FDI in India

Foreign direct investment (FDI) is direct investment into production in a country by a company in another country, either by buying a company in the target country or by expanding operations of an existing business in that country.

Methods

The foreign direct investor may acquire voting power of an enterprise in an economy through any of the following methods:

• by incorporating a wholly owned subsidiary or company
• by acquiring shares in an associated enterprise
• through a merger or an acquisition of an unrelated enterprise
• participating in an equity joint venture with another investor or enterprise

Foreign direct investment incentives may take the following forms

• low corporate tax and individual income tax rates
• tax holidays
• other types of tax concessions
• preferential tariffs
• special economic zones
• EPZ – Export Processing Zones
• Bonded Warehouses
• Maquiladoras
• investment financial subsidies
• soft loan or loan guarantees
• free land or land subsidies
• relocation & expatriation
• infrastructure subsidies
• R&D support
• derogation from regulations (usually for very large projects)

Foreign direct investment in India

Starting from a baseline of less than $1 billion in 1990, a recent UNCTAD survey projected India as the second most important FDI destination (after China) for transnational corporations during 2010–2012. As per the data, the sectors that attracted higher inflows were services, telecommunication, construction activities and computer software and hardware. Mauritius, Singapore, US and UK were among the leading sources of FDI. According to Ernst & Young, FDI in India in 2010 was $44.8 billion and in 2011 experienced an increase of 13% to $50.8 billion.^] India has seen an eightfold increase in its FDI in March 2012.

India disallowed overseas corporate bodies (OCB) to invest in India.

2012 FDI reforms

On 14 September 2012, Government of India allowed FDI in aviation up to 49%, in the broadcast sector up to 74%, in multi-brand retail up to 51% and in single-brand retail up to 100%. The choice of allowing FDI in multi-brand retail up to 51% has been left to each state.

In its supply chain sector, the government of India had already approved 100% FDI for developing cold chain. This allows non-Indians to now invest with full ownership in India's burgeoning demand for efficient food supply systems.  The need to reduce waste in fresh food and to feed the aspiring demand of India's fast developing population has made the cold supply chain a very exciting investment proposition.

Foreign investment is announced by the government of India as FEMA (Foreign Exchange Management Act).

IT was introduced by Prime Minister Manmohan Singh when he was finance minister (1991)