"India's Rising FDI Inflows Expose Persistent Reform Gaps"
FDI (Foreign Direct Investment)
long-term investment creating a lasting management stake in a foreign enterprise
FPI (Foreign Portfolio Investment)
short-term, market-sensitive investment in listed securities
Since 1991 liberalization reforms, India has used two main channels to bring in foreign capital. Both channels are governed under the Foreign Exchange Management Act (FEMA). One channel is Foreign Portfolio Investment (FPI). This is short-term capital placed in listed securities. The other channel is Foreign Direct Investment (FDI). This is long-term capital that creates a lasting stake in an enterprise. FDI is a non-debt creating capital flow. This means it does not add to the country's external debt, unlike loans or external commercial borrowings. Among specific instruments, Global Depository Receipts (GDRs) count as FDI. Foreign Institutional Investment, Foreign Currency Convertible Bonds, and NRE deposits do not count as FDI. The Department for Promotion of Industry and Internal Trade (DPIIT) administers this policy. It uses automatic and government-approval routes across sectors.
India has also used trade agreements to anchor investment ties for over two decades. It signed FTAs with several Asian economies from the early 2000s. A long-running Broad-based Trade and Investment Agreement (BTIA) negotiation with the European Union remained unresolved for over a decade. That stalled effort has since evolved into today's renewed push for a full India-EU trade pact. Newer agreements like the India-EFTA Trade and Economic Partnership Agreement (TEPA) have also been signed. As a WTO member, India has kept its commitments to cut tariffs and remove import restrictions. This helped raise its trade and investment openness over time.
After 1991 liberalization, India's share of agriculture in GDP declined. The shares of services and industry grew. India's foreign exchange reserves increased substantially. This was due to rising FDI inflows, remittances, and trade openness. Trade-Related Investment Measures (TRIMs) under WTO rules prohibit quantitative restrictions on imports by foreign investors. They apply only to trade in goods, not services. They do not regulate foreign investment itself.
The DPIIT sits at the centre of India's FDI approval system. However, DPIIT is the nodal agency but not the decision-maker on approvals. Actual clearances often depend on line ministries and State governments. A revised Standard Operating Procedure set a 12-week approval deadline. Compliance remains uneven across sectors. Large coordinated projects show how effective administrative coordination can speed up capital deployment. An example is a major semiconductor facility in Gujarat.
Much of the remaining friction is internal rather than external. It shows up between the Centre and States. It shows up between DPIIT and line ministries. It shows up between central rules and state notifications needed to enforce policy. Commercial dispute resolution has improved through the Commercial Courts Act, 2015 and the Mediation Act, 2023. …
With reference to Foreign Direct Investment in India, which one of the following is considered its major characteristic?
Consider the following:
1.Foreign currency convertible bonds
2.Foreign institutional investment with certain conditions
3.Global depository receipts
4.Non-resident external deposits
Which of the above can be included in Foreign Direct Investments?
'Broad-based Trade and Investment Agreement (BTIA)' is sometimes seen in the news in the context of negotiations held between India and
Which of the following has/have occurred in India after its liberalization of economic policies in 1991?
1.Share of agriculture in GDP increased enormously.
2.Share of India's exports in world trade increased.
3.FDI inflows increased.
4.India's foreign exchange reserves increased enormously.
Select the correct answer using the codes given below:
Consider the following statements regarding Foreign Direct Investment (FDI) in India:
1.FDI is a debt-creating capital flow.
2.Global Depository Receipts (GDRs) are classified as FDI.
3.Foreign Institutional Investment (FII) is always classified as FDI.
How many of the above statements are correct?
With reference to Foreign Direct Investment (FDI) in India, consider the following statements:
1.The DPIIT is the final approving authority for all FDI proposals.
2.FDI inflows are governed under the Foreign Exchange Management Act (FEMA).
3.Greenfield investment refers to setting up new facilities rather than acquiring existing ones.
Which of the statements given above is/are correct?
With reference to India's labour codes, consider the following statements:
1.They consolidate 29 central labour laws into four codes.
2.Labour is a subject under the Concurrent List of the Constitution.
3.Central Rules alone are sufficient for the codes to take full effect nationwide.
Which of the statements given above is/are correct?
Match List I (Legislation/Scheme) with List II (Primary Purpose) and select the correct answer using the codes given below:
List I:
A.Commercial Courts Act, 2015
B.Mediation Act, 2023
C.Taxation Laws (Amendment) Act, 2021
D.Vivad se Vishwas scheme
List II:
1.Institutionalising mediation as a dispute resolution method
2.Faster adjudication of high-value commercial disputes
3.Withdrawing retrospective tax demands
4.Reducing the direct-tax litigation backlog
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