So what is FDI all about?

FDI – Foreign Direct Investment.

FDI in simple terms is a company from a country investing into the business of another country.

Example, Wal-Mart trying to invest into the retail markets in India. FDI can be done as investing into production, joint ventures, acquisitions or expanding the existing operations into another country.

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Why India seeks FDI?

  • Capital need – as the money in India is inadequate for a good economic growth
  • Especially country like India when transforming from developing to developed nation!!
  • FDI bring Technology, skills and business expertise
  • Employment increase
  • Indirectly helps increasing exports

 

Why the opposition?

  • Domestic companies loose the markets
  • Small enterprise face tough competition in terms of quality, knowledge, skill and technical expertise.
  • Eventually, domestic companies may surrender their ownership to these companies.

Automatic route and Government route

In FDI policies, a company interested for FDI has to take prior Government approval if legislated as Government route. And no prior approval is required is automatic route.

There will be a percentage of FDI that a company can invest on –

Some of them for example are:

  • FDI cap in telecom – 100% (automatic route upto 49% and beyond via govt. route)
  • Insurance sector – 49% – Automatic route
  • Single brand retail – 100% 49% through automatic, 49-100% through government
  • Petroleum 49% in – automatic route, from earlier approval route
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