NEW DELHI (India CSR): The FDI Policy Section of the Ministry of Finance, Govt. of India’s primary responsibility is to provide policy support on Foreign Investment, which includes introducing new FDI policy initiatives and clarifications. The main goal of this section is to enhance India’s investment environment, achieved by actively coordinating with multiple entities like DPIIT, DFS, RBI and SEBI on foreign investment issues and suggesting amendments in FDI policy according to the Indian economy‘s requirements, Annual Report 2022-23 of Ministry of Finance revealed.
India swiftly ascends as a favored destination for investment, experiencing a twentyfold surge in FDI inflows over the past two decades. The Financial Year 2021-22 marked a milestone for India, as it registered an unprecedented annual FDI inflow amounting to USD 84.84 billion, the report said.
Table 1: Key Roles of FDI Policy Section
| Roles of FDI Policy Section |
|---|
| Suggests measures for improving the investment environment |
| Coordination with DPIIT, DFS, RBI and SEBI |
| FDI policy amendments |
| Publishes ODI outflows data |
| Suggests measures for improving investment environment |
FDI: An Investor-Friendly Policy
The Indian government has instituted an investor-friendly policy to attract FDI. This policy is known for its transparency, predictability, and simplicity. With a negligible negative list, the majority of sectors are now open for 100% FDI under the Automatic route, which requires no prior government or RBI approval, streamlining the investment process significantly.
Government Approval for Certain FDI Proposals
DEA holds the authority to approve specific FDI proposals, especially those related to “financial services not regulated by any Financial Sector Regulator” and applications for foreign investment into a Core Investment Company or an Indian company investing only in the capital of other Indian companies.
FDI Policy Reforms Across Sectors
The Government has undertaken considerable FDI policy reforms across sectors, specifically targeting Non-resident Indians (NRIs), the Insurance sector, Petroleum and Natural Gas sector, the Telecom sector, and the Life Insurance Corporation of India (LIC).
Table 2: FDI Policy Reforms
| Policy Reforms | Description |
|---|---|
| Investments by NRIs | Clarity on downstream investments made by Indian companies owned and controlled by NRIs |
| FDI in Insurance | Increased permissible FDI limit from 49% to 74% |
| FDI in Petroleum and Natural Gas | Allowed foreign investment up to 100% for strategic disinvestment of a PSU |
| FDI in Telecom | Allowed 100% FDI in telecom services except cases requiring government approval |
| FDI in LIC | Permitted 20% FDI in LIC under the automatic route |
Record-breaking Annual FDI Inflow
These proactive measures and policy reforms have led to a record-breaking annual FDI inflow of USD 84.84 billion in the Financial Year 2021-22, marking the highest ever for India.
The Government’s initiatives over the years have yielded substantial results, evidenced by the progressively escalating volumes of FDI inflow into the country, setting new benchmarks. The Government continuously reviews and periodically modifies the FDI policy to maintain India’s appeal as an investment-friendly destination. A liberal, transparent policy for FDI has been instituted, with most sectors open to FDI under the automatic route. To enhance business ease and allure investments, the Government has recently executed reforms across various sectors, including Coal Mining, Contract Manufacturing, Digital Media, Single Brand Retail Trading, Civil Aviation, Defence, Insurance, and Telecom.
