Prelims Level
Mains Level
Prelims Syllabus : Economy Mains Syllabus : Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

In News:

  • According to Commerce and Industry Ministry data, Foreign direct investment (FDI) into India contracted by 7% to $33.49 billion during April-December in the current fiscal.

Explained:

  • Foreign fund inflows during April-December 2017-18 stood at $35.94 billion. The key sectors that received the maximum foreign investment in the nine months of this fiscal include.
    • Services ($5.91 billion)
    • Computer software and hardware ($4.75 billion)
    • Chemicals ($6.05 billion), and
    • The automobile industry ($1.81 billion).

FDI:

  • 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.
  • Foreign direct investments are distinguished from portfolio investments in which an investor merely purchases equities of foreign-based companies.
  • Foreign direct investment (FDI) is a major source of non-debt financial resource for the economic development of India.
  • For a country where foreign investments are being made, it also means achieving technical know-how and generating employment.
  • Singapore was the largest source of FDI with $12.97 billion inflow.

FDI Governed by?

  • FDI in India is regulated under Schedule 1 of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000
  • Besides FEMA, 1999, FDI is also subject to other regulations as per Reserve Bank of India (RBI) and DPIIT (Department for Promotion of Industry and Internal Trade). DPIIT is the nodal agency entrusted to formulate FDI Policy. It issues press notes to make amendments in the existing policy and also issues consolidated FDI Policy on an annual basis.
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