Foreign direct investment (FDI)

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.