Foreign Direct Investment (FDI) is important for emerging markets and developing economies. It is an essential term that UPSC aspirants must know for their Economy and GS-III syllabus. Word: FDI Subject: Economy What is FDI? Foreign Direct Investment (FDI) is defined as an investment in which a company takes controlling ownership of a business entity in another country. Therefore, foreign companies get directly involved with day-to-day operations in other countries. It is generally made in open economies that have a skilled workforce and growth prospects. This is significant as they are bringing money, knowledge, skills and technology along with them. What are the different routes through which India gets FDI? India gets FDI through two routes: A) Automatic route: Under this route, the non-resident or Indian company does not require a prior nod from the Reserve Bank of India (RBI) or the government of India for FDI. B) Government route: Under this route, the government's approval is mandatory. The company will have to apply through Foreign Investment Facilitation Portal, which facilitates single-window clearance. The Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce, issues the Standard Operating Procedure (SOP) for the processing of applications under the existing FDI policy. Point to ponder: Which are the sectors that come under 100% automatic route and government route category? Which sectors are prohibited under FDI? Where does India rank as per FDI inflows?
