Major FDI Reforms: Overview

Major FDI Reforms: Overview

Question: India follows one of the most liberalised FDI policy regimes across the globe. Elaborate on the key FDI reforms in recent times.

- India has one of the most liberalised FDI policy regimes across the globe

- Government has an investor friendly policy in FDI, whereby FDI up to 100% under the automatic route in many sectors/activities

- Major changes have been initiated in the FDI policy regime to ensure India remains investor friendly

- Key FDI reforms have been initiated in the defence and railways sectors

- Entire range of rail infrastructure opened up to 100% FDI under the automatic route

- In the defence, sectoral cap was raised to 49%

- For boosting infrastructure creation and pragmatism in policy making, GoI reviewed FDI policy in construction development sector through quick exit norms, rationalisation of area limitations and due emphasis for reasonably priced housing

- To provide impetus within the medical devices sector, a carve out was created in the FDI policy on the pharma sector

- Currently, 100% FDI under the automatic route is permitted

- Government has also made plans to expand insurance cover to its massive population and provide required capital to insurance companies, raise the FDI limit in this sector to 49%

- Pension sector has also been opened to FDI up to 49%

- FDI provisions with respect to NRI investment has also been clarified by providing for purposes of FDI policy, investment by NRIs on non repatriation basis under FEMA(Transfer or Issue of Security by Persons Resident Outside India) Schedule 4. The regulations will be deemed to be domestic investment equivalent to investment made by residents

- Several steps have also been taken to improve ease of doing business in India

- Ministries and State Governments will rationalise the regulatory environment through use of IT and business process reengineering

- Measures will raise FDI which complements and supplements domestic investment

- Domestic companies are also benefited through foreign direct investment through enhanced access for supplementary capital and advanced, modern technologies; exposure to international managerial practices and opportunities of integration into international markets resulting in rapid domestic growth of the nation

- FDI concerns private business decisions and international investors normally require time for policy assessment

Facts and Stats

- FDI is of two types: outwards and inwards

- UNCTAD survey is has projected India as the second most favourable destination for FDI following China in the period between 2010-2012

- Sectors which attracted maximum investment include telecom, services, computer hardware and software

- Mauritius, Singapore, the US and UK were among leading FDI sources

- India is ranked fourth in terms of FDI in the textile sector after China, the US and Italy

- Infrastructure sector received 28.6 percent of total FDI inflows from the period 2008 to 2010