2405:201:C01D:9082:7CBD:9392:6360:8125 at 06:48, 28 June 2021

2021-06-28T06:48:18Z

New page

{{use dmy dates|date=June 2016}}
{{Use Indian English|date=June 2016}}

{{Short description|Investment in India's economy}}

A '''foreign direct investment''' ('''FDI''') is an [[investment]] in the form of a [[Controlling interest|controlling ownership]] in a [[business]] in one country by an entity based in another country. It is thus distinguished from a [[foreign portfolio investment]] by a notion of direct control. Broadly, foreign direct investment includes "mergers and acquisitions, building new facilities, reinvesting profits earned from overseas operations, and intra company loans". FDI is the sum of [[equity capital]], long-term capital, and short-term capital as shown in the [[balance of payments]]. FDI usually involves participation in management, [[joint-venture]], [[transfer of technology]] and expertise. ''Stock'' of FDI is the ''net'' (i.e., outward FDI minus inward FDI) cumulative FDI for any given period. Direct investment excludes [[Foreign portfolio investment|investment through purchase of shares]] (if that purchase results in an investor controlling less than 10% of the shares of the company).

== FDI in India ==
'''[[Foreign direct investment]] (FDI) in India''' is a major monetary source for [[economic development in India]]. Foreign companies [[foreign direct investment|invest directly]] in fast growing private auspicious businesses to take benefits of cheaper wages and changing business environment of India. [[Economic liberalisation in India|Economic liberalisation]] started in India in wake of [[1991 Indian economic crisis|the 1991 economic crisis]] and since then FDI has steadily increased in India,<ref>{{cite web|url=http://www.igidr.ac.in/faculty/nag/What%20has%20Happened%20Since%201991%20-%20An%20Assessment%20of%20Economic%20Reforms.pdf |title=What Has Happened since 1991? : Assessment of India's Economic Reforms |author=R. Nagaraji |publisher=Igidr.ac.in |access-date=2015-10-12}}</ref><ref>{{cite web|url=http://articles.economictimes.indiatimes.com/2011-07-24/news/29807511_1_market-economy-scooters-india-s-gdp |title=How the Indian economy changed in 1991–2011 |work= The Economic Times |date= 24 July 2011 |access-date=11 October 2015}}</ref> which subsequently generated more than one crore (10 million) jobs.

On 17 April 2020, India changed its [[foreign direct investment]] (FDI) policy to protect Indian companies from "opportunistic takeovers/acquisitions of Indian companies due to the current [[COVID-19 pandemic]]", according to the [[Department for Promotion of Industry and Internal Trade (DPIIT)|Department for Promotion of Industry and Internal Trade]].<ref>{{Cite web|url=https://timesofindia.indiatimes.com/business/india-business/changes-in-fdi-rules-dont-violate-treaties-india-to-china/articleshow/75283196.cms|title=India to China on FDI Policy: Changes in FDI rules don't violate treaties|date=22 April 2020|website=The Times of India|language=en|access-date=2020-04-22}}</ref><ref>{{Cite web|url=https://www.hindustantimes.com/india-news/govt-tweaks-foreign-investment-rules-to-curb-opportunistic-takeovers/story-93jDE0mbun58VvVyiEv3CO.html|title=Govt tweaks FDI rules to shield domestic firms. Thank you, tweets Rahul Gandhi|date=2020-04-18|website=Hindustan Times|language=en|access-date=2020-04-22}}</ref><ref>{{Cite web|url=https://www.financialexpress.com/economy/chinas-protest-of-indias-revised-fdi-policy-a-process-of-de-globalisation-begins-opine-experts/1936163/|title=China's protest of India's revised FDI Policy: A process of de-globalisation begins opine experts|date=2020-04-22|website=The Financial Express|language=en-US|access-date=2020-04-22}}</ref><ref>https://dipp.gov.in/sites/default/files/pn3_2020.pdf</ref> While the new FDI policy does not restrict markets, the policy ensures that all FDI will now be under scrutiny of the [[Ministry of Commerce and Industry (India)|Ministry of Commerce and Industry]].<ref>{{Cite news|last=Suneja|first=Kirtika|url=https://economictimes.indiatimes.com/news/economy/policy/fdi-policy-does-not-restrict-market-access-officials/articleshow/75281313.cms|title=FDI policy does not restrict market access: Officials|date=2020-04-22|work=The Economic Times|access-date=2020-04-22}}</ref><ref>{{Cite web|url=https://www.livemint.com/companies/news/scrutiny-is-key-to-allowing-chinese-presence-in-india-11587497418031.html|title=Scrutiny is key to allowing Chinese presence in India|last=Tripathi|first=Dhirendra|date=2020-04-22|website=Livemint|language=en|access-date=2020-04-22}}</ref>

