What is Foreign Direct Investment (FDI)?
- It is the investment made by a person or a company in one country into businesses located in another country.
- Generally, FDI takes place when an investor establishes foreign business operations or acquires foreign business assets.
Automatic & Approval Routes:
- The entry of Foreign Direct Investment by non-residents into India is regulated through two routes –automatic route and approval route.
- Under the Automatic Route, the foreign investor does not require any approval from the Reserve Bank or Government of India for the investment.
- Under the approval route, the foreign investor should obtain prior approval of the Government of India agencies or bodies specified.
Why in the news?
- India has attracted the highest ever total FDI inflow of US$ 81.72 billion during the financial year 2020-21 and it is 10% higher as compared to the last financial year 2019-20 (US$ 74.39 billion).
News in detail
- Measures taken by the Government on the fronts of Foreign Direct Investment policy reforms, investment facilitation and ease of doing business have resulted in increased FDI inflows into the country.
- The following trends in India’s Foreign Direct Investment are an endorsement of its status as a preferred investment destination amongst global investors:
- FDI equity inflow grew by 19% in the F.Y. 2020-21 (US$ 59.64 billion) compared to the previous year F.Y. 2019-20 (US$ 49.98 billion).
- In terms of top investor countries, ‘Singapore’ is at the apex with 29%, followed by the U.S.A (23%) and Mauritius (9%) for the F.Y. 2020-21.
- ‘Computer Software & Hardware’ has emerged as the top sector during F.Y. 2020-21 with around 44% share of the total FDI Equity inflow followed by Construction (Infrastructure) Activities (13%) and Services Sector (8%) respectively.
- Under the sector `Computer Software & Hardware’, the major recipient states are Gujarat (78%), Karnataka (9%) and Delhi (5%) in F.Y. 2020-21.
- Gujarat is the top recipient state during the F.Y. 2020-21 with 37% share of the total FDI Equity inflows followed by Maharashtra (27%) and Karnataka (13%).
- The major sectors, namely Construction (Infrastructure) Activities, Computer Software & Hardware, Rubber Goods, Retail Trading, Drugs & Pharmaceuticals and Electrical Equipment have recorded more than 100% jump in equity during the F.Y. 2020-21 as compared to the previous year.
- Out of top 10 countries, Saudi Arabia is the top investor in terms of percentage increase during F.Y. 2020-21.