What is the Foreign Direct Investment Policy in India?

India has more Foreign Direct Investment opportunities, and this is evident from India’s rank in the world FDI table. If you study the table, you will find that this country has made remarkable progress in a very short span of time. And it was not possible to achieve growth without opening the doors to foreign investors and making necessary changes in policy.

Let’s study the world FDI table

In 2013, the country was in the 15th position on the world FDI table. It was receiving lesser foreign investment than needed. Here you can argue that the foreign policy at that time was not supportive of foreign investment. And you could be correct to some extent as the next year, India improved its position to 9th. 

Policy Changes 2014

The year 2014 was significant for the foreign investment policy in India as the Government of India made major changes in the policy. It was clear that the administration was determined to bring foreign investment into the country, and the government was even ready to make fundamental changes in policy to increase the inflow of foreign funds.

For example, the upper limit of FDI in the insurance sector was increased from 26% to 49% to attract foreign investors. Also, the government launched the Make in India initiative under which the government liberalized the FDI policy for 25 sectors. The results bore fruits, and the country’s FDI and ranking improved further. 

In 2015, FDI inflows increased by 48% and this growth is attributed to the new foreign investment policy, which allowed more and more investors to consider India as an investment destination. The “Make in India” initiative started by the government played a huge role in making India the top destination for foreign investors. 

India Brand Equity Foundation (IBEF)

Before we discuss more changes, here is what you should know about India Brand Equity Foundation (IBEF) Trust. It is a government body or organization controlled by the government of India. IBEF was formed with the sole aim of educating foreign investors about the investment opportunities available in India. And this organization played a crucial role in increasing the flow of foreign investment.

Continuing with their efforts to further liberalize the FDI policy in India, the government further opened the defence manufacturing for foreign investment from 49% to 74%. At the same time, the government restricted opportunistic takeovers of Indian businesses from neighbouring countries by amending the policy. And it proved a big step towards protecting domestic businesses from unwanted acquisitions.

In times of pandemic, the government made a major policy change to protect domestic businesses from foreign investors. According to the new policy, foreign investors from the countries sharing their land borders with India would have to get approval from the Ministry of Commerce and Industry for investment. The consolidated policy was released in October 2020.

How Is India Doing On FDI?

India has strengthened its Foreign Direct Investment to an excellent level. The country is already number one, and it now wants to open more sectors for foreign investors. The government is determined to bring foreign investment to achieve its growth targets.

The country is doing well on the FDI front due to the policy changes that made it investor friendly. In addition, IBEF helped the country reach out to targeted investors looking for investment opportunities. IBEF has a crucial role to play as a one-stop platform for all information about foreign policy. 

The world is recognizing the Foreign Direct Investment opportunities available in the country. The policy changes made in 2014 and 2020 put the country in the top position of the world FDI table.