FDI in Indian economy

Apr, 08, 2019

[op-ed snap] Capital high

CONTEXT

The inflow of foreign capital into India’s stock market in the month of March hit a high of $4.89 billion, the biggest foreign inflow into Indian stocks since February 2012.

Foreign Investment  Situation in India

  • Foreign investment in Indian equities stood at $2.42 billion in February, as against a net outflow of $4.4 billion during the same month a year earlier, and is expected to be strong in April as well.
  • Both cyclical and structural factors are behind this sudden uptick in foreign investment that has helped the rupee make an impressive comeback.
  • Last year, India received more foreign direct investment than China for the first time in two decades
  • While the Chinese economy has been slowing down considerably in the last one year, India has emerged as the fastest-growing major economy.

Reasons

  • Other short-term reasons may also be behind some of the recent inflow of capital into the country.
  • For one, there is a sense among a section of investors that their fears of political instability are misplaced.
  • More important, there are clear signs that western central banks have turned dovish.
  • Both the Federal Reserve and the European Central Bank, for instance, have promised to keep interest rates low for longer.
  • This has caused investors to turn towards relatively high-yielding emerging market debt.
  • Indian mid-cap stocks, which suffered a deep rout last year, are now too attractive to ignore for many foreign investors.

Need for a cautious approach

  • The return of foreign capital is obviously a good sign for the Indian economy.
  • But policymakers need to be careful not to take foreign investors for granted.
  • Other emerging Asian economies will be competing hard to attract foreign capital, which is extremely nimble.
  • Any mistake by policymakers will affect India’s image as an investment destination.
  • To retain investor confidence, whichever government comes to power after the general election this summer will need to increase the pace of structural reforms and also ensure proper macroeconomic management with the help of the Reserve Bank of India.

Challenges

  • Long-pending reforms to the labour and land markets are the most pressing structural changes that will affect India’s long-term growth trajectory.
  • The high fiscal deficit of both the Centre and the State governments and the disruptive outflow of foreign capital are the other macroeconomic challenges.
  • These are some issues that need to be solved sooner rather than later.
Dec, 12, 2018

[op-ed snap] Why High-Profile Foreign Investors and Multinational Companies Sue India

Note4students

Mains Paper 2: IR | Bilateral, regional & global groupings & agreements involving India &/or affecting India’s interests

From the UPSC perspective, the following things are important:

Prelims level: Bilateral investment treaties

Mains level: India’s new model BIT and inherent flaws in it


Context

Legal cases arising out of BITs

  1. Ever since foreign investors started bringing cases against India under different bilateral investment treaties (BITs), the focus on the so-far neglected area of international investment law has increased
  2. BIT disputes against India, involving billions of dollars, revolve around measures triggered “by public health emergencies, economic crises or other matters directly involving public welfare — which would, therefore, be permissible under the Constitution, but which a corporation believes have negatively impacted its financial interests”

How do BITs work?

  1. Signing a BIT, like entering into any treaty, is in itself a sovereign function
  2. By signing, states voluntarily accept certain restrictions on the exercise of their sovereign public power
  3. If a state adopts a public measure which is not in accordance with these accepted restrictions, the multinational corporations, subject to jurisdictional requirements, are very much within their right to challenge such measures as breaches of the BIT
  4. Whether such measures are permissible under the state’s constitution or not is immaterial as regards that state’s international law obligations are concerned

Are MNCs wrong in bringing these claims?

