Context: Foreign direct investment (FDI) through automatic route in India grew by 13% to a record of $49.97 billion in the 2019-20 financial year, according to official data.
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- Total foreign direct investment (FDI) into India jumped 18 percent to $73.46 billion in the 2019-20 financial year.
- It is the highest in four years.
- The country had received an FDI of $44.36 billion during the financial year 2018-19.
- The sectors which attracted maximum foreign inflows during 2019-20 include services, computer software and hardware, telecommunications trading , automobile, construction , and chemicals.
- Singapore emerged as the largest source of FDI in India during the last fiscal with $14.67 billion investments.
- It was followed by Mauritius ($8.24 billion), the Netherlands ($6.5 billion), the U.S. ($4.22 billion), Cayman Islands ($3.7 billion), Japan ($3.22 billion), and France ($1.89 billion).
Foreign Direct Investment:
- It is an investment made by a firm or individual in one country into business interests located in another country.
- Generally, FDI takes place when an investor establishes foreign business operations or acquires foreign business assets in a foreign company.
- However, FDIs are distinguished from portfolio investments in which an investor merely purchases equities of foreign-based companies.
Foreign Direct Investment (FDI) is the investment through capital instruments by a person resident outside India
(a) in an unlisted Indian company; or
(b) in 10 percent or more of the post issue paid-up equity capital on a fully diluted basis of a listed Indian company.
Foreign Investment Promotion Board (FIPB)
- The Foreign Investment Promotion Board (FIPB), was housed in the Department of Economic Affairs, Ministry of Finance.
- It is an inter-ministerial body, responsible for processing of FDI proposals and making recommendations for Government approval.
- FIPB decisions are based on the extant FDI Policy, Press Notes and other related notified guidelines formulated by Department for Promotion of Industry and Internal Trade (DPIIT).
- In the process of making recommendations, the FIPB provides significant inputs for FDI policy-making.
- With the abolition of the Foreign Investment Promotion Board (FIPB) the work of granting government approval for foreign investment under the extant FDI Policy and FEMA Regulations, has been entrusted to the concerned Administrative Ministries/Departments.
- The Department for Promotion of Industry and Internal Trade, has been given the responsibility of overseeing the applications filed on the Foreign Investment Facilitation Portal and to forward the same to the concerned Administrative Ministry.
- A Standard Operating Procedure (SOP) developed by DIPP in consultation with the concerned Administrative Ministries is being followed for processing of the FDI applications.
Covid Pandemic Impact
- On 18 April 2020, the government of India passed an order that would protect Indian companies from FDI during the pandemic.
- All countries sharing a land border with India would now face scrutiny from the Ministry of Commerce and Industry before any FDIs