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What Is FDI?

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One of the most striking developments during the last two decades is the spectacular growth of FDI in the global economic landscape. This unprecedented growth of global FDI in 1990 around the world makes FDI an important and vital component of development strategy in both developed and developing nations and policies are designed in order to stimulate inward flows. In fact, FDI provides a win – win situation to the host and the home countries. Both countries are directly interested in inviting FDI, because both benefit a lot from such type of investment. The ‘home’ countries want to take the advantage of the vast markets opened by industrial growth. On the other hand the ‘host’ countries want to acquire technological and managerial skills and …show more content…

One main reason behind reforms is providing access to capital, technology and market. In order to increase the inflow of FDI in India many policies has been made and these policies are renewed from time to time to attracting more foreign investment and to simplify the procedure of investment in India. Number of measures which were adopted is as follows:
• Foreign firms obtained automatic right over international brand names in 1992.
• Requirement of industrial licensing in specified industries were abolished and FIIs were allowed to invest in new mutual fund schemes in 1993.
• Banks were allowed to set their interest rates for lending and companies were allowed to issue preferential equity to FIIs in1994.
• FIIs were allowed to invest in unlisted firms and also allowed to invest 100 percent in debt instrument in 1996, which was previously only 30 percent.
• 100 percent of foreign equity was allowed in infrastructure projects like port, roads and highways in …show more content…

• In case of hotels 100 percent FDI is permitted through automatic route.
• 100 percent FDI allow for trading companies for Exports Bulk imports, cash and carry wholesale trading.
• 100 percent FDI is allowed for business activities in power sector like electricity generation, transmission and distribution other than automatic plants.
• 100 percent FDI is allowed for the production of drugs and pharmaceuticals, subject to the fact that venture do not attract compulsory licensing and does not involve the use of recombinant DNA technology.
• By following the investment guidelines of RBI FDI of 49 percent is allowed in the banking sector through automatic route
• On condition of getting licence from Insurance Regulatory and Development Authority (IRDA) 26 percent of FDI is allowed in Insurance sector through automatic route.
• Up to 100 percent equity is allowed in following sector:- o 34 High priority Industry groups. o Export Trading Companies. o Hotels and Tourism related projects. o Hospitals and Diagnostic

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