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Foreign direct investment (FDI)

  • Posted By
    10Pointer
  • Categories
    Economy
  • Published
    11th Dec, 2020

Context

FDI equity inflows into India cross $500 billion milestone.

What is the status of FDI in India?

  • Foreign direct investment (FDI) equity inflows into India crossed the $ 500 billion milestone during April 2000 to September 2020 period.

Who are the major contributors?

  • About 29 % of the FDI came through the Mauritius route, followed by Singapore (21 %), the U.S., the Netherlands, Japan (each 7 %), and the UK (6 %).
  • What are the key sectors?
  • The key sectors which attracted the maximum of these inflows include services segment, computer software and hardware, telecommunications, trading, construction development, automobile, chemicals, and pharmaceuticals.

What are the routes?

1. Automatic Route

  • Under the Automatic Route, the non-resident investor or the Indian company does not require any approval from Government of India for the investment.

2. Government Route

    • Under the Government Route, prior to investment, approval from the Government of India is required.
    • Proposals for foreign direct investment under Government route, are considered by respective Administrative Ministry/ Department.

    What are the recent Government Initiatives?

    • In August 2020, the Indian government amended Foreign Direct Investment Policy, 2017 on commercial coal mining policy making it approved only under the Government route.
    • In May 2020, Government increased FDI in defence manufacturing under the automatic route from 49% to 74%.
    • In April 2020, Government amended existing consolidated FDI policy for restricting opportunistic takeovers or acquisition of Indian companies from neighboring nations.
    • In March 2020, Government permitted non-resident Indians (NRIs) to acquire up to 100% stake in Air India.

    Sectors

    Permissible limits

    Infrastructure

     

    Automotive

    Pharmaceuticals

    Service

    Railways

    Chemicals

    Textile

    Airlines

     

    100% FDI under automatic route is permitted in construction

    sector for cities and townships.

    100% FDI is permitted in this sector via automatic route.

    74% FDI is permitted in this sector.

    FDI limit in insurance sector was raised from 26% to 49%

    100% FDI is allowed under automatic route in most of areas of railway

    100% FDI is allowed in Chemical sector under automatic route(few exceptions)

    100% FDI is allowed under automatic route.

    Domestic scheduled passenger airline is permitted to 100%.