Measures taken by government to attract FDI

 FDI

Foreign Direct Investment, or FDI for short, is the process by which a firm or a person from one nation invests in assets or commercial ventures in another nation obtaining a 'lasting interest' and control of an enterprise.

Simply, as its full form suggest Foreign Direct Investment (FDI) it means a country or individual from the country directly putting investments in another country’s business or assets.FDI can encompass any material or intangible resources that enhance the investment in a foreign company; it is not just financial inputs. Establishing a long-term interest in the foreign entity is the goal of both kinds.

Foreign Direct Investment (FDI) can be both monetary and non-monetary. (More).

What Can Be Done to Improve FDI in India? 

To improve the investment climate and draw in foreign direct investment (FDI), the Indian government has put in place a number of programs and reforms. Simplifying rules, fostering a favourable business climate, and providing incentives to foreign investors are the main goals of these initiatives.

FDI Policy Liberalization:

• Higher FDI restrictions in important industries like retail, insurance, aviation, and defence. To lessen the requirement for government clearances, the automatic route was extended. 
• 100% FDI is permitted in industries such as real estate, construction, and e-commerce marketplaces.

Defense: Raised the FDI cap to 74% under the automatic route and 100% through the government route in cases requiring advanced technology.

Insurance: Increased the FDI limit from 49% to 74%.

Telecom: 100% FDI allowed in the telecom sector under the automatic route.

Ease of Doing Business

• Introduction of a single-window system for faster approvals of FDI proposals. Established to encourage manufacturing and establish India as a major production base worldwide. 
• Encourages businesses, both foreign and indigenous, to establish industries in India. Startup india scheme is designed to attract FDI in start-ups by offering tax exemptions, simplification of compliance, and access to funding.

Infrastructure Development

• Creation of smart cities and industrial corridors (like the Delhi-Mumbai Industrial Corridor) to supply top-notch infrastructure.
  
  
  
• 100% FDI allowed in power generation, transmission, and distribution, with a focus on renewable energy projects.
• Investments in digital infrastructure to enhance internet connectivity and promote tech-based FDI.

Financial Market Reforms

• Permitted foreign direct investment in credit information bureaus, asset reconstruction firms, and stock exchanges. Liberalized rules for foreign portfolio investors (FPI's).

Bilateral Agreements and Trade Reforms

• Signed Bilateral Investment Treaties (BITs) with multiple nations to give foreign investors a stable legal environment. India signed a BIT with Uzbekistan on September 27, 2024, and another with the UAE on February 13, 2024. 
  
  
  
• Negotiated Comprehensive Economic Partnership Agreements (CEPAs) and free trade agreements (FTAs) with countries such as the UK, Australia, and the United Arab Emirates in order to promote investment and commerce.
• Set up SEZs with tax benefits and world-class infrastructure to attract FDI in manufacturing and export-oriented industries.

Initiatives for Start-Ups and SMEs

Relaxed norms for foreign investments in start-ups and technology-driven sectors.100% FDI permitted for e-commerce marketplaces like Amazon and Flipkart.

Recent Success Stories

Companies like Apple and Samsung have expanded operations in India under the PLI scheme.

India attracted substantial FDI in solar and wind energy, becoming one of the largest renewable energy markets globally.

Impact of These Measures

In FY 2021–2022, India saw its largest-ever FDI inflow of $84.8 billion, demonstrating the success of reforms.Significant foreign investment has been made in industries like manufacturing, technology, and medicines.

By continuously refining its policies and focusing on ease of doing business, the Indian government aims to further strengthen its position as a preferred FDI destination.