Govt to simplify rules, regulations for FDI
New Delhi: The government on Tuesday said rules and regulations for foreign direct investment (FDI) will be simplified to facilitate inflows. The announcement assumes significance as FDI into the country has recorded a decline.
FDI equity inflows in India declined 3.49 per cent to $44.42 billion in 2023-24 due to lower infusion in sectors such as services, computer hardware and software, telecom, auto and pharma. “The rules and regulations for FDI and overseas investments will be simplified to facilitate foreign direct investments, nudge prioritisation, and promote opportunities for using Indian Rupee as a currency for overseas investments,” Finance Minister Nirmala Sitharaman said. FDI equity inflows stood at $46.03 billion during 2022-23.
The total FDI — which includes equity inflows, reinvested earnings and other capital — declined marginally by one per cent to $70.95 billion during 2023-24 from $71.35 billion in 2022-23. In 2021-22, the country received the highest ever FDI inflows of $84.83 billion. During the last fiscal, FDI equity inflows decreased from major countries, including Mauritius, Singapore, the US, the UK, UAE, Cayman Islands, Germany, and Cyprus.
However, inflows increased from the Netherlands and Japan.
Sectorally, inflows contracted in services, computer software and hardware, trading, telecommunication, automobile, pharma and chemicals.
In contrast, construction (infrastructure) activities, development and power sectors registered healthy growth in inflows during the period under review. As per India’s FDI policy, the onus of compliance with provisions of the policy lies on the investee company.
Any violations of FDI regulations are covered by the penal provisions of the FEMA (Foreign Exchange Management Act) as FDI is a capital account transaction. The RBI administers FEMA, and the Directorate of Enforcement under the finance ministry is the authority for the enforcement of FEMA and takes up investigation in cases of contravention of the law.
