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Indian Economy

Rise in Foreign Direct Investment

  • 29 May 2020
  • 2 min read

Why in News

According to data released by the Department for Promotion of Industry and Internal Trade (DPIIT), total Foreign Direct Investment (FDI) in India increased by 18% to $73.46 billion in the 2019-20 financial year.

  • DPIIT is under the Ministry of Commerce and Industry.

Key Points

  • Total FDI has doubled from the year 2013-14 when it was only $36 billion.
  • The total investment by Foreign Institutional Investors was $247 million.
  • The sectors that attracted the most foreign inflows during 2019-20 included services, computer software and hardware, telecommunications, trading and automobiles.
  • Singapore emerged as the largest equity FDI source, contributing to inflows of $14.67.
  • The inflows have been attributed to the government’s Make in India programme.

Foreign Direct Investment

  • FDI 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, including establishing ownership or controlling interest in a foreign company.
  • It is different from Foreign Portfolio Investment where the foreign entity merely buys equity shares of a company. FPI does not provide the investor with control over the business.
  • Routes through which India gets FDI:
    • Automatic Route: In this, the foreign entity does not require the prior approval of the government or the RBI.
    • Government route: In this, the foreign entity has to take the approval of the government.
      • The Foreign Investment Facilitation Portal (FIFP) facilitates the single window clearance of applications which are through approval route.
      • This portal is administered by the Department for Promotion of Industry and Internal Trade (DPIIT).

Source: IE

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