  1. Contrary to popular perception, none of these claims have been brought because India exercised her sovereign public power to attain an important public welfare objective that allegedly hurt the financial interests of a foreign investor
  2. If the judiciary cannot get its act together; if the executive, Central and state, behaves in a manner that disregards due process, or goes back on the assurances and promises that lured foreign investors to invest; if the legislature amends laws retrospectively ignoring the decision of the apex court of the country, then what is a foreign investor expected to do?
  3. To bemoan these claims suggests not accepting to be governed by rule of law (but by the rule of whims and fancies) and telling foreign investors to accept whatever treatment is dished out to them in the name of third world sovereignty

India’s new model BIT

  1. The new model BIT is a major departure from earlier models (1993 and 2003) as it provides protection to foreign investors in limited circumstances
  2. Under the new Model, controversial clauses such as most favoured nation have been completely dropped while the scope of national treatment and fair and equitable treatment clauses has been considerably narrowed down
  3. Although investor-state dispute settlement (ISDS) mechanism – which allows investors to initiate international arbitration against states and thereby bypass domestic courts entirely – has been retained but access to ISDS mechanism has been made conditional on the exhaustion of local remedies
  4. In simple words, foreign investors will have to first approach the relevant domestic courts for the resolution of an investment dispute before commencing an arbitration case
  5. Besides, the new model provides an exhaustive list of economic, environmental and social measures, which shall be exempted under the treaty
  6. This includes taxation matters, intellectual property rights and measures to protect macroeconomic stability

Redrawing BIT

The redrawing of BITs should be based on two factors

  • First, there has to be a recognition that BITs are an integral element of the legal infrastructure necessary for the functioning of the global economy based on rules, not power politics
  1. Looked this way, BITs are an important component of international rule of law holding states accountable internationally for the exercise of their public power vis-à-vis foreign investors
  • Second, the functioning of the international investment relations between countries, under a rule of law framework, has to be informed by the normativity of ‘embedded liberalism’
  1. ‘Embedded liberalism’, different from the laissez faire liberalism of the 19th century, focuses on shaping an economic order that represents a compromise between free markets and States intervening in favour of their regulatory goals

Flaws in model BIT

  1. It significantly dilutes international scrutiny of India’s exercise of public power
  2. It undermines international rule of law and is divorced from the conception of ‘embedded liberalism’
  3. It takes India back to the pre-economic liberalisation era by giving a new template of the old-fashioned economic nationalism prioritising Indian government’s interests over foreign investors

Way forward

  1. The BIT cases against India should have triggered an introspection of the overall governance and decision-making processes
  2. Instead, India has used these cases to play the victim
  3. This victimhood narrative has ignored the fact that these cases deserved to be brought due to India’s poor governance and abuse of public power

Original article: Why High-Profile Foreign Investors and Multinational Companies Sue India

With inputs from the article: Remodeling India’s Investment Treaty Regime

Jul, 28, 2018

India drops three ranks in AT Kearney FDI Confidence Index

Image Source

Note4students

Mains Paper 3: Economy | Mobilization of resources

From UPSC perspective, the following things are important:

Prelims level: FDI Confidence Index

Mains level: Issues rose after implementation of landmark GST and Demonetisation


News

GST implementation challenges, demonetisation may have deterred investors

  1. India in 2018 has fallen out of the top 10 destinations for FDI in terms of its attractiveness, according to an AT Kearney report.
  2. The report says it could be due to troubles in the implementation of the GST and the government’s demonetisation decision in 2016.

Highlights of the Report

  1. India ranks 11 in the 2018 AT Kearney FDI Confidence Index, down from 8 in 2017 and 9 in 2016.

2.      The report highlighted several of the reforms such as removing the Foreign Investment Promotion Board and liberalizing FDI limits in key sectors that have maintained India’s high rankings in terms of FDI attractiveness.

3.      Other notable reforms include the liberalisation of foreign investment thresholds for the retail, aviation, and biomedical industries as per the report.


