India attracted over a trillion dollars in foreign direct investment between April 2000 and September 2024 as per data of the Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry
More on India’s FDI
- Top Investors: Mauritius, Singapore, USA
- Other Key Investors: Japan, the U.K., the UAE, Cayman Islands, Germany and Cyprus
- Key Sectors: Services, software, and telecommunications.
- Performance of States: A state-wise analysis of the figures shows that Maharashtra received the highest inflow of $13.55 billion during April-September 2024-25. It was followed by Karnataka ($3.54 billion), Telangana ($1.54 billion) and Gujarat (about $4 billion).
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About FDI
- Foreign Direct Investment (FDI) refers to an investment by an individual or a company in one country into business interests located in another country.
- Allowed 100% FDI in some sectors- IT and Software Development, E-commerce, Renewable Energy, Automobile Sector, Food Processing
- FDI prohibited in certain sectors- Lottery and Gambling, Atomic Energy, Tobacco, Chit Funds
- Two routes of FDI:
- Automatic Route: No prior government approval is required. Investment is made directly in permitted sectors, subject to FDI policy regulations. Examples: Infrastructure, IT, and most manufacturing sectors.
- Government Approval Route: Requires prior approval from the relevant government authorities or ministries. Examples: Defense, media, and multi-brand retail sectors.
Difference Between Foreign Direct Investment and Foreign Portfolio Investment
| Aspect |
Foreign Direct Investment (FDI) |
Foreign Portfolio Investment (FPI) |
| Definition |
Investment in physical assets or ownership in a foreign entity to gain significant control. |
Investment in financial assets like stocks, bonds, and other securities without direct control. |
| Investment Nature |
Long-term and strategic |
Short-term and market-driven |
| Control and Influence |
Provides significant control over management and decision-making in the invested company. |
No managerial control; purely passive financial investment. |
| Examples |
Acquisition of a factory or establishment of a subsidiary. |
Buying shares in a foreign company through stock exchanges. |
Benefits of FDI
- Economic Growth: Boosts capital inflows, enhancing productivity and infrastructure.
- Employment Generation: Creates direct and indirect jobs in various sectors.
- Technology Transfer: Facilitates the introduction of advanced technology and expertise.
- Global Integration: Encourages stronger ties with global markets.
- Infrastructure Development: Promotes development in sectors like transportation, telecom, and energy.
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Government Initiatives to Attract More FDI
- Ease of Doing Business:
- Simplified regulatory frameworks and procedures.
- Implementation of the Insolvency and Bankruptcy Code (IBC).
- FDI Policy Reforms:
- Increased FDI limits in key sectors like defense (74%), insurance (74%), and telecom (100%).
- National Single Window System (NSWS):
- A single digital platform for investors to obtain approvals and clearances.
- Production-Linked Incentive (PLI) Schemes:
- Offered in sectors like electronics, pharmaceuticals, and textiles to attract investment.
- Tax Reforms:
- Reduced corporate tax rates for new manufacturing companies (15%).
- Infrastructure Development:
- Initiatives like the National Infrastructure Pipeline and Gati Shakti Plan to attract investments.
10 Dec 2024
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