkart, ReNew Power and a number of InvITs. It invested C$128 million in NSE in FY21 ...| April 12, 2022, Tuesday -
Irdai may go for 100% FDI in 'new' insurance biz to expand scope of sector
In Budget FY21, Finance Minister Nirmala Sitharaman had announced raising the cap of FDI to 74 per cent for insurance companies ...| April 11, 2022, Monday -
Chennai declared world's cheapest FDI location for electronics R&D
Chennai emerged as the cheapest location in top 100 electronics FDI destinations, with estimated annual operating costs of $1.24 ...| April 07, 2022, Thursday -
Exiting from India is mostly part of the global strategy of the marquee firms to put their energies into more lucrative projects ...| April 07, 2022, Thursday