Back2Basics

FDI Confidence Index

  1. The Foreign Direct Investment Confidence (FDI) Index is prepared by A.T. Kearney.
  2. It is an annual survey which tracks the impact of likely political, economic, and regulatory changes on the foreign direct investment intentions and preferences of CEOs, CFOs, and other top executives of Global 1000 companies.
  3. The report includes detailed commentary on the markets and the impact a variety of global trade issues have on their FDI attractiveness, as well as a ranking of the top 25 countries.
Jun, 16, 2018

FII flows to Indian markets may slow as Fed hikes rates

Note4students

Mains Paper 3: Economy | Effects of liberalization on the economy

From UPSC perspective, the following things are important:

Prelims level: FIIs (foreign institutional investors), Difference between FDI & FII

Mains level: Impact of policies of various financial sector regulators across the world on India


News

Impact of fed rate hikes

  1. Foreign investors, who have pulled out nearly $240 million from Indian stocks since the beginning of the year, may continue selling after interest rate increase in the US
  2. FIIs (foreign institutional investors) have been net sellers in this year
  3. The quarter percentage point increase is the second hike this year and the seventh since it started increasing lending rates in 2015
  4. The US Federal Reserve’s rate-setting panel also signaled two more rate hikes this year

Why funds revert?

  1. Higher interest rates tempt large foreign funds to move their money to the US
  2. Rising interest rates suggest a pickup in consumption and demand. It is a sign that US economy is getting stronger
  3. The currency may also depreciate further if US Fed goes ahead and hike rates further
  4. A few investors who have invested in the Indian markets over the last 3-5 years or even more might have chosen to book profit at this juncture, anticipating higher volatility in the Indian markets the closer it is to general elections
May, 05, 2018

MHA fast-tracks security clearance for overseas investment proposals

Note4students

Mains paper 3: money-laundering and its prevention

Prelims Level: Particulars of the Revised National Security Clearance Policy, 2015, FDI through automatic routes

Mains Level: Potential security threats from liberalized FDI inflow


News

Speedy Clearance of FDI proposals

  1. Among foreign countries, the maximum investment proposals in critical sectors like telecom and defense that was cleared by the Home Ministry in 2017 were from China, United Kingdom, U.S., and Mauritius
  2. The Ministry said it has given security clearance to more than 5,000 investment proposals, including for Foreign Direct Investment, in the last four years
  3. The earlier time taken for security clearance for a project was eight-nine months on an average. This has been brought down to 40 days since last year
  4. At present, only 11 sectors, including defense and retail trading, require government approval for foreign direct investment
  5. Over 90% of FDI proposals have come through the automatic route

Potential threats from the free flow of FDI

  1. Sovereignty risks: Funding of terror groups and other banned outfits.
  2. Financial risks: Money Laundering, Unverifiable investors from tax heavens, Hawala etc.
  3. Commercial risks: Dumping cheap manufactured components
  4. Political risk: Political Funding & subsequent influence on decisions

Back2Basics

Revised National Security Clearance Policy, 2015

  1. The Ministry of Home Affairs had formulated a new national security clearance policy in 2015 after the government decided to speed up projects, which were stuck for lack of approval by Intelligence Bureau (IB) or other agencies including the State police
  2. It has introduced the National Security Clause as an important component of this Policy
  3. It aims to extend fast-track security clearance to foreign investment proposals in the critical sectors such as telecom, private security, and defense while ensuring that national interests are not endangered
  4. The clearance process aims to boost government’s ease-of-doing-business and Make in India initiative.
  5. The policy has 15 parameters on which inputs from security agencies are sought. Once it has got an application from an investor, the Ministry decides on the status of security clearance to the company within 4-6 weeks.
  6. As per the policy, the promoters, owners, and directors of the company are mandated to give self-declarations regarding any criminal history on their part, which reduced the period required to give security clearance from 2-3 months earlier to just 4-6 weeks now
  7. Security inputs from the Intelligence Bureau, the CBI, the Enforcement Directorate and other agencies are sought only in cases of serious crimes and not in case of minor offenses
Apr, 19, 2018

NIIF partners UK govt for Green Growth Equity Fund

Note4students

Mains Paper 3: Economy | Infrastructure: Energy, Ports, Roads, Airports, Railways etc.

