Short Note : FDI in India

Published: July 18, 2019

Foreign direct investment (FDI) is an investment which is made by an individual, group of individuals or the corporate of one country in the business of another country It takes place when an investor needs to establish foreign business operations or acquire foreign business assets. This may include getting ownership or a controlling stake in a foreign company.

This is different from foreign portfolio investment (FPI) in which an investor only purchases equities of foreign-based companies.

FDI opportunities in India

  • FDIs are a critical driver of economic growth.
  • The incoming of FDI also means acquiring technical know-how and generating employment in the country.
  • They are a major source of non-debt financial resource for the government of India.
  • The foreign companies can invest in India as the Indian economy has relatively lower wages, lower manufacturing costs.
  • The Indian Government, to encourage FDIs in India, is giving special investment privileges to investors like tax exemptions, etc.
  • The Indian government s favorable policy regime and robust business environment have ensured that foreign capital is coming into the country.
  • The Indian government has also relaxed FDI norms across various industrial sectors such as defense, PSU oil refineries, telecom, power exchanges, and stock exchanges, among others to encourage investment.

Why is it in the news?

The Ministry of Home Affairs grants security clearance to the FDI being done in the country. This earlier created a bottleneck in the incoming of FDI. To resolve this, the MHA is now looking into the various FDI cases expeditiously. Given the renewed focus, the average time taken to clear FDI has declined from about four months in 2014 to just about two months in 2019.

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