== Types of Foreign Direct Investment ==
There are mainly two types of FDI- Horizontal and Vertical. However, two other types of FDI have emerged- Conglomerate and Platform FDI. 1. '''HORIZONTAL FDI:''' Under this type of FDI, a business expands its inland operation to another country. The business undertake the same activities but in foreign country. 2. '''VERTICAL FDI:''' In this case, a business expands into another country by moving to a different level of supply chain. Thus business undertakes different activities overseas but these activities are related to main business. 3. '''CONGLOMERATE FDI:''' Under this type of FDI, a business undertakes unrelated business activities in a foreign country. this type is uncommon as it involves the difficulty of penetrating a new country and an entirely new market. 4. '''PLATFORM FDI:''' Here, a business expands into another country but the output from the business is then exported to a third country.

== Routes ==
There are two routes by which India gets FDI.<ref name="rbi1">{{cite web|url=https://www.rbi.org.in/scripts/FAQView.aspx?Id=26 |title=Reserve Bank of India – Frequently Asked Questions |work=[[Reserve Bank of India]] |access-date=11 October 2015}}</ref>
<br />'''1. Automatic route''': By this route FDI is allowed without prior approval by Government or [[Reserve Bank of India]].<ref name="rbi1" />
<br />'''2. Government route''': Prior approval by government is needed via this route. The application needs to be made through Foreign Investment Facilitation Portal, which will facilitate single window clearance of FDI application under Approval Route. The application will be forwarded to the respective ministries which will act on the application as per the standard operating procedure.<ref>http://fipb.gov.in/Forms/SOP.pdf</ref> [[Foreign Investment Promotion Board]] (FIPB) which was the responsible agency to oversee this route was abolished on May 24, 2017. It held its last meeting on 17 April, which was the 245th meeting of the Board.<ref name="rbi1" /><ref>{{cite web|url=http://www.livemint.com/Politics/Cs8tkz7CqpiTGx4qnoDBQP/FIPB-abolished-What-happens-to-foreign-investors-now.html |title=FIPB Abolished – What happens now? |access-date=25 May 2017}}</ref> On 24 May 2017, [[Foreign Investment Promotion Board]] was scrapped by the Union Government.Henceforth, the work relating to processing of applications for FDI and approval of the Government thereon under the extant FDI Policy and FEMA, shall now be handled by the concerned Ministries/Departments in consultation with the Department for Promotion of Industry and Internal Trade(DPIIT) , Ministry of Commerce, which will also issue the Standard Operating Procedure (SOP) for processing of applications and decision of the Government under the extant FDI policy<ref>{{Cite web|url=http://pib.nic.in/newsite/PrintRelease.aspx?relid=162097|title=Cabinet approves phasing out Foreign Investment Promotion Board|website=pib.nic.in|access-date=2018-05-02}}</ref>

== FDI Recipients ==
The World Investment Report 2020 by the UN Conference on Trade and Development (UNCTAD) said that India was the 9th largest recipient of FDI in 2019, with $51 billion of inflow during the year, an increase from $42 billion of FDI received in 2018, when India ranked 12 among the top 20 host economies in the world. In the " Development Asia" region, India was among top 5 host economies for FDI. The report said that global FDI flows are forecast to decrease by up to 40% in 2020, from their 2019 value of USD 1.54 trillon. According to Financial Times, in 2015 India overtook China and United States as the top destination for the FDI. In first half of 2015 India attracted investment of $31 billion compared to $28 billion and $27 billion of China and US respectively. Data for 2019-2020 indicates that services sector attracted the highest FDI equity inflow of US$7.85 billion, followed by computer software and hardware at US$7.67 billion, telecommunications sector at US$4.44 billion, and trading at US$4.57 billion.