From UPSC perspective, the following things are important:

Prelims level: NIIF, Green Growth Equity Fund

Mains level: Government initiatives for reviving infrastructure sector and providing required capital to the sector


News

Launch of GGEF

  1. The government’s National Investment and Infrastructure Fund of India (NIIF) has announced a partnership with the UK government to launch Green Growth Equity Fund (GGEF)
  2. NIIF and the UK government have committed £120 million each for the fund which will be managed by EverSource Capital, a joint venture of home-grown private equity firm Everstone Group and Lightsource BP

About the fund

  1. Green Growth Equity Fund is an alternative investment fund registered with the Securities and Exchange Board of India
  2. It aims to raise £500 million from international institutional investors to invest in areas such as renewable energy, clean transportation, water, sanitation, waste management, emerging technologies and other similar industries in India
  3. It will be the first investment for NIIF’s Fund of Funds

National Investment and Infrastructure Fund of India (NIIF)

  1. NIIF, an institution sponsored by the government of India, is a collaborative investment platform for international and Indian investors
  2. The government had set up the Rs40,000 crore NIIF in 2015 as an investment vehicle for funding commercially viable greenfield, brownfield, and stalled projects
Apr, 06, 2018

NIIF, Everstone Group in talks to tie up for $500 million fund

Note4students

Mains Paper 3: Economy | Mobilization of resources

From UPSC perspective, the following things are important:

Prelims level: NIIF, Green Growth Equity Fund

Mains level: Various initiatives to boost capital investments


News

Private equity firm to manage GGEF

  1. The government’s National Investment and Infrastructure Fund (NIIF) is in talks with private equity firm Everstone Group for a tie-up to manage its Green Growth Equity Fund (GGEF)
  2. The corpus of the fund is expected to be in the range of $500 million to $1 billion

About NIIF

  1. NIIF, an institution sponsored by the government of India, is a collaborative investment platform for international and Indian investors
  2. The government had set up the Rs40,000 crore NIIF in 2015 as an investment vehicle for funding commercially viable greenfield, brownfield, and stalled projects
  3. NIIF’s mandate includes investing in areas such as energy, transportation, housing, water, waste management and other infrastructure-related sectors in India
  4. The Indian government is investing 49% and the rest of the corpus is to be raised from third-party investors such as sovereign wealth funds, insurance and pension funds, endowments, etc

Back2Basics

Green Growth Equity Fund (GGEF)

  1. GGEF, which will invest in renewable energy assets, is a joint venture between NIIF and the UK government
  2. It aims to leverage private sector investment from the City of London to invest in green infrastructure projects in India
  3. It shall have anchor commitments of GBP 120 million each from Government of India (through NIIF) and Government of UK
Jan, 11, 2018

[pib] FDI policy further liberalized in key sectors

Note4Students

From UPSC perspective, the following things are important:

Prelims level: FDI, FII, FPI, DIPP

Mains level: Liberalisation in Indian economy


News: 

  • 100% FDI under automatic route for Single Brand Retail Trading
  • 100% FDI under automatic route in Construction Development
  • Foreign airlines allowed to invest up to 49% under approval route in Air India
  • FIIs/FPIs allowed to invest in Power Exchanges through primary market

Details

  • Government approval no longer required for FDI in Single Brand Retail Trading (SBRT)
  • Foreign airlines are allowed to invest under Government approval route in the capital of Indian companies operating scheduled and non-scheduled air transport services
  • Real-estate broking service does not amount to real estate business and is, therefore, eligible for 100% FDI under the automatic route.
  •  Allowing FIIs/FPIs to invest in Power Exchanges through the primary market as well.

