What are the recent changes in FDI policy in India?
In 2020, the government announced increasing the foreign direct investment (FDI) limit from 49 per cent to 74 per cent under the automatic r... India's FDI policy for countries sharing land borders was amended on April 17, 2020, through Press Note 3 to only allow inflows through the ...
The Government of India increased FDI in the defence sector by increasing it to 74% through the automatic route and 100% through the government route. The government has amended rules of the Foreign Exchange Management Act (FEMA), allowing up to 20% FDI in insurance company LIC through the automatic route.
Press Note no. 2 (2021 series) dated 14 June 2021: Review of the FDI policy on Insurance sector: In March 2021, the Parliament of India approved a Bill to increase foreign direct investment (FDI) in Indian insurance companies to 74% from the existing cap of 49%.
FDI in Air Transport Services is also now permitted up to 100 per cent, with FDI up to 49 per cent under the automatic route and FDI beyond 49 per cent under the approval route. Investment by Non-Resident Indians (NRIs) in Air Transport Services sector is now permitted up to 100 per cent under the automatic route.
FDI in service sector was increased to 46% in 2014–15. It is US $1.88 billion in 2017. Service sector includes banking, insurance, outsourcing, research & development, courier and technology testing. FDI limit in insurance sector was raised from 26% to 49% in 2014.
Trend on Foreign Direct Investment (FDI) in India. Singapore (27.01%) and USA (17.94%) have emerged as top 2 sourcing nations in FDI equity flows into India in FY2021-22 followed by Mauritius (15.98%), Netherland (7.86%) and Switzerland (7.31%).
- Karnataka (37.55%),
- Maharashtra (26.26%),
- Delhi (13.93%),
- Tamil Nadu (5.10%) and.
- Haryana (4.76%)
Total FDI inflows in the country in the last 22 years (April 2000 - March 2022) are $ 847 bn while the total FDI inflows received in the last 8 years (April 2014- March 2022) was $ 523 bn which amounts to nearly 40% of total FDI inflow in last 22 years.
| Table 3: Sector Specific Limits of Foreign Investment in India | ||
|---|---|---|
| Sector | FDI Cap/Equity | Entry Route |
| 6. Commodity Exchanges | 49% (FDI+FII) (FDI 26 % FII 23%) | FIPB |
| 7. Insurance | 26% | Automatic |
| 8. Petroleum and natural gas : a. Refining | 49% (PSUs). 100% (Pvt. Companies) | FIPB (for PSUs). Automatic (Pvt.) |
According to the United Nations Conference on Trade and Development (UNCTAD), India jumped one position to 7th among the top recipients of foreign direct investment (FDI) 2021.
Who are the 5 largest investors of FDI?
- Singapore. Amidst the COVID-19 outbreak, Singapore is still consistently ranked as the main country of FDI origin. ...
- China. China has become a strong player in Indonesia's FDI. ...
- Hong Kong. ...
- Japan. ...
- Malaysia.
During the first half of the 1990s, FDI emerged, for the first time, as a preferred route for mobilising financial resources over loans and other forms of financial channels.
FDI strengthens financial services of a country by not only entering its banking industry but also by extending other activities such as merchant banking, portfolio investment, etc., which has resulted in the promotion of more new companies. It has also helped the capital market in the country.
In financial year 2021, Singapore had the highest FDI equity inflow to India, which was valued at over 129 billion Indian rupees, followed by the United States valued at nearly 102 billion Indian rupees.
Global foreign direct investment (FDI) flows showed a strong rebound in 2021, up 77% to an estimated $1.65 trillion, from $929 billion in 2020, surpassing their pre-COVID-19 level, according to UNCTAD's Investment Trends Monitor published on 19 January.
Trend of FDI in India
According to the latest data of the Department of Industrial Policy and Promotion (DIPP), FDI in 2017-18 grew by only 3 per cent to USD 44.85 billion. Foreign inflows in the country grew by 8.67 per cent in 2016-17, 29 per cent in 2015-16, 27 per cent in 2014-15, and 8 per cent in 2013-14.
While lowering of restrictions attract FDI from developed countries, fiscal incentives and lower tariffs attract FDI from developing countries. Interestingly, BITs, which emphasize non- discriminatory treatment of FDI, are found to have a significant impact on aggregate FDI.
Government policies can influence FDI by altering the relative attractiveness of the host country to foreign investors in a wide variety of ways. Many such policies can be indirect and implicit.
