India 7th on the list of FDI inflows: UNCTAD

India 7th on the list of FDI inflows: UNCTAD

In News:

• India's ranking jumped one spot to the 7th spot among most prominent recipients of Foreign direct investment (FDI) during the year 2021's calendar year in accordance with the United Nations Conference on Trade and Development (UNCTAD).

Today's news article:

• UNCTAD (Objectives, Functions, Reports, etc.)
• FDI (Meaning the difference between the FII and FDI)
• Information Summary (World investment report highlights)

United Nations Conference on Trade & Development (UNCTAD)

• UNCTAD is an permanent intergovernmental institution founded through the United Nations General Assembly in 1964.
• It is accountable for the management of development issues and international trade issues, in particular.
• Making policy decisions in different domains such as technology, trade aid, finance and transport are the main issues of UNCTAD.
• The Conference usually meets every four years.
• It was the Second UNCTAD Conference took place in New Delhi, India in 1968..
• Members The number of countries that are members is 195.
• Headquarters: Geneva, Switzerland

Objectives of UNCTAD:

• UNCTAD and its activities both at the global and national levels, seeks to assist nations to:
• Learn about options for tackling issues of macro-level development.
• Integrate yourself to the international trading system.
• Reduce dependence on commodities by diversifying economies.
• Reduce their risk of being a victim of financial risk and debt.
• Increase development-friendliness by attracting more investments.

Reports Published by UNCTAD:

• Trade and Development Report
• Trade and Environment Review
• World Investment Report
• Least Developed Countries Report

Foreign direct investment (FDI)

• Foreign direct investments (FDI) can be described as an investment made by a person in one country to a company or business in a different country with the goal of creating a long-term interest.
• Through FDI foreign firms are directly involved in day-to-day activities in another country.

The difference between FII and FDI:

• FDI also known as Foreign Direct Investment is an investment made by a parent company in an overseas country.
• Contrarily, FII or Foreign Institutional Investor is an investment made by an investor on the market of a country that is not a member of the international system..
• In FII it is the case that companies require registration on the stock exchange in order to make investments.
• A Foreign Institutional Investor is also called hot money because the investors are able to purchase it and get it back.
  • However, when it comes to Foreign Direct Investment, this is not feasible.
• In short, FII can enter the market quickly and be able to withdraw without difficulty.
  • However, FDI can't enter or exit the same way.
• This distinction is what makes nations select FDI over FIIs.
• The year 2013 saw the formation of a four-member panel led by Arvind Mayaram was formed to give precise definitions of FDI and FII with the intention to clarify the two kinds of foreign investment.

What is the process by which FDI come into India?

• Foreign Investment in India is subject to the FDI policy that was announced by the Government of India and the requirements in the Foreign Exchange Management Act (FEMA) 1999..
• FDI gets into India through one of two ways:
  • Automatic route
  • Government approval method
• Automatic route :
  • A non-resident, or Indian company is not required to obtain the prior approval of the RBI or the government of India to apply for FDI.
• Government route :
  • The approval of the government is obligatory.
  • The business will need to apply through the Foreign Investment Facilitation Portal, that allows single-window clearance.
  • The application is then sent to the appropriate ministry, which will either approve or deny the application after concert and with Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce.
  • DPIIT will release an Standard Operating Procedure (SOP) for the processing of applications as per the current FDI policy.

Sectors where FDI is banned:

• There are certain industries in which FDI is completely prohibited by any method. The following industries are among them:
  • Atomic Energy Generation
  • Anything Gambling or Betting companies
  • Lotteries (online, private, government, etc.)
  • Investment in Chit Funds
  • Nidhi Company
  • Plantation or agricultural activities (although there are other exceptions such as horticulture, fishing and tea plantations). Pisciculture and animal husbandry etc.)
  • Residential and commercial real estate (except commercial developments, townships and commercial projects, etc.)
  • Trading in TDR's
  • Cigarettes, cigarettes, cigars or any tobacco related industry

News Summary:

• While FDI flows into India's decline, India's position has risen one notch to seventh place among the top the foreign direct investment (FDI) for the calendar year 2021 as per UNCTAD's most recent World Investment Report.

Major Highlights of the Report:

• The World Investment Report focuses on the trends in foreign direct investments (FDI) globally, at both the national and regional levels , and on the emergence of new measures that will increase its impact on development.
• According to the most recent report, the top 3 destinations for FDI around the globe are:
  • United States ($367 billion),
  • China ($181 billion) and
  • Hong Kong ($141 billion)
• UNCTAD declared that the world's FDI flows returned back to pre-pandemic levels in 2021 and grew by 64 percent to $1.6 trillion.
• UNCTAD forecasts that the current growth rate of 2021 will not be sustained, and that global FDI flows by 2022 could be on the downwards path or, at best, stay at best flat.

India's Scenario:

• Of the 10 top host countries for FDI and FDI, only India has seen a decrease of FDI inflows.
• Inflows of FDI into India fell to $45 billion by 2021 from $64 billion 2020.

 

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