FDI in India

WHY IN NEWS?

The Union Cabinet approved an ordinance to amend two laws to ease mining rules, enabling foreign direct investment (FDI) in coal mining.

ABOUT FDI in India

• A foreign direct investment (FDI) is an investment in the form of a controlling ownership in a business in one country by an entity based in another country.
• With FDI, foreign companies are directly involved with day-to-day operations in the other country.
• This means they aren’t just bringing money with them, but also knowledge, skills and technology.
• FDI is an important monetary source for India's economic development.
• Economic liberalisation started in India in the wake of the 1991 crisis and since then, FDI has steadily increased in the country.
• During the fiscal ended March 2019, India received the highest-ever FDI inflow of $64.37 billion.
• Routes through which India gets FDI
  • Automatic route: The non-resident or Indian company does not require prior nod of the RBI or government of India for FDI.
  • Government route:
    • The government's approval is mandatory.
    • The company will have to file an application through Foreign Investment Facilitation Portal, which facilitates single-window clearance.
    • The application is then forwarded to the respective ministry, which will approve/reject the application in consultation with the Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce.
    • DPIIT will issue the Standard Operating Procedure (SOP) for processing of applications under the existing FDI policy.
• There are a few industries where FDI is strictly prohibited under any route. These industries are:
  • Atomic Energy Generation
  • Any Gambling or Betting businesses
  • Lotteries (online, private, government, etc)
  • Investment in Chit Funds
  • Nidhi Company
  • Agricultural or Plantation Activities (although there are many exceptions like horticulture, fisheries, tea plantations, Pisciculture, animal husbandry, etc)
  • Housing and Real Estate (except townships, commercial projects, etc)
  • Trading in TDR’s
  • Cigars, Cigarettes, or any related tobacco industry

Prelims Question

Q. FDI is completely prohibited in India in which among the following sectors?
1. Nidhi company
2. Tobacco industry
3. Pension sector
Select the correct answer using the code given below:
a. 1 and 2 only
b. 2 and 3 only
c. 1 and 3 only
d. 1,2 and 3

Answer to the Prelims Question