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Economy
Pradeep Kumar

02/06/21 11:00 AM IST

The surge in FDI inflows

In news

Total foreign direct investment (FDI) inflow in 2020-21 is $81.7 billion, up 10% over the previous year.

Highlights
  • Measures taken by the Government on the fronts of Foreign Direct Investment (FDI) policy reforms, investment facilitation and ease of doing business have resulted in increased FDI inflows into the country.”
  • “Gross inflows/gross investment” in the RBI report is the same as “total FDI inflow”.
  • The gross inflow consists of (i) “direct investment to India” and (ii) “repatriation/disinvestment”.
  • The disaggregation shows that “direct investment to India” has declined by 2.4%.
  • Hence, an increase of 47% in “repatriation/disinvestment” entirely accounts for the rise in the gross inflows.
  • In other words, there is a wide gap between gross FDI inflow and direct investment to India.
  • The surge in total FDI inflow during the pandemic year is entirely explained by booming short term FIIs in the capital market – and not adding to fixed investment and employment creation.
Foreign Direct Investment (FDI)
  • A foreign direct investment (FDI) is an investment made by a firm or individual in one country into business interests located in another country.
  • Generally, FDI takes place when an investor establishes foreign business operations or acquires foreign business assets in a foreign company. 
Source: The Hindu

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