Foreign Direct Investment (FDI) Current Affairs

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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.


Finance Ministry asks Ministries to decide on FDI proposals within 60 Days

The finance Ministry has asked all those ministries tasked with clearing foreign direct investment proposals in the 12 sectors that require government’s nod to take a decision on such proposals within 60 days. Last month, the Cabinet abolished the Foreign Investment and Promotion Board (FIPB), which was the authority for clearing foreign direct investment (FDI) proposals for a period of 25 years.

A timeline of 4 weeks has been fixed for the transfer of all pending applications with the FIPB to the respective administrative ministries.

Salient Highlights

Department of Industrial Policy and Promotion (DIPP) would come up with standard operating procedures to process FDI proposals in consultation with the administrative ministries. This will be helpful in ensuring consistency of treatment and uniformity of approach.

A panel led by the secretaries of the department of economic affairs (DEA) and the department of industrial policy and promotion (DIPP) will be conducting a quarterly review on the pending proposals.

Ordinary FDI applications pertaining to non-resident Indian (NRI)/export-oriented unit (EOU), food processing, single-brand retail trading and multi-brand retail trading proposals need to be decided in 60 days.

FDI proposals by NRIs/EoUs requiring approval of the government will be dealt by the DIPP. DIPP will be the administrative ministry for this purpose. In addition, the DIPP will handle the applications related to imports of capital goods or machinery.

Applications involving investments from “countries of concern” which require security clearance under to the Foreign Exchange Management Act (FEMA) will be cleared by the Home Ministry. In addition, applications pertaining to private security agencies would be decided by the home ministry.

The Department of Economic Affairs (DEA) will be the authority to clear the proposals of financial services not under a regulator, or where there is more than one regulator or there is a doubt about the regulator.

If the FDI proposals lacks clarity on the administrative department, then the DIPP will help in identifying the ministry.

FDI proposal with respect to banks will be approved by the Department of Financial Services.  

Foreign investment proposals above Rs 5,000 crore will be cleared by the Cabinet Committee on Economic Affairs (CCEA).

FDI Approving Authorities after FIPB Abolition

Mining: Ministry of Mines

Defence: Department of production, Ministry of Defence

Small arms: Ministry of Home Affairs.

Broadcasting & Print Media: Ministry of Information and broadcasting

Print Media: Ministry of Information and broadcasting

Civil Aviation: Ministry of Civil aviation

Satellites: Department of Space

Telecom: Department of Telecommunications (DoT), Ministry of Communications.

Trading (Single brand and food products retail trading): Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce and Industry

Financial Services not regulated by a regulator or where there is more than one regulator or in respect of which there is a doubt about the regulator: Department of Economic Affairs, Ministry of Finance.

Banking (Private & Public): Department of Financial services, Ministry of Finance.

Pharmaceuticals: Department of Pharmaceuticals, Ministry of Chemicals and Fertilisers


China overtakes US as top foreign investment destination: UNCTAD report

As per United Nations Conference of Trade and Development (UNCTAD) report, China has overtaken the United States (US) as the top destination for foreign direct investment (FDI).

US  was on top as foreign investment destination for past 11 years i.e. since 2003.

Key facts from UNCTAD report

  • In 2014, foreign firms had invested 128 billion dollars in China compared to 86 billion invested in the US.
  • The growth in China’s foreign investment had benefited the services sector as manufacturing had slowed in 2014.
  • Hong Kong stood at the second spot after China and ahead of US with foreign investment of 111 billion dollars.
  • Globally, foreign investment had fallen by 8% to a total of $1.26trillion in 2014. The reasons cited for this decline was partly due to the fragility of the global economy due geopolitical risks.
  • In 2014, the foreign investment in developing nations had increased by 4%, whereas developed nations saw a decline of 14 percent, mostly due to the large fall in the US.

Top 10 foreign investment destinations in 2014

Rank Country FDI*
1 China 128
2 Hong Kong 111
3 United States 86
4 Singapore 81
5 Brazil 62
6 United Kingdom 61
7 Canada 53
8 Australia 49
9 Netherlands 42
10 Luxembourg 36

Note: * in billion dollars.