INTRODUCTION- Sectors in which fdi is permitted in india Foreign direct investment decides ways, in which forms and individuals can hold assets in foreign places, which are to be regarded as direct investments. From the past few years, FDI has undergone certain changes.
WHAT IS FDI?
Any investment done by an individual or a form of one country to a business of another country is known as foreign direct investment. The main purpose of FDI is to raise funds for the economy of a country and to check upon the flow of foreign currencies to one from India. The main economic crisis of 1991 has led the FDI to increase in India throughout the years. FDI has been a major source for creating over 1 crore jobs in India and also for maintaining of economic stability of the country.
FDI ROUTES
For India to attract foreign investment it has set up 2 different routes:-
1. AUTOMATIC ROUTE- Route in which no approval of government or Reserve Bank of India is necessary for FDI to enter the country.
2. GOVERNMENT ROUTE-It is a route in which FDI, in order to enter the country, requires the approval of RBI or Government.
SECTORS IN WHICH FDI IS PERMITTED IN INDIA
1. INVESTMENT IN INDIA’S AUTOMOBILE SECTOR- The automobile sector is the largest sector of tractor manufacturers second largest of bus manufacturer and third largest of the heavy truck manufacturer in the world. India, from 2018 became the fourth largest automobile sector. FDI policy in the automobile sector allows 100% FDI under the automatic route. FDI in the automobile industry will help bring technological know-how leading to economic development. This, in turn, can stimulate more job opportunities.
2. CHEMICAL INDUSTRY– Around 6% of the country’s GDP is contributed by the chemical industry in India. Thus it is recognized as an indispensable part of the country’s economy. More than 80000 commercial products are being covered by chemical industries in India, making it highly diversified in nature. By 2025 this industry is expected to reach a dollar 304 billion. The chemical industry in India is allowed 100% FDI under the automatic route.
3. CONSTRUCTION INDUSTRY- The major part of India’s GDP is being contributed by the industry and being an efficient contributor to the GDP of India this industry has created innumerable opportunities.
4. MEDIA SECTOR– Rapidly advancing industry and highly growth is what is media and entertainment industry known for. Since India’s consumer demand increases, therefore, the number of films made for your increases making this industry in India as globally most significant from industry and `world’s largest newspaper distribution market. This industry is considered as the second largest base after China and there are more than 570 million internet users, close to 2520 multiplexes, and has registered publications of 1,18,239. The media and entertainment industry in publishing and magazines sector is allowed 100% FDI on the government route. On the other hand the media sector in cable networks area is allowed up to 74% FDI under the automatic route.
5. EDUCATION SECTOR- Having a large and competent institution for educational centers India holds an important place in the global institution’s industry. For the progress of society, education has always been regarded as the backbone. India being densely populated of about 500 million people it off great opportunity for education. According to the constitution of India free and compulsory education has been regarded as a fundamental right for children between 6(Six) to 14(Fourteen) years of age. By the year 2020, the Government of India is aiming to raise gross enrolment ratio to 30%.
6. AGRICULTURAL SECTOR- A sector that provides over 50% of countries workforce, employment. 18% of the Gross domestic product in the financial year 2018 is contributed by this sector. India ranks second globally in terms of farm output with the climatic condition that supports the productivity of different crops. Between the years 2000 and 2019 the food processing industries received an FDI of USD 9.41 billion.
7. BFSI SECTOR- India ranks the highest in the fintech adaptation rate which is 87% higher than the global average rate of 64%. Indian fintech market contributes to the following:-
• UPI and digital India government initiatives
• Disposable income which is at a growing rate
• Middle-class group expansion
• The increasing level of smartphone diffusion.
1. WELLNESS SECTOR- 100% FDI in the sector has been allowed under the automatic route. India has become the largest in the sector both in employment and revenue terms. This sector includes medical tourism health insurance hospital devices and medical equipment. Ayurvedic treatments are also included in the sectors and India is the world’s second-largest exporter of this.
2. THERMAL POWER SECTOR- India is ranked as a third-largest producer and fourth-largest consumer of electricity globally. Around 14955 villages have been provided electricity so far. An investment of around 9-9.5 TN is forecasted to be attracted by India. In this sector 100% FDI is allowed for generation from all sources under the automatic route. In the thermal power sector of India 49% FDI is allowed under the automatic route.
3. TEXTILE AND GARMENTS SECTOR- Being one of the oldest industries in this sector India who is the abundant availability of cotton, silk, jute, wool, etc and is one of the largest producers of textile and garments. This industry contributes to 2% of GDP, 14% of industrial production and 27% of countries’ foreign exchange.
4. CIVIL AND AVIATION SECTOR- India is the fastest growing industry in the sector during the last 3 years and is considered third largest in the world. 100% FDI is allowed in civil aviation and permitted in a helicopter under the automatic route.
5. FOOD SECTOR- This sector had established opportunities for investments in the food retail sector and attracting fiscal incentives. The expected market for this sector is dollar 828 billion by the year 2020. 100% FDI under both the routes in food processing sector is allowed. Sectors In Which FDI Is Permitted In India
In addition to this there are several other sectors in which FDI is allowed in India:-
• RAILWAY SECTOR
• PETROLEUM AND NATURAL GAS SECTOR
• CAPITAL GOODS SECTOR
• ELECTRONICAL SYSTEM SECTOR
• RETAIL AND E-COMMERCE SECTOR
• ROADS AND HIGHWAY SECTOR
• TELECOMMUNICATION SECTOR
• TOURISM AND HOSPITALITY SECTOR
• AUTO COMPONENT SECTOR
• BIOTECHNOLOGICAL SECTOR
• GEMS AND JEWELLERY SECTOR
• LEATHER SECTOR
• METALS AND MINING SECTOR
• PHARMACEUTICAL SECTOR
• PORTS AND SHIPPING SECTOR
There are some of the sectors where FDI is prohibited in India:-
• LOTTERIES
• GAMBLING AND BETTING
• TRANSFERABLE DEVELOPMENT RIGHTS
• REAL ESTATE BUSINESS
• FARMHOUSE CONSTRUCTION
• NIDHI COMPANIES
• CHIT FUNDS
• CASINOS
• TOBACCO SUBSTITUTES
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CONCLUSION
Thus it can be concluded that in identifying and attracting FDI inflows to the country which are the sectors that are important and which are the sectors that are prohibited. The study also reveals that for economic growth India FDI is considered to be one of the most important factors. FDI helps in increasing trade in the foreign markets. But on the other hand in the R&D sector FDI has failed to raise and stabilize the growth of economy. FDI now contributes over 20% GDP of the country globally. Other countries are investing in most emerging countries like China and India has a lead to increased foreign exchange inflows. On the contrary, this also leads to the emergence of various problems and challenges such as a monopoly, unemployment, etc. These FDI policies need to be framed very carefully so that not many problems arise in the future.
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