4. Promotion to Foreign Investment

Functioning as a typical closed economy, the Indian economy had never shown any good faith towards foreign capital. The new industrial policy was a pathbreaking step in this regard. Not only the draconian FERA was

committed to be diluted, but the government went to encourage foreign investment (FI) in both its forms—direct and indirect. The direct form of FI was called as the foreign direct investment (FDI) under which the MNCs were allowed to set up their firms in India in the different sectors varying from 26 per cent to 100 per cent ownership with them—Enron and Coke being the flag-bearers. The FDI started in 1991 itself. The indirect form of foreign investment (i.e., in the assets owned by the Indian firms in equity capital) was called the portfolio investment scheme (PIS) in the country, which formally commenced in 1994.31 Under the PIS the foreign institutional investors (FIIs) having good track record are allowed to invest in the Indian security/stock market. The FIIs need to register themselves as a stock broker with SEBI. It means India has not allowed individual foreign investment in the security market still, only institutional investment has been allowed till now.32‌