Economics Prelims cum Mains

Delhi-NCR overtakes Maharashtra as India’s top FDI destination

The News:

  • The recent data released by Department of Industrial Policy and Promotion has revealed that the Delhi NCR, covering the national capital and parts of Uttar Pradesh (UP) and Haryana, has surpassed Maharashtra by attracting foreign direct investment (FDI) equity inflows into the country.


What is Foreign Direct Investment (FDI)?

  • Foreign Direct  Investment  is  the  investment  made  in  production  or  business by  the  country  in  another  country  by  either  means  of  buying  a  company  or expanding  its  business  in  the  foreign
  • It is  usually  by  means  of  bonds  and shares.
  • Foreign direct investment is when an individual or business owns 10 percent or more of a foreign company.
  • Foreign direct investment usually involves participation in management, joint ventures, transfer of technology and expertise.
  • It brings in long term growth , generate employment and fuels economic activities.
  • FDI also facilitates international trade and transfer of knowledge, skills and technology.


Foreign direct investment in India:

Automatic Route:

  • Under this route FDI is allowed without prior approval by Government or Reserve Bank of India.

Government Route:

  • Prior approval by government is needed via this route.
  • Under this route applications are considered by the Foreign Investment Promotion Board (FIPB).
  • For more than 49% FDI in defence, approval from Cabinet Committee on Security is required.
  • The proposals involving investments of more than USD 769.23 million are considered by Cabinet committee on economic affairs.

Note: The Indian company receiving FDI under either route is required to comply with provisions of the FDI policy including reporting the FDI and issue of shares to the Reserve Bank of India.


News Summary:

  • States getting highest FDI inflows: Delhi, Maharashtra, Tamil Nadu, Karnataka and Gujarat received approximately 75% of the total FDI equity inflows into the country in the first nine months of FY2018-19.
  • States which received nearly 15% of FDI equity inflows in in the first nine months of FY2018-19 are Andhra Pradesh, West Bengal, Kerala, Rajasthan, Punjab, Haryana and Himachal Pradesh.
  • Top 5 sectors receiving highest FDI inflows (nearly 65% of total FDI equity inflows):
    1. Chemicals
    2. Services
    3. Computer hardware and software
    4. Telecommunication
    5. Trading
  • There has been overall low investment in emerging markets because of uncertainty in the global markets. Such as:
    • Trade war between the US and China,
    • Concerns over Brexit,
    • Tightening of monetary policies by major global central banks,
    • Rupee depreciation
    • Geo-political tensions etc.


Role and functions of the Department of Industrial Policy and Promotion (DIPP):

  • Formulation and implementation of industrial policy and strategies for industrial development in conformity with the development needs and national objectives;
  • Monitoring the industrial growth, including advice on all industrial and technical matters;
  • Formulation of Foreign Direct Investment (FDI) Policy and promotion, approval and facilitation of FDI;
  • Encouragement to foreign technology collaborations at enterprise level and formulating policy parameters for the same;
  • Formulation of policies relating to Intellectual Property Rights in the fields of Patents, Trademarks, Industrial Designs and Geographical Indications of Goods and administration of regulations, rules made there under;
  • Administration of Industries (Development & Regulation) Act, 1951
  • Promoting industrial development of industrially backward areas and the North Eastern Region including International Co-operation for industrial partnerships
  • Promotion of productivity, quality and technical cooperation.

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