Tags : GS Prelims Paper 1 GS Mains Paper 3 Economic and Social Development-Sustainable Development, Poverty, Inclusion, Demographics, Social Sector Initiatives, etc. Indian Economy and issues relating to planning, mobilization, of resources, growth, development, and employment Important International institutions, agencies and their structure & mandate
FOREIGN DIRECT INVESTMENT (FDI)
  • Foreign direct investment (FDI) is when a company takes controlling ownership in a business entity in another country. With FDI, foreign companies are directly involved with day-to-day operations in the other country. 
  • It is different from Foreign Portfolio Investment where the foreign entity merely buys stocks and bonds of a company. FPI does not provide the investor with control over the business.
Routes through which India gets FDI
  • Automatic route: The non-resident or Indian company does not require a prior nod of the RBI or government of India for FDI. 
  • Govt route: The government's approval is mandatory. The company will have to file an application through Foreign Investment Facilitation Portal, which facilitates single-window clearance. The application is then forwarded to the respective ministry, which will approve/reject the application in consultation with the Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce. 
Sectors that come under up to 100% Automatic Route' category are:
  • Infrastructure Company in the Securities Market: 49%
  • Insurance: up to 49%
  • Medical Devices: up to 100%
  • Pension: 49%
  • Petroleum Refining (By PSUs): 49%
  • Power Exchanges: 49%
FDI prohibition
There are a few industries where FDI is strictly prohibited under any route. These industries are:
  • Atomic Energy Generation
  • Any Gambling or Betting businesses
  • Lotteries (online, private, government, etc.)
  • Investment in Chit Funds
  • Nidhi Company
  • Agricultural or Plantation Activities (although there are many exceptions like horticulture, fisheries, tea plantations, Pisciculture, animal husbandry, etc)
  • Housing and Real Estate (except townships, commercial projects, etc)
  • Trading in TDR’s
  • Cigars, Cigarettes, or any related tobacco industry
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