Foreign Direct Investment

Subject: Economy

Section: External Sector

Context- 347 FDI proposals received from countries sharing land border with India; 66 approved.

Concept-

In April 2020, the government had made its prior approval mandatory for foreign investments from countries that share land border with India to curb opportunistic takeovers of domestic firms following the COVID-19 pandemic.
Countries which share land border with India are China, Bangladesh, Pakistan, Bhutan, Nepal, Myanmar and Afghanistan.
As per that decision, FDI proposals from these countries need government approval for investments in India in any sector.
The 66 approved proposals are from sectors including automobile (7), chemicals (5), computer software and hardware (3), pharma (4), education (1), electronics (8), food processing (2), information and broadcasting (1), machine tools (1), petroleum and natural gas (1), power (1), services sector (11).

FDI Policy in India:

Non-residents investing in India are required to comply with India’s Foreign Direct Investment Policy (FDI Policy) and other foreign investment and foreign exchange regulations, including the Foreign Exchange Management Act (FEMA).
The FDI Policy is issued and revised from time to time by the Department for Promotion of Industry and Internal Trade (DPIIT) under the Ministry of Commerce and Industry, Government of India (GOI).
Non-resident investors do not require any prior licensing or registration for foreign direct investment (FDI) in India.
India regulates FDI depending on the sector in which the investment is proposed to be made.
FDI is permitted in most sectors under two routes:
- the automatic route and
- the approval route.
Under the automatic route, the investment may be made without any approval from any government agency.
- Examples of sectors under the automatic route include, among others, infrastructure, healthcare, manufacturing and renewable energy
Under the approval route, prior government approval is required for FDI.
- Sectors under the approval route include, among others, multi-brand retail, broadcasting, banking, defense, mining, print media and biotechnology.
FDI is prohibited in a limited number of sectors such as manufacturing of tobacco, trading in transferrable development rights, real estate business (subject to limited exceptions), and gambling and betting, including casinos.

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