FOREIGN DIRECT INVESTMENT (FDI)

Mains Enrichment Cards     6th September 2023        
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FOREIGN DIRECT INVESTMENT (FDI) : REVISION CARD


INTRODUCTION: 

Definition Based

FDI means investment through capital instruments by a person resident outside India in an unlisted Indian company; or in 10% or more of the post issue paid-up equity capital of a listed Indian company.

FDI Inflow (Fact Based)

India continues to be an attractive destination for foreign investment, ranking as world’s 7th largest FDI recipient in 2021 (UNCTAD), attracting highest ever FDI of >$85 billion in 2021-22.

 


FORMULA BY theIAShub

↑ FDI = ↑ Economic Growth + ↑ Job Creation + ↑ Export Potential ↑ FDI = ↑ Global Partnership + ↑ Technological Transfer + ↑ Innovation  ↑ FDI = ↑ Infrastructure Development + ↑ Productivity + ↓ Trade Deficit

SPEECH BY PROMINENT PERSONALITIES (PM, PRESIDENT, UN OFFICIAL et. al)/RECOGNITION IF ANY:

PM MODI

  • FDI is a responsibility for Indians & an opportunity for the World. For the people of India, it means 'First Develop India'.
  • FDI is a testament to global trust in India's growth story.
  • We welcome foreign investors with open arms, as partners in India's journey towards prosperity and progress.

CURRENT DEVELOPMENT: 

  • Ministry of New & Renewable Energy (MNRE) has issued an order to set up a project development cell to attract investment in renewable energy.
  • National E-Commerce Policy to encourage FDI in marketplace model of e-commerce.

DATA/FACT:

World Investment Report 2023 (UNCTAD)

10% increase in FDI, making India third-largest host country for greenfield project and the second-largest for international project finance deals.

FDI after LPG reforms (1990-91)

Increased from $97 Mn in 1991 to $85 bn in 2021-22. (Economic Survey 2022-23)

Top contributors to India's FDI

Singapore > Mauritius > USA

Top Sectors receiving FDI

Computer SW & HW > Services Sector > Automobile 

Top FDI recipient states

Maharashtra  > Karnataka > Delhi 


KEYWORDS:

  • BODY: Bright spot in the global economy; 4 ‘I’s of investment (Infrastructure, Integrity, Inclusive Development and International Outlook); Engine/Chariot of Growth
  • CONCLUSION: From International Funding to Economic Partnership; Triveni: Demography, Democracy and Diversity; Naya Bharat, Naye Avsar, Nayi Samridhi (New India, New Opportunities, New Prosperity)

COMMITTEES RECOMMENDATIONS/NATIONAL OR INTERNATIONAL REPORTS:

  • Aravind Mayaram committee: it recommended simplifying and rationalizing FDI regulations, streamlining sectors, and raising sectoral caps to promote ease of doing business and attract investments.
  • Niti Ayog panel: Advised easing FDI norms, promoting strategic sectors, improving investment climate, simplifying approval processes, and enhancing transparency to attract FDI and foster economic growth.

GOVT SCHEMES, POLICIES AND INITIATIVE:

  • To ease Investment: Foreign Investment Facilitation Portal; Empowered Group of Secretaries (EGoS); Project Development Cells (PDCs), National Single Window System (NSWS)
  • To Boost FDI in Manufacturing: FDI Make in India; PLI Scheme; National technical Textile Mission, 
  • National Digital Communications Policy, 2018 with a target of increasing FDI inflows in telecommunications sector
  • Other initiatives: PM Gati Shakti, single window clearance, reducing corporate tax rates, enhancing the ease of doing business, and implementing reforms in the FDI policy and the establishment of a GIS-mapped land bank.

EXAMPLES/CASE STUDIES:

National

  • FDI spurred India's IT boom, auto manufacturing hub, and modernized retail sector, stimulating economic growth, employment, and innovation.

International

  • China's open-door policy: FDI-driven shift: agrarian to global manufacturing dominance via open-door policy.
  • New Zealand (Regulatory Ease): Efficient business registration process has positively impacted its FDI attractiveness. 

CONCLUSION

  • Amidst world's gaze on India's FDI potential, now's the time to accelerate ‘structural reforms.’ This ‘turbocharges FDI inflow,’ maximizing the chance to harness unparalleled growth prospects.
  • The Government of India has established an ‘open & transparent FDI policy,’ granting automatic entry to numerous sectors. This approach fosters a liberal environment for foreign investors seeking business opportunities in India.
  • With the active implementation of EoDB initiatives and the NSWS portal for approvals, and with a skilled workforce, digitisation, the robust legal system and a competitive tax system, India is set to become a major global hub for FDI.
FOREIGN DIRECT INVESTMENT (FDI) : MICRO DIAGRAMS

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