FDI- Foreign Direct Investment

1.Foreign Direct Investment or FDI is a major driver of economic growth and is largely a matter of private business decisions. FDI inflows of depend on a number of factors such as availability of natural resources, infrastructure, market size, general investment climate etc.

2.Government of India has put in place a liberal and transparent policy for FDI with most sectors open for FDI under the automatic route .

3.To further attract more investors the department for promotion of Industry and Internal trade along with the investment promotion agency, Invest India have joined hands to put in place a new mechanism which those looking to invest 500 million dollars or more will have a designated person to facilitate all clearances.

4.The government has been from time to time relaxing the policy to make more items on the Automatic list rather than on the Restrictive list and also the government has been in fact in certain items which earlier prohibited all together reducing the prohibited list gradually and now just handful of products based on health ground, security ground.

Factors for Healthy FDI Inflows(What MNC’S want?)

5.a.Predictable: Regulatory Framework Policy has to be predictable if you suddenly change the policy mid course, for example that we have seen in  the case of FDI for  E-Commerce that mid course the policy was altered after giants such as Amazons and Walmart had already brought in money . So regulatory in framework is an extremely important factor.

b.Political and Economical Stability: Political and economical stability in the country is equally important aspect for them to look at in that country for in terms of investment.

c.Currency Stability: Currency Stability is equally is an important issue because if you say  rupees become cheaper so now they can bring in money, Then they keep on waiting.

d.Country’s Competitiveness: They would bring the money when they know the country has competitiveness in their product making otherwise they can go somewhere else where the product make cheaper, they can find markets.

e.Growing Country: They look at the aspect is that where the country is growing or not. Some of their needs are met and the demands of the country becomes larger if the growth of country is faster.

6.What is missing in India?

a.Stability is missing in India. Changes take place so frequently in India that they get shaken up.While market Size or demand is a favourable factor, lack of stability discourages MNC’s.

b.Taxation environment at times is unpredictable.

c.There is still a general/global impressions that emerging markets includes in India are mired in red tape that is very difficult to do business. We may have moved from 100 positions to 77.

7.Way Forward

The new policy of ‘Handholding the Investor’ is a very favourable policy.The Department for Promotion of Industry and Internal Trade (DPIIT) is in the process of setting up a mechanism to handhold investors and help them set up their facilities in India,
Recently prime minister visited the US for made large number of industries and they invited them to come adn and put forward a framework for the better preferences..An additional facility and offices has been created with in that framework which was One Stop Shop and focus on larger investment so that we can have more investment has coming.FDI typically means growth and development for a larger duration because that is a direct investment which either goes with a structure of manufacturing in terms of creating facilities whether retail outlets and defence. so that we had opened a large sector