Radical Liberalization of the Foreign Direct Investment (FDI) Regime in India

Abstract

Apart from being a critical driver of economic growth, foreign direct investment (FDI) is a major source of non-debt financial resource for the economic development of an underdeveloped country like India. The main advantage of this form of assistance is that generally the foreign investor also brings with him new technology, better management and organization, superior marketing and cheaper finance.  Whereas foreign companies invest in India to take advantage of relatively lower wages, special investment privileges such as tax exemptions, etc. The Indian government’s favorable policy regime and robust business environment investment have ensured that foreign capital keeps flowing into the country in order to supplement domestic capital, technology and skills. The government has taken many initiatives in recent years such as relaxing FDI norms across sectors such as defense, PSU oil refineries, telecom, power exchanges pharmaceuticals, and stock exchanges, among others. Coordinated and concerted efforts have been made by the Indian government to provide impetus to the ‘’Make in India’’ initiative for accelerated economic growth. This paper aims to examine the various FDI reforms that the Indian government has undertaken in the recent past and its effects on the respective sectors.

Keywords: Foreign Capital, Foreign Direct Investment, Foreign Investor, FDI Inflows, Greenfield and Brownfield Projects, Automatic and Government Approval Route