== Government initiatives ==
The [[Government of India]] has amended FDI policy to increase FDI inflow. In 2014, the government increased foreign investment upper limit from 26% to 49% in [[insurance]] sector. It also launched [[Make in India]] initiative in September 2014 under which FDI policy for 25 sectors was liberalised further.<ref>{{cite web |url=http://articles.economictimes.indiatimes.com/2014-12-28/news/57462668_1_fdi-foreign-direct-investment-amarchand-mangaldas-krishan-malhotra |title=Eyeing big-billions in 2015, government rolls out FDI red carpet |work=The Economic Times |date=28 December 2014 |access-date=11 October 2015}}</ref><ref>{{cite web|url=http://indianexpress.com/article/business/business-others/govt-initiatives-help-revive-fdi-inflow-after-3-year-slump-up-54-in-fy15/ |title=Govt initiatives help revive FDI inflow after 3-year slump, up 54% in FY15 |work=[[The Indian Express]] |date=31 August 2015 |access-date=11 October 2015}}</ref> {{As of|April 2015}}, FDI inflow in India increased by 48% since the launch of "Make in India" initiative.<ref>{{cite web |url=http://articles.economictimes.indiatimes.com/2015-07-14/news/64406052_1_fdi-inflows-foreign-direct-investment-usd |title=FDI up 48% since 'Make in India' campaign launch |work=The Economic Times |date=14 July 2015 |access-date=2015-10-11}}</ref> 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 neighbouring nations.In March 2020,government permitted Non Resident Indians (NRIs) to acquire up to 100% stake in Air India

India was ranking 15th in the world in 2013 in terms of FDI inflow, it rose up to 9th position in 2014<ref>{{cite web|author=ISTJun 25, 2015 |url=https://blogs.wsj.com/indiarealtime/2015/06/25/india-attracts-enough-fdi-to-join-global-top-ten/ |title=India Attracts Enough FDI to Join Global Top Ten – India Real Time – WSJ |work=The Wall Street Journal |date=2015-06-25 |access-date=2015-10-11}}</ref>{{reliable source|date=October 2015}} while in 2015 India became top destination for foreign direct investment.<ref name="TOI1">{{cite web|date=30 September 2015|title=India pips US, China as No. 1 foreign direct investment destination|url=http://timesofindia.indiatimes.com/india/India-pips-US-China-as-No-1-foreign-direct-investment-destination/articleshow/49160838.cms|access-date=11 October 2015|work=[[The Times of India]]}}</ref> The [[Department of Industrial Policy and Promotion|Department for Promotion of Industry and Internal Trade]] and [https://www.investindia.gov.in/ Invest India] has developed the [https://indiainvestmentgrid.com/portal/# India Investment Grid (IIG)] which provides a pan-India database of projects from Indian promoters for promoting and facilitating foreign investments.

=== Coronavirus pandemic impact ===
On 18 April 2020, the government of India passed an order that would protect Indian companies from FDI during the pandemic. All countries sharing a land border with India would now face scrutiny from the Ministry of Commerce and Industry before any FDIs.<ref>{{Cite news|url=https://economictimes.indiatimes.com/news/economy/policy/view-why-govts-recent-fdi-move-may-not-bode-well-for-the-indian-economy/articleshow/75238956.cms|title=View: Why govt's recent FDI move may not bode well for the Indian economy|date=2020-04-19|work=The Economic Times|access-date=2020-04-22}}</ref> These changes were incorporated in the Consolidated FDI policy released on 28 October 2020.<ref>{{cite web |title=Govt releases consolidated FDI policy document; replaces countries of concern with land border - Economic Times |url=https://economictimes.indiatimes.com/news/economy/policy/govt-releases-consolidated-fdi-policy-document-replaces-countries-of-concern-with-land-border/articleshow/78916870.cms}}</ref>

== Sectors ==
During 2014–16, India received most of its FDI from [[Mauritius]], [[Singapore]], [[Netherlands]], [[Japan]] and the [[US]].
<ref>{{cite web|url=http://indiainbusiness.nic.in/newdesign/index.php?param=investment_landing/247/1 |title=Welcome to India in Business |publisher=Indiainbusiness.nic.in |access-date=2015-10-17}}</ref> On 25 September 2014, [[Government of India]] launched [[Make in India]] initiative in which policy statement on 25 sectors were released with relaxed norms on each sector.<ref>{{cite web|url=http://www.thehindu.com/business/Economy/modi-to-launch-make-in-india-campaign-on-sep-25/article6422804.ece |title='Make in India' pitch from Sept. 25 |work=The Hindu |date=2014-09-21 |access-date=2015-10-17}}</ref> Following are some of major sectors for Foreign Direct Investment.

