FDI POLICY MEASURES

Foreign direct investment (FDI) is an important driver of economic growth

which helps in—sustaining high growth rate, increasing productivity, a major source of non-debt financial resources, and employment generation. A favourable policy regime and sound business environment facilitate FDI flows.

The government has taken various reforms to liberalizing and simplifying the FDI policy to provide ease of doing business climate in the country that will also lead to larger FDI inflows. A number of sectors have been liberalized, including defence, construction, broadcasting, civil aviation, plantation, trading, private sector banking, satellite establishment and operation and credit information companies. By early 2017, the government had taken the following policy steps to promote FDI in the economy:

(i) Up to 49 per cent FDI permitted in insurance and pension funds (26 per cent under automatic route) and defence sector.

(ii) 100 per cent FDI permitted in manufacturing of medical devices; the

white label ATM and railway infrastructure.

(iii) 100 per cent FDI allowed in marketing of food products produced and manufactured in India (Union Budget 2016–17).

(iv) To undertake important banking sector reforms and public listing of general insurance companies undertake significant changes in FDI policy (Union Budget 2016–17).

(v) Reforms in FDI policy in the areas of Insurance and Pension, Asset Reconstruction Companies, Stock Exchanges (Union Budget 2016– 17).

(vi) A new policy for management of the PSUs, including strategic disinvestment—this is supposed to have liberal provisions for the FDI (Union Budget 2016–17).

As per the Economic Survey 2016-17, boosted by the government initiatives, during first half of 2016-17, FDI inflows improved to US$ 21.7 billion (from US$ 16.6 billion for the same period of the previous year) showing a growth of 30.7 per cent.

Meanwhile, the Union Budget 2017-18 has announced to abolish the FIPB (Foreign Investment Promotion Board) and promised to further liberalise the FDI policy. More than 90 per cent of the FDI inflows coming under

automatic route together with their online processing, the inter-ministerial nodal body (i.e. FIPB) approving FDI has lost much of its relevance. The few areas in which FDI needs a government approval (such as defence, telecom, insurance, banking, retail trade, etc.), in future, the approval will be given by either the concerned ministries or the regulatory bodies.