Other Approval Requirements under FDI Policy

  • Issue of shares against non-cash considerations like pre-incorporation expenses, import of machinery etc. shall be permitted under automatic route in case of sectors under the automatic route.
  • To align FDI policy on Indian company/ies/ LLP and in the Core Investing Companies with FDI policy provisions on Other Financial Services

Competent Authority for examining FDI proposals from countries of concern

  • FDI applications for investments in automatic route sectors, requiring approval only on the matter of investment being from country of concern would be processed by Department of Industrial Policy & Promotion (DIPP) for Government approval

Pharmaceuticals

  • Now it’s been decided to amend the definition of ‘medical devices’ as contained in the FDI Policy

Restrictive conditions regarding audit firms

  • It has been decided to provide in the FDI policy that wherever the foreign investor wishes to specify a particular auditor/audit firm having the international network for the Indian investee company, then audit of such investee companies should be carried out as joint audit wherein one of the auditors should not be part of the same network
Aug, 22, 2017

FDI jumps 37% to $10.4 billion during April-June 2017

Image result for Foreign direct investment

Image source

Note4students

Mains Paper 3: Economy | Mobilization of resources

From UPSC perspective, the following things are important:

Prelims level: Foreign direct investment (FDI)

 Mains level: FDI flow to India-Challenges and Way forward


News

  1. Foreign direct investment (FDI) into the country grew by 37 per cent to USD 10.4 billion during the first quarter of the current fiscal
  2. Since the launch of ‘Make in India’ initiative (October 2014 – June this year), foreign inflows jumped 64 per cent to USD 110.12 billion from USD 67.26 billion in the same period last year.
  3. Sectors which attracted the highest foreign inflows include services, telecom, trading, computer hardware and software and automobile. 
  4. Bulk of the FDI came in from Singapore, Mauritius, the Netherlands and Japan. 
  5. The government has announced several steps to attract foreign inflows.The measures include liberalisation of FDI policy and improvement in business climate.

Why FDI is important for India?

  1. India needs around USD 1 trillion for overhauling its infrastructure sector such as ports, airports and highways to boost growth.
  2. A strong inflow of foreign investments will help improve the country s balance of payments situation
  3. It will strengthen the rupee value against other global currencies, especially the US dollar.
May, 03, 2017

Eclectic FPI mix drives Indian equities

  • What do Trinidad and Tobago, Russia, Brazil, Greece, Cook Islands, Israel, New Zealand and Republic of Malta
    have in common?
  • One institutional investor from each of these countries has registered as a foreign portfolio investor (FPI) with
    the Securities and Exchange Board of India (SEBI), aiming to reap gains from the Indian equity market.
  • According to SEBI data, there are nearly 8,000 registered FPIs in India coming from almost 60 different countries across the world.
  • The number of FPIs domiciled in Mauritius was much higher and began to fall only after the benefits of double tax avoidance started to wean away.
  • Simply put, FPIs from Mauritius were not required to pay any tax in India before the rules were changed.
  • Market participants say that an increasing number of foreign investors are attracted to India because of the higher returns when compared with some of the other leading markets, including the emerging markets pack.
  • SEBI data shows that there are investors from countries like Bahamas, Liechtenstein, Republic of Slovenia,
    Brunei, Bermuda, Guernsey and Jersey. Both Guernsey and Jersey are islands in the English Channel.
  • Foreign investors have historically been the prime drivers of the various bull runs seen in the Indian equity market.
  • Data from National Securities Depository Ltd. (NSDL) shows that FPIs have been net buyers of Indian equity at ₹40,911 crore or more than $6 billion.
May, 03, 2017

No logic behind low credit rating for India: Parekh

  • Critical of rating agencies for giving India the lowest investment grade rating, eminent banker Deepak
    Parekh has wondered how a country with such “strong fundamentals” on both economic and political fronts can be rated so low.
  • India continues to be rated ‘BBB-’, just a notch above the junk grade and lowest among investment grade ratings, by most of the global credit rating agencies.
  • This is despite the government pitching hard for an upgrade on the basis of several reforms initiated over the
    last few years.
  • On the other hand, Italy and Spain, which are far weaker and smaller, are having much higher ratings than India.
  • With all macro economic fundamentals being positive, India, the fastest growing emerging economy for over one year now is rated just BBB-.

