Foreign Direct Investment refers to the investment that is made by a firm into an entity situated in a different country. FDI takes place when foreign business operations are set up by an investor including the foreign business assets such as defining the ownership and the control of interest in a foreign country. This can also include defining the ownership of more than just capital investment such as management as well as technology provisions. Foreign Direct Investment as a strategy ensures that control is exercised over the process of decision-making of a foreign company.
· Upward trend of FDI in India
Since India lies in the list of developing countries which is still trying to make a prominent place in the economy of the world, it needs a mix of investment which involves both national as well as international ties. Due to this, India is an attractive option for the foreign nations which constantly keep an eye out for fast-growing economies of the world. A foreign company/individual can invest in India via two routes including the automatic and government routes. No prior approval is required in automatic route, but the government route cannot be undertaken without obtaining an approval from the Government of India.
In order to increase the number of FDI in India, the government modified the FDI policy in 2014 by increasing FDI up to 100% from 49% in the insurance sector along with 25 other sectors. After this change was made, India also became a very attractive option for FDI surpassing China and USA. However, there are still some sectors where FDI cannot be exercised including chit funds, Nidhi companies, casinos, lottery business, railways, and real estate.
Per review of the data of 2018, it can be seen that Singapore has been the major investor in India with a percentage of 38.3% of the total FDI. Mauritius, Netherlands, and USA too have joined the list with an investment of 18.27%, 8.8%, and 7.1% respectively. Some other investors include Germany, France, UAE, Japan, and Cyprus. Chemical sector has witnessed the major investment of 23.5% followed by services at 22.7% and computer software hardware at 18.6%.
· How to move ahead with FDI in India?
The fact that FDI has been a very attractive option is not hidden but it has some disadvantages as well which must be focussed on while policies are being defined for FDI. One must ensure that the entire inflow should not be dependent on foreign direct investments alone. Other than this, people must be made aware of other options such as FII and venture capital as well. The foreign money inflow must be increased in the country by utilizing Indian innovation to improvise the foundations of the domestic economy.
With the help of FDI, India would be well integrated with the worldwide market as a result of which India can also make its place in the global market with its product as well as services export.