India is turning into an open-market economy. India has been attraction for overseas investers, after the United States, China and Britain.
The Indian economy has continuously recorded high growth rates and become an attractive destination for investment.
In India to attract investors there are stable economic policies, availability of cheap and quality human resources, and new unexplored markets. The government initiatives like - allowing foreign education providers to set up campuses in India, FDI in limited liability partnership firms, etc are successful in recent times.
Impact of FDI on Indian economy
Because of FDI, We have financial stability and economic growth with the help of investments in different sectors.There has been a positive GDP growth rate in country’s economy,after liberalization of trade policies.
FDI helps in generating employment, generating revenues in the form of tax and incomes, development of infrastructure, backward and forward linkages to the domestic firms for the requirements of raw materials, tools, business infrastructure, etc which helps in developing Indian economy.
How to make FDI in India
In the form of financial collaborations, joint ventures, technical collaborations, capital markets and private placements FDI can be done.
There are some sectors which require prior approval of Reserve Bank of India (RBI) or Foreign Investment Promotion Board (FIPB) for e.g. manufacture of cigarettes and tobacco, manufacture of electronic aerospace and defence equipments, manufacture of items exclusively reserved for small scale sector with more than 24 per cent overseas investment and all other proposals falling outside notified sectoral policy.
The foreign investors can invest in India in two ways:
Incorporation of an Indian company : The foreign investor can have a separate legal entity in India under the provisions of the Companies Act, 1956. Based on sectoral guidelines specified by the Government of India, The foreign investors can invest in such Indian company up to 100 per cent of capital.
Unincorporated entity : Subjected to conditions and activities permitted under the Foreign Exchange Management Regulations, A foreign company can operate in India, by establishing a Branch Office of the other place of business (foreign entity).
Who can invest in India
Within FDI Policy under government route plans, a non-resident of India can invest in India. In India under various SEBI guidelines, Qualified financial Investors (QFIs) are allowed to invest through SEBI registered Depository Participants only in the equity shares of listed Indian companies through recognised stock exchanges.
Foreign institutional investors can invest in the capital markets in India through the portfolio investment scheme (PIS).
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