=== Infrastructure ===
10% of India's GDP is based on construction activity. Indian government has invested $1 trillion on infrastructure from 2012–2017. 40% of this $1 trillion had to be funded by private sector. 100% FDI under automatic route is permitted in construction sector for cities and townships.<ref>{{cite web|url=http://indianexpress.com/article/business/economy/government-relaxes-fdi-norms-for-construction-real-estate-sector/ |title=Government relaxes FDI norms for construction, real estate sector |work=The Indian Express |date=29 October 2014 |access-date=11 October 2015}}</ref><ref>{{cite web|url=http://makeinindia.com/sector/construction/ |title=Construction |publisher=Make In India |access-date=11 October 2015}}</ref>{{primary source inline|date=October 2015}}<ref>{{cite web|url=https://in.finance.yahoo.com/photos/7-major-sectors-attracting-fdi-for-india-1347532884-slideshow/7-major-sectors-attracting-fdi-for-india-photo-1347532594.html |title=7 major sectors attracting FDI for India | 7 major sectors attracting FDI for India |publisher= Yahoo Finance |date=13 September 2012 |access-date=11 October 2015}}</ref>

=== Automotive ===
FDI in automotive sector was increased by 89% between April 2014 to February 2015.<ref>{{cite web|url=http://articles.economictimes.indiatimes.com/2015-05-25/industry/62624695_1_automobile-sector-fdi-policy-passenger-car |title=FDI in automobile sector up 89% in April–February FY'15 |work=The Economic Times |date=25 May 2015 |access-date=11 October 2015}}</ref> India is 7th largest producer of vehicles in the world with 25.5 million vehicles annually. 100% FDI is permitted in this sector via automatic route. Automobiles shares 7% of the India's GDP.<ref>{{cite web|author=Invest India |url=http://www.investindia.gov.in/automobile-sector/ |title=Automobile |publisher=Invest India |date=16 March 2012 |access-date=11 October 2015}}</ref>

=== Pharmaceuticals ===
Indian pharmaceutical market is 3rd largest in terms of volume and 13th largest in terms of value. Indian pharma industry is expected to grow at 20% compound annual growth rate from 2015 to 2020.<ref>{{cite web|url=http://www.ibef.org/industry/pharmaceutical-india.aspx |title=Indian Pharmaceutical Industry, Pharmaceutical Industry In India, Pharma |publisher=Ibef.org |date=2015-09-09 |access-date=2015-10-17}}</ref> 74% FDI is permitted in this sector.<ref>{{cite web|url=http://pib.nic.in/newsite/PrintRelease.aspx?relid=114030 |title=Review of the policy on Foreign Direct Investment in Pharmaceutical Sector – carve out for medical devices |publisher=Pib.nic.in |date=24 December 2014 |access-date=11 October 2015}}</ref><ref>{{cite web|url=http://www.business-standard.com/article/economy-policy/government-keeps-100-fdi-policy-in-pharma-unchanged-114010801306_1.html |title=Government keeps 100% FDI policy in pharma unchanged | Business Standard News |work=Business Standard |access-date=11 October 2015}}</ref><ref>{{cite web|author=Deepshikha Sikarwar |url=http://articles.economictimes.indiatimes.com/2014-12-31/news/57558111_1_pharma-sector-medical-devices-sector-brownfield-investments |title=Finance Ministry pitches for easing of FDI norms in pharma sector |work=The Economic Times |date=31 December 2014 |access-date=2015-10-11}}</ref>

=== Service ===
FDI in service sector was increased to 46% in 2014–15. It is US $1.88 billion in 2017. Service sector includes [[Banking in India|banking]], [[Insurance in India|insurance]], [[Business process outsourcing to India|outsourcing]], research & development, courier and technology testing.<ref>{{cite web|date=15 June 2015 |url=http://economictimes.indiatimes.com/news/economy/finance/fdi-inflows-in-services-sector-increased-by-46-per-cent-in-2014-15-department-of-industrial-policy-and-promotion-data/articleshow/47662695.cms |title=FDI inflows in services sector increased by 46 per cent in 2014–15: Department of Industrial Policy and Promotion data |work=The Economic Times |access-date=11 October 2015}}</ref> FDI limit in insurance sector was raised from 26% to 49% in 2014.<ref>{{cite web|url=http://timesofindia.indiatimes.com/business/india-business/Six-insurance-companies-evince-interest-to-raise-FDI-cap-to-49/articleshow/49257138.cms |title=Six insurance companies evince interest to raise FDI cap to 49% |work=The Times of India |access-date=2015-10-11}}</ref> FDI limit in Insurance has been further increased to 74% in 2021.

