Recent Trends In Foreign Direct Investment in India
By Team Legistify / 2016-05-18
Comparative analysis with FDI inflow in China, FDI in different sectors in India & government measures at a glance, sectors where FDI is not allowed in India under the automatic route as well as the government route.

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Foreign Direct Investment (FDI) in India is the major monetary source for economic development in India. Foreign companies invest directly in fast-growing private Indian businesses to take benefits of cheaper wages and changing business environment in India. India allows FDI in most sectors through the Automatic route, but in certain segments that are considered sensitive for the economy and security, the proposals have to be first cleared by Foreign Investment Promotion Board (FIPB).

In India, FDI inflows have risen rapidly, from $24 billion in 2012 to $44.2 billion in 2015- a seven-year high. This increase is also fairly broad-based. It is not just the e-commerce (trading) sector that has received more inflows; but other sectors such as computer software and hardware, construction, services, autos and the telecom sectors also account for a large share of the increase.

COMPARATIVE ANALYSIS WITH FDI INFLOW IN CHINA

Even though China continues to attract larger FDI inflows than India in absolute terms, India has started to close the gap, when FDI is measured as a share of GDP. FDI inflows into China have moderated to 2.3 percent of GDP in 2015, from 2.6 percent in 2014. During the same period, FDI inflows into India rose to 2.1 percent from 1.7 percent.

Additionally, one could also argue that the quality of FDI inflow into India is much better. Over the last decade or more, China has accumulated a large stock of FDI. As a result, almost half of the FDI inflow into China includes retained earnings. In contrast, almost three-quarters of FDI inflows into India are fresh equity infusions.

Comparative analysis with FDI inflow in China, FDI in different sectors in India & government measures at a glance, sectors where FDI is not allowed in India under the automatic route as well as the government route.

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