Understanding Foreign Direct Investment (FDI)
Definition and Nature of FDI:
- A Foreign Direct Investment (FDI) is an investment done by a firm or any individual in one country into business interests located in another country.
- Usually, these actions are establishing new subsidiaries, acquisitions or mergers between existing foreign companies, or forming a joint venture.
- FDI is one of the important non-debt financial resources for economic development for India.
- FDI in India does not cover the purchases of stocks and bonds of a company, which is a feature of Foreign Portfolio investment (FPI).
- The investment by an FDI mostly includes equity capital, reinvested earnings, and intra-company loans.
- Automatic and government-notified routes come under government FDI channels for FDI.
- It can be obtained through the Foreign Investment Facilitation Portal by applications for a single-window clearance under FDI route approval.
Government Initiatives to Boost FDI
- It is seen that the Indian Government is creating better pathways for FDI by liberalizing the FDI norms, ‘Make in India’ and ‘Atmanirbhar Bharat’ campaign, launching schemes that attract investments.
- Currently, there are around 1,000 companies that are vacating China, owing to the pandemic created by Covid 19, the only company from Lava International is already have indications of its relocation.
FDI is a major non-debt financial resource for the economic development of India
• The components of FDI are equity capital, reinvested earnings, and intra-company loans.
• FDI routes include automatic route, government route, and the Foreign Investment Facilitation Portal (FIFP).
• Relaxation of FDI norms across sectors, ‘Make in India’ and ‘Atmanirbhar Bharat’ campaigns, and launch of schemes attracting investments.
• Higher FDI inflows have been possible due to liberal and attractive policy regime, a good business climate, and reduced regulatory framework.
Retaining Growth
• Government policies/decisions are crucial in creating a conducive environment for global investors.
• A sound trade policy and level playing field are necessary for continued foreign investments.