Back2Basics:

  • What is a ‘Credit Rating’? An assessment of the creditworthiness of a borrower in general terms or with
    respect to a particular debt or financial obligation.
  • A credit rating can be assigned to any entity that seeks to borrow money – an individual, corporation, state or
    provincial authority, or a sovereign government.
  • Credit assessment and evaluation for companies and governments is generally done by a credit rating agency
    such as Standard and Poor’s, Moody’s or Fitch.
  • Moody’s was the first agency to issue publicly available credit ratings for bonds, in 1909, and other agencies
    followed suit in the decades after.
  • Credit rating agencies typically assign letter grades to indicate ratings. Standard and Poor’s, for instance, has a
    credit rating scale ranging from AAA (excellent) and AA+ all the way to C and D.
  • A debt instrument with a rating below BBB- is considered to be speculative grade or a junk bond, which means it is more likely to default on loans.
  • The agency also looks at the entity’s future economic potential. If the economic future looks bright, the credit
    rating tends to be higher; if the borrower does not have a positive economic outlook, the credit rating will fall.
Oct, 10, 2016

Treaty hurdle no bar for U.S. investments

  1. Talks between India-USA are in a limbo over a proposed Bilateral Investment Treaty (BIT)
  2. However, US companies are finding novel ways to address investment protection and dispute-related issues with their Indian counterparts
  3. U.S. investors are also signing up with Indian firms to use London and Brussels as seats of arbitration
  4. For instance: The Gujarat International Finance Tec-City (GIFT City) has offered American investors the option of using the Singapore arbitration model to solve disputes
  5. GIFT City: India’s first International Financial Services Centre (IFSC)
  6. The BIT is aimed at promoting and protecting two-way direct investments
Sep, 08, 2016

FDI in multi-brand retail only if playing field level

  1. The Centre will allow foreign direct investment in multi-brand retail only after equipping domestic traders and farmers to compete with such retailers
  2. Aim: To ensure a level playing field
  3. Why not yet? The rationale behind this is the lack of adequate infrastructure and last-mile connectivity in the country to ensure the financial inclusion of traders and farmers
Sep, 01, 2016

Cabinet nod for permanent residency to FDI investors

  1. News: Union Cabinet approved a scheme to grant permanent residency status (PRS) to all foreign investors, except those from Pakistan, subject to the relevant conditions.
  2. Aim: To encourage foreign investment in India and facilitate the Make in India programme
  3. Conditions: To avail this scheme, the foreign investor will have to invest a minimum of Rs.10 crore to be brought within 18 months or Rs.25 crore to be brought within 36 months
Aug, 19, 2016

Panel suggests corporate bond index, easier norms for FPIs

  1. Context: The ‘Report of the Working Group on Development of Corporate Bond Market in India’ has been submitted to RBI Governor Raghuram Rajan in his capacity as Chairman of the FSDC (Financial Stability and Development Council) Sub Committee
  2. Aim: To develop corporate bond market in India
  3. Recommendations: Easing of norms for foreign investors, a corporate bond index on the lines of Sensex or Nifty
  4. Also, making it mandatory for large corporates to tap this market for funds beyond a threshold
  5. Tightening of norms for credit rating agencies by mandating them to strictly adhere to timely public disclosure of defaults
Aug, 11, 2016

Cabinet nod for changes to FDI regulations in NBFCs

  1. Effect: The amendment in the existing Foreign Exchange Management regulations on NBFCs will enable inflow of foreign investment in ‘other financial services’ on automatic route
  2. Condition: Such services must be regulated by any financial sector regulators (RBI, SEBI, PFRDA etc.)/ Govt agencies
  3. Others: Foreign investment in ‘other financial services’ that are not regulated by any regulators or by a Govt agency can be made via the approval route
  4. Minimum capitalisation norms: These have been eliminated as most of the regulators have already fixed minimum capitalisation norms
Jul, 12, 2016

