Last year Foreign Direct Investment (FDI) inflows in India touched record-breaking high of $49.9 billion. In other feats, India became the second-highest foreign investor in the UK. Moreover, the Indian government is mulling to ease FDI norms to achieve self-sustainability.
Crux of the Matter
The investment climate in India improved in India since the opening up of the economy in 1991. India is currently planning to ease its Foreign Investment policies to attract investments from across the globe. A few months ago, India was in talks with Japenese and South Korean Industrial giants over the matter of investment in India as these companies are planning to shift their operation outside China. Google CEO Sundar Pichai announced that Google will invest $10 bn in India over the next 5-7 years.
Moreover, Railways are bidding out £400 billion of projects in the public-private partnership (PPP) mode in the next 12 years. New industrial and forest policies are being planned to remove any hurdles that a foreign investor may face. An immediate preferential trade agreement with the UK and EU with the long term goal of a free trade agreement is also being mulled over.
“There are further reforms in mining and FDI in certain sectors where it is constrained. We will simplify processes and make it easier to do business here” Piyush Goyal, Union Minister of Commerce and Industry
Understanding FDI Foreign direct investment is an investment by a foreign entity in other country or its business entities generally with an ownership stake bringing infrastructure, funds, creating job opportunities and boosting the country’s overall economy with its long term investments and goals. A company can invest in two types of investment i.e. Greenfield investments, which means a company will build its own, brand new facilities from the ground up and Brownfield investments, which means when a company purchases or leases an existing facility to start operations in a foreign country.
Moreover, FDI can be done in 3 ways: – In Category 1, FDI is permitted through Automatic Route – In Category 2, FDI is permitted through Government Route – In Category 3, FDI is permitted through a mix of Government and Automatic Route
The automatic route requires no approval from the government but the government route requires a permit from the government or the respective ministry.
FDI v/s FII FDI is a foreign investor’s investment in domestic companies and assets of another country generally for an ownership stake. Whereas FII is an investment made in the financial markets of a foreign nation. In FDI, the investment is generally done for a long period of time, whereas in FII the investment may or may not be for a long period – there remains a risk of FIIs pulling back money from the financial market of a country in a short period. FDIs have a contribution to the overall economic development of a country, whereas FIIs are subject to companies’ interest, thus it does not contribute much. Apart from funds, FDIs bring technology, infrastructure, etc., whereas FIIs only bring funds.
Curiopedia
The Foreign Investment Promotion Board (FIPB) was a national agency of the Government of India, with the remit to consider and recommend foreign direct investment (FDI) which does not come under the automatic route. FIPB was abolished on 24 May 2017, during the 2017-2018 budget speech in Lok Sabha.
In 2015, French tax economist Gabriel Zucman published “The Hidden Wealth of Nations” which used global national account data to calculate the quantum of net foreign asset positions of rich countries that are unreported because they are located in tax havens. Zucman estimated that circa 8–10% of the global financial wealth of households, or over $7.6 trillion, was held in tax havens.
Stephen Hymer is considered to be the father of International Business due to his contributions related to Foreign Direct Investment as well as his studies and academic production on the field of theories of multinational enterprises. Hymer’s main contributions, which predated most of today’s existing theory on the subjects of multinational enterprises and FDI, are collected in eleven documents, including his 1960 doctoral thesis “The International Operations of National Firms: A Study of Direct Foreign Investment”.
Curated Coverage
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