===Railways===
100% FDI is allowed under automatic route in most of areas of railway, other than the operations, like High speed train, railway electrification, passenger terminal, mass rapid transport systems etc.<ref>{{cite web|url=http://zeenews.india.com/business/news/economy/cabinet-clears-100-fdi-in-railways-infrastructure-49-in-defence_105602.html |title=Cabinet clears 100% FDI in Railways infrastructure, 49% in defence | Zee News |publisher=Zeenews.india.com |access-date=2015-10-13}}</ref><ref>{{cite web|url=http://makeinindia.com/sector/railways/ |title=Railways |publisher=Make In India |access-date=2015-10-13}}</ref> [[High-speed rail in India|Mumbai-Ahemdabad high speed corridor]] project is single largest railway project in India, other being [[Harbour Line (Mumbai Suburban Railway)|CSTM-Panvel suburban corridor]]. Foreign investment more than {{INRConvert|90000|c}} is expected in these projects so far.<ref>{{cite web|url=http://www.rediff.com/business/report/indian-railways-opens-up-rs-90000-cr-fdi-opportunity/20141212.htm |title=Indian Railways opens up Rs 90,000 cr FDI opportunity |publisher=Rediff.com |date=2014-12-12 |access-date=2015-10-13}}</ref>

===Chemicals===
[[Chemical industry in India]] earned revenue of $155–160 billion in 2013.<ref>{{cite web|url=http://www.business-standard.com/content/b2b-chemicals/indian-chemicals-industry-to-record-11-12-growth-rate-frost-sullivan-114010801336_1.html |title=Indian chemicals industry to record 11–12% growth rate: Frost & Sullivan | Business Standard News |work=Business Standard |access-date=2015-10-17}}</ref> 100% FDI is allowed in Chemical sector under automatic route. Except Hydrocynic acid, Phosgene, Isocynates and their derivatives, production of all other chemicals is de-licensed in India.<ref>http://www.ficci.com/sector/7/Project_docs/Chemical-Petrochemical-sector.pdf</ref> India's share in global specialty chemical industry is expected to rise from 2.8% in 2013 to 6–7% in 2023.<ref>{{cite web|url=http://www.business-standard.com/content/b2b-chemicals/specialty-chemicals-industry-making-india-a-global-manufacturing-powerhouse-115100700405_1.html |title=Specialty chemicals industry: Making India a global manufacturing powerhouse | Business Standard News |work=Business Standard |access-date=2015-10-17}}</ref>

===Textile===
Textile is one major contributor to India's export. Nearly 11% of India's total export is textile. This sector has attracted about $1647 million from April 2000 to May 2015. 100% FDI is allowed under automatic route.<ref>{{cite web|url=http://www.ibef.org/industry/textiles.aspx |title=Textile Industry in India, Indian Textile Industry, Garment Industry |publisher=Ibef.org |access-date=2015-10-17}}</ref> During year 2013–14, FDI in textile sector was increased by 91%.<ref>{{cite web|url=http://www.business-standard.com/article/news-ians/fdi-in-textile-sector-up-91-percent-in-2013-14-114081500556_1.html |title=FDI in textile sector up 91% in 2013–14 | Business Standard News |work=Business Standard |access-date=2015-10-17}}</ref> Indian textile industry is expected reach up to $141 billion till 2021.<ref>{{Cite web |url=http://www.cci.in/pdfs/surveys-reports/Textile-Industry-in-India.pdf |title=Archived copy |access-date=17 October 2015 |archive-url=https://web.archive.org/web/20150824060055/http://www.cci.in/pdfs/surveys-reports/Textile-Industry-in-India.pdf |archive-date=24 August 2015 |url-status=dead }}</ref>

===Airlines===
Foreigner investment in a scheduled or regional air transport service or domestic scheduled passenger airline is permitted to 100%.

== References ==
{{Reflist}}

==External links==
*[http://fifp.gov.in/ Foreign Investment Facilitation Portal]
*[http://dipp.nic.in/ Department of Industrial Policy & Promotion]
*[https://www.fdi.finance/ FDI In India]

{{Economy of India}}

[[Category:Investment in India]]
[[Category:Foreign direct investment]]
[[Category:Foreign trade of India]]

Foreign direct investment in India - Revision history

2405:201:C01D:9082:7CBD:9392:6360:8125 at 06:48, 28 June 2021