US investors keen on Indian road and port sectors

  1. News: The mood among US investors is highly positive towards Indian road and port infrastructure sector Union Minister Nitin Gadkari said
  2. He also assured that the negative remarks about the country’s investment climate in a recent report of the US State Department, would have no impact on investment flow
  3. India will be looking for ways to adopt the latest US technologies in road safety, highway construction, and waterways management
Jul, 08, 2016

FDI in newspapers and periodicals

  1. News: The government is mulling a raise in foreign direct investment limit in newspapers and periodicals to 49% from 26% currently
  2. Currently, the FDI policy permits 26% foreign direct investment in the publishing of newspapers and periodicals dealing with news and current affairs through government approval route
  3. The Department of Industrial Policy and Promotion (DIPP) will consider the proposal
Jun, 22, 2016

India retains tenth spot among FDI destinations

  1. The World Investment Report 2016 released by the United Nations Conference on Trade and Development (UNCTAD)
  2. India has retained its ranking as the t10th highest recipient of foreign direct investment in 2015, receiving $44 billion of investment that year compared to $35 billion in 2014, according to the United Nations
  3. India also jumped a place in terms of attractiveness as a business destination in 2015, to 6th place, with 14% of the respondents naming it as their destination of choice
Jun, 21, 2016

Radical liberalisation of the FDI regime by Govt- II

  1. Aviation: 100% FDI in India-based airlines
  2. However, a foreign carrier can only own upto 49% stake in the venture, and the rest can come from a private investors including those based overseas
  3. Impact: This is expected to bring in more funds into domestic airlines
  4. Airport: 100% FDI in existing airport projects has been allowed without government permission, from 74% permitted so far
  5. The move comes close on the heels of the new civil aviation policy that relaxed norms for domestic carriers to fly abroad
  6. Pharma: Up to 74% FDI under automatic route in existing pharmaceutical ventures
  7. Govt approval route will continue beyond 74% FDI & upto 100& in such brown-field pharma
Jun, 21, 2016

Radical liberalisation of the FDI regime by Govt

  1. Defence: FDI beyond 49% (& upto 100%) has been permitted through the government approval route, in cases resulting in access to modern technology in the country
  2. The condition of access to ‘state-of-art’ technology in the country has been done away with
  3. Why? Many foreign investors had complained about the ambiguity regarding that term
  4. Retail: 100 per cent FDI under government approval route for trading, including through e-commerce, in respect of food products manufactured or produced in India
  5. This brings into effect the proposal made in the Budget 2016-17
Apr, 26, 2016

FDI inflows hit record in April-February last fiscal

  1. Context: India received $51 billion FDI, the highest-ever, during April-February FY16, according to DIPP
  2. Reason: Govt’s efforts to improve the ease of doing business and initiatives such as Make In India
  3. The complex procedures and delays are now being gradually dismantled
  4. Where from? Singapore ($10.98 bn), Mauritius ($6.1 bn)
  5. Top sectors: Computer software/ hardware, Services, Automobile, Telecom
Apr, 19, 2016

Services corner bulk of FDI inflows

  1. Context: Official data released by the Department of Industrial Policy and Promotion (DIPP)
  2. Findings: India received an all-time high annual foreign direct investment (FDI) in 2015
  3. Services lead: The surge is led by the inflows into the services sector rather than manufacturing or infrastructure
  4. The ‘Make in India’ initiative has not yet materialised into FDI inflows
  5. More than half of total FDI came into the services sector- software, financial services, trading, hospital and tourism
Mar, 30, 2016

Government permits 100 per cent FDI in e-commerce

  1. News: The govt permitted 100% FDI in the market place format of e-commerce retailing
  2. Reason: To attract more foreign investments in the e-commerce segment
  3. FDI has not been allowed in inventory-based model of e-commerce
  4. The govt. has already allowed 100% FDI in business-to-business e-commerce
  5. Definition: As per the guidelines, e-commerce means buying and selling of goods and services, including digital products over digital and electronic network
Mar, 21, 2016

