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UNCTAD: India among Top FDI Destinations

According to UNCTAD’s World Investment Report 2017, India continues to remain as a favourite destination for FDI even though tax related concerns remain as a deterrent for the foreign investors.

Salient Highlights of the Report

According to the report, the favourite destinations for FDI are the US, China and India. 

As per the report FDI inflows into a developing Asia has reduced by 15% to USD 443 billion in 2016. This decline is the first since 2012. Other than South Asia, the decline has affected the three sub regions of Asia. However, the report has observed that an improved economic outlook in major economies like ASEAN, China and India is expected to boost investor’s confidence thereby increasing the region’s prospects for 2017. In Asian region, major recipients like China, India and Indonesia have renewed their policies to attract FDI. This is expected to increase the FDI inflows in 2017.

In South Asia, FDI inflows increased by 6% to USD 54 billion and outflows declined by 29% to USD 6 billion.

FDI inflows into India remained stagnant at USD 44 billion. India’s outward foreign flows declined by about one third. Cross-border merger and acquisition deals have become important tools in the hands of the foreign multinational enterprises to foray into the rapidly-growing Indian market. The report has also noted that signing of tax treaty with Mauritius would have contributed to decline in instances of round tripping of FDI.

for the first time, China has emerged as the world’s second largest investor of FDI.

BRICS grouping (Brazil, the Russian Federation, India, China and South Asia), which accounts for 22% of the global GDP has received only 11% of the global FDI inflows.

The World Investment Report has been published by the United Nations Conference on Trade and Development (UNCTAD) annually since 1991. The report focuses on trends in foreign direct investment (FDI) worldwide, at the regional and country levels. United Nations Conference on Trade and Development (UNCTAD) was established in 1964.

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FDI inflow increases by 18% to $46 billion in 2016: DIPP

According to data released by the Department of Industrial Policy and Promotion (DIPP), India attracted $46 billion foreign direct investment (FDI) in 2016.

It shows that, India’s FDI grew by 18% in 2016 as compared to $39.32 billion FDI inflows in 2015.

Key Facts
  • The main sectors which attracted the highest FDI inflows included services, telecom, trading, computer hardware and software and automobile.
  • Bulk of the FDI came in from Singapore followed by Mauritius, Netherlands and Japan.
Background
  • Foreign investments are considered crucial for India as it needs around 1 trillion dollars for overhauling its infrastructure sector such as ports, airports and highways to boost growth.
  • Strong inflow of foreign investments mainly helps to improve the country’s balance of payments (BoP) situation and also strengthen the rupee value against other global currencies, especially dominant US dollar.
  • To attract inflow of foreign investments, the central government has announced several measures including liberalisation of FDI policy and improvement in business climate.
  • In the Budget 2017-18, Finance Minister further announced relaxation of foreign investment norms and also abolished Foreign Investment Promotion Board (FIPB).

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FIPB clears 6 FDI proposals worth Rs 1,187 crore

The Inter-ministerial body Foreign Investment Promotion Board (FIPB) approved six investment proposals envisaging foreign investments of Rs 1,186.5 crore.  Decision in this regard was taken by FIPB meeting headed by Economic Affairs Secretary Shaktikanta Das.

It has approved the proposals of Sanofi Synthelabo India, Star Den Media Services, Idea Cellular Infrastructure Services, Boehringer Ingelheim India Pvt. Ltd, Menarini India Private Limited and Recipharm Participation B.V. Netherlands.

Background

India allows FDI in most sectors through the automatic route, but in certain segments considered sensitive for the economy and security, then those proposals first have to be cleared by FIPB. The Union Government has taken a slew of measures in the recent past to boost foreign direct investment into the country. The FDI in the country has grown to $40 billion in the financial year 2015-16 as against $30.94 billion in the previous FY 2014-15.

About Foreign Investment Promotion Board (FIPB)

  • The FIPB is inter-ministerial body that offers a single window clearance for applications on Foreign Direct Investment (FDI) that are under the approval route.
  • The finance secretary is the chairman of the FIPB. It is housed in the Department of Economic Affairs, Union Ministry of Finance. Presently, FDI proposals up to 3,000 crore rupees are cleared by the FIPB.
  • However, those proposals involving FDI of more than 3,000 crore rupees are given final clearance by the Cabinet Committee on Economic Affairs (CCEA) headed by Prime Minister.

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