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Foreign Direct Investment
Indian Economy: An Overview
 
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The idea of India is changing. This is best proved by the increasing number of countries showing interest to invest in India. Another encouraging factor is that India is considered a stable country for investing in by corporates overseas.

This is evident from the fact that not a single corporate has approached the World Bank Group's Multilateral Investment Guarantee Agency (Miga) for non-commercial risk cover for making investments into the country.

India has displaced US as the second-most favoured destination for foreign direct investment (FDI) in the world after China according to an AT Kearney's FDI Confidence Index that tracked investor confidence among global executives to determine their order of preferences.

The United Nations Conference on Trade and Development (Unctad) has said that India is among the "dominant host countries" for FDI in Asia and the Pacific (APAC).

It is evident. The investment scenario in India has changed. And the figures say that it is for the better.

India attracted more than three times foreign investment at US$ 7.96 billion during the first half of 2005-06 fiscal, as against US$ 2.38 billion during the corresponding period of 2004-05.

For the first six months of this fiscal, the country drew US$ 2.86 billion of FDI and US$ 5.10 billion of portfolio investment through GDRs, ADRs, FIIs, offshore funds and others.

In a bid to stimulate the sector further, the government is working on a series of ambitious economic reforms.

The Centre has divested some of its own powers of approving foreign investments that it exercised through the Foreign Investment Promotion Board (FIPB) and has handed them over to the general permission route under the RBI.

The FDI cap for aviation has been hiked from 40 to 49 per cent through the automatic route.

It has set up an Investment Commission that will garner investments in the infrastructure sector among others, and plans to increase the limit for investment in the infrastructure sector.

The Government approved sweeping reforms in FDI with a first step towards partially opening retail markets to foreign investors. It will now allow 51 per cent FDI in single brand products in the retail sector. Besides retail, other sector are being opened:
 

  • 100 per cent allowed in new sectors such as power trading, processing and warehousing of coffee and rubber.
  • FDI limit raised to 100 percent under automatic route in mining of diamonds and precious stones, development of new airports, cash and carry wholesale trading and export trading, laying of natural gas pipelines, petroleum infrastructure, captive mining of coal and lignite.
  • Subject to other regulations, 100 percent FDI is allowed in distillation and brewing of potable alcohol, industrial explosives and hazardous chemicals.
  • Indian investor allowed to transfer shares in an existing company to foreign investors.
  • Limit for telecoms services firms raised to 74 per cent from 49 per cent.

 

  
     
 
   

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