Govt allows 49% FDI in insurance under automatic route

  1. News: The govt has relaxed FDI norms for the insurance sector by permitting overseas companies to buy 49% stake in domestic insurers without prior approval
  2. Reason: Govt. wants to bring to attract more foreign investment in the sector
  3. Statistics: There are 52 insurance companies operating in India, of which 24 are in the life insurance business and 28 in general insurance
  4. During Apr-Dec 2015, FDI into the country grew by 40% to $ 29.44 billion
Mar, 03, 2016

Small retailers oppose 100 % FDI in marketing of food products

  1. Context: Budget proposed that 100% FDI will be allowed through the govt approval route in marketing food products produced in India
  2. News: Several small retailers, street vendors and farmers’ organisations have opposed the move
  3. Reason: They have questioned the govt’s claim that post-harvest losses are high (around 30-40%)
  4. According to a recent report of the Indian Council of Agricultural Research,  the post-harvest losses of several food items were very low (at below 10%)
  5. Criticism: The move would threaten livelihood of all street vendors depending on retailing food
  6. This will allow big food companies and MNCs into multi-brand retail trade through the backdoor
Mar, 02, 2016

FDI in food processing to push local sourcing: Budget

  1. What? Proposal to permit 100 % FDI in the marketing of food products made in India
  2. Benefits: Expected to encourage manufacturers to utilise local produce in their products even more
  3. Companies are expected to step up their R&D effort to accommodate local produce in their products
  4. This could be a game changer for the domestic food processing business
  5. It could have a cascading impact on local farming
Nov, 12, 2015

Govt eases FDI norms in 15 major sectors, including defence, civil aviation

The Government has eased FDI norms in 15 major sectors.

  1. The govt. also increased the financial power of the FIPB to give single window clearance for investment projects up from Rs 3,000 crore to Rs 5,000 crore.
  2. This will help him reinforce the govt’s narrative on economic reforms and its intent to attract global investors and ease rules for them.
  3. The new norms have removed outdated conditionalities and  many more areas have been put on the automatic route.
  4. In defence, the govt. has allowed foreign investment up to 49% under the automatic route, earlier under the govt. approval route.-
Jul, 21, 2015

Why are defence and banking out of composite FDI caps?

  1. The reason is that being very important sectors, Govt. does not want them to suffer from vulnerability of ‘quick come – quick go’ international money.
  2. In defence sector, foreign investment is limited to 49% under automatic route. However, portfolio investments such as FPIs is capped at 24%.
  3. In private banking sector, FDI limit is 74% of net paid up capital with 49% cap on FPIs.
Jun, 27, 2015

India leads FDI in South Asia with 34 billion investment in 2014

  1. FDI inflow to India has surged by 22% to about 34 billion US dollars.
  2. India has improved its position to 9th top host country in the world for FDI in 2014.
  3. Top 5 FDI recipients in South Asia: India, Iran, Pakistan, Bangladesh, Sri Lanka.
  4. India was also the biggest investor in terms of outward FDI in South Asia region with 9.8 billion dollars.
Jun, 16, 2015

FDI in services sector grows by 46% in 2014-15 fiscal

  1. How & why? The government had taken series of steps to improve ease of doing business and attracting domestic as well as foreign investments.
  2. The services sector includes banking, outsourcing, insurance, Research & Development (R&D), courier and technology testing.
May, 22, 2015

Union Government relaxes FDI norms for NRIs, PIOs, OCI

  1. Gov. will amend FDI policy on investments by NRIs, PIOs & OCIs which will give them parity in economy and education.
  2. Now non-repatriable investments under under Schedule 4 of FEMA regulations will considered as domestic investment.
  3. FDI in Railway infrastructure sector has been opened to 100% FDI under automatic route.
  4. FDI limit in the insurance sector has been increased to 49%.
  5. Sectoral cap for FDI in defence sector has been raised to 49%.
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