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DAILY NEWS ANALYSIS

  • 05 April, 2021

  • 3 Min Read

Increased FDI Inflows in FY 2020-21

India has attracted highest ever total FDI inflow of US$ 81.72 billion during the financial year 2020-21 and it is 10% higher as compared to the last financial year 2019-20 (US$ 74.39 billion).

  • FDI equity inflow grew by 19% in the F.Y. 2020-21 (US$ 59.64 billion) compared to the previous year F.Y. 2019-20 (US$ 49.98 billion).
  • In terms of top investor countries, Singapore is at the apex with 29%, followed by the U.S.A (23%) and Mauritius (9%) for the F.Y. 2020-21.
  • Computer Software & Hardware’ has emerged as the top sector during F.Y. 2020-21 with around 44% share of the total FDI Equity inflow followed by Construction (Infrastructure) Activities (13%) and Services Sector (8%) respectively.
  • Under the sector `Computer Software & Hardware’, the major recipient states are Gujarat (78%), Karnataka (9%) and Delhi (5%) in F.Y. 2020-21.
  • Gujarat is the top recipient state during the F.Y. 2020-21 with 37% share of the total FDI Equity inflows followed by Maharashtra (27%) and Karnataka (13%).
  • Out of top 10 countries, Saudi Arabia is the top investor in terms of percentage increase during F.Y. 2020-21. It invested US$ 2816.08 million in comparison to US$ 89.93 million reported in the previous financial year.

FDI Routes in India

There are three routes through which FDI flows into India. They are described in the following table:

Category 1

Category 2

Category 3

100% FDI permitted through Automatic Route

Up to 100% FDI permitted through Government Route

Up to 100% FDI permitted through Automatic + Government Route

Automatic Route FDI

In the automatic route, the foreign entity does not require the prior approval of the government or the RBI

Examples:

  • Medical devices: up to 100%
  • Thermal power: up to 100%
  • Services under Civil Aviation Services such as Maintenance & Repair Organizations
  • Insurance: up to 49%
  • Infrastructure company in the securities market: up to 49%
  • Ports and shipping
  • Railway infrastructure
  • Pension: up to 49%
  • Power exchanges: up to 49%
  • Petroleum Refining (By PSUs): up to 49%

Government Route FDI

Under the government route, the foreign entity should compulsorily take the approval of the government. It should file an application through the Foreign Investment Facilitation Portal, which facilitates single-window clearance. This application is then forwarded to the respective ministry or department, which then approves or rejects the application after consultation with the DPIIT

Examples:

  • Broadcasting Content Services: 49%
  • Banking & Public sector: 20%
  • Food Products Retail Trading: 100%
  • Core Investment Company: 100%
  • Multi-Brand Retail Trading: 51%
  • Mining & Minerals separations of titanium bearing minerals and ores: 100%
  • Print Media (publications/printing of scientific and technical magazines/speciality journals/periodicals and a facsimile edition of foreign newspapers): 100%
  • Satellite (Establishment and operations): 100%
  • Print Media (publishing of newspaper, periodicals and Indian editions of foreign magazines dealing with news & current affairs): 26%

Sectors where FDI is prohibited

There are some sectors where any FDI is completely prohibited. They are:

  • Agricultural or Plantation Activities (with exceptions like horticulture, fisheries, tea plantations, Pisciculture, animal husbandry, etc.)
  • Atomic Energy Generation
  • Lotteries (online, private, government, etc.)
  • Investment in Chit Funds
  • Trading in TDR’s
  • Any Gambling or Betting businesses
  • Cigars, Cigarettes, or any related tobacco industry
  • Housing and Real Estate (except townships, commercial projects, etc.)

Source: PIB


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