FDI - ECONOMY
News: The
flow of FDIS into India decline in 2022-23
What's in the news?
● Foreign
direct investments declined to $46 billion in 2022-23 from $58.77 during
2021-22 (over 22 percent), dragged by lower inflows in computer hardware,
software, and automobiles, according to DPIIT data.
Foreign Direct Investment (FDI):
● FDI
is the medium for acquiring ownership of
assets in one country (the home country) by residents of other countries.
● FDI
may result in control of the
production, distribution, and other activities in a firm in the host country.
● FDI
is considered a major source of non-debt
financial resources for economic development.
Routes through which India gets FDI:
1. Automatic Route:
● In
this, the foreign entity does not require the prior approval of the government
or the RBI.
2. Government route:
● In
this, the foreign entity has to take the approval of the government.
Sector Specific Conditions for FDI:
● Mining
and Exploration of metal and non-metal ore - 100% FDI through Automatic Route
● Coal
& Lignite - 100% FDI through Automatic Route
● Defence
Industry - 100%. However, Automatic is only up to 74%. Beyond 74%, it is a
Government route wherever it is likely to result in access to modern technology
or for other reasons to be recorded.
● Print
Media and Digital Media - 26% through Government Route
● Intermediaries
or Insurance Intermediaries - 100% FDI through Automatic Route
● E-commerce
activities - 100% FDI through Automatic Route
● Single
Brand Product Retail Trading - 100% Automatic
● Multi
Brand Retail Trading - 51% through Government route
● Railways
Infrastructure - 100% FDI through Automatic Route in the construction,
operation and maintenance of the railway transport sector: Suburban corridor
projects through PPP model and High-speed train projects.
Prohibited Sectors:
● Lottery
Business including Government/private lottery, online lotteries, etc.
● Gambling
and Betting including casinos etc.
● Chit
funds
● Nidhi
company
● Trading
in Transferable Development Rights (TDRs)
● Manufacturing
of cigars, cheroots, cigarettes, tobacco, or of tobacco substitutes
● Activities/sectors
not open to private sector investment e.g.(I) Atomic Energy and (II) Railway
operations (other than permitted activities).
● Real
Estate Business or Construction of Farm Houses
○ ‘Real
estate business’ shall not include development of townships, construction of
residential /commercial premises, roads or bridges and Real Estate Investment
Trusts(REITs) registered and regulated under the SEBI(REITs) Regulations 2014.
FDI and FPI:
1. FDI:
● Foreign
Direct Investment (FDI) is the investment of a person who is not a resident of
India in capital instruments.
a. in
a listed or an unlisted Indian company.
b. on
a fully diluted basis, 10% or more
of a listed Indian company's post-issue paid-up equity capital.
2. FPI:
● 'Foreign
Portfolio Investment' refers to any capital instrument investment made by a
person residing outside of India that is
a. less
than ten percent of a listed Indian
company's fully diluted post-issue paid-up share capital OR
b. less than 10%
of the paid-up value of each series of a listed Indian company's capital
instrument.