THE UNRAVELING TAPESTRY: ASSESSING THE IMPACT OF COVID-19 ON FOREIGN DIRECT INVESTMENT (FDI) IN INDIA
ABSTRACT: Foreign Direct Investment (FDI) is the investment made by a foreign company in the Indian market. FDI is considered to be an important source of economic growth and development in India. The Covid-19 pandemic has affected the global economy, including India. The pandemic has caused a disruption in supply chains, reduced demand, and a decline in economic activity, leading to a decline in FDI inflows. According to the data released by the Department for Promotion of Industry and Internal Trade (DPIIT), India has attracted FDI worth $35.73 billion in the financial year 2019-20. However, due to the pandemic, FDI inflows in the country have fallen by 43% in the April-June quarter of 2020 compared to the same period last year. The Indian government has taken several measures to attract FDI during the pandemic. In May 2020, the government announced reforms in various sectors, including agriculture, mining, and defense, to attract more FDI. The government has also relaxed several FDI norms to attract foreign investors. Despite the pandemic, India remains an attractive destination for foreign investors due to its large market, skilled workforce, and favorable business environment. In conclusion, while the Covid-19 pandemic has affected FDI inflows in India, the country remains an attractive destination for foreign investors. The Indian government has taken measures to attract more FDI during the pandemic, and it is expected that FDI inflows will increase in the coming months. In this paper an attempt is made to analyse the impact of covid-19 on FDI flow into country. For this purpose, sector wise and country wise analyse has been made.
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RESEARCH METHODOLOGY: The present study is based on the secondary data published by various agencies and organizations. The present study makes use of the data and information provided by RBI, UNCTAD World Bank, IMF, WTO, Newspapers, Magazines, Books, Economic journals and Internet etc. FOREIGN DIRECT INVESTMENT (FDI): Foreign Direct Investment (FDI) plays a vital role in the economic development of India. The government of India has established various routes for foreign investors to invest in India, including automatic and government routes. 1. Auto Route for FDI in India: The automatic route for investment refers to a method of investing in India where foreign investors do not require any prior approval from the government or the Reserve Bank of India (RBI) to invest. Under the automatic route, investments are allowed in most sectors without any restrictions, subject to certain conditions such as sectoral caps, pricing guidelines, etc. The automatic route is beneficial for investors as it ensures a hassle-free and speedy investment process. The sectors that allow investments through the automatic route include: • Agriculture and Animal Husbandry • Construction and Development of Townships, Housing, Built-up Infrastructure and Real Estate Broking Services • Banking, Non-Banking Financial Institutions, and Insurance Manufacturing • Trading • Wholesale Trading • Power and Energy • Mining and Exploration • Telecommunications • Information Technology However, even though investments through the automatic route do not require prior approval, investors are required to comply with certain post-investment reporting requirements. 2. Government Route for FDI in India: The government route is the other route for FDI in India, where the foreign investors are required to obtain prior approval from the government or the Reserve Bank of India (RBI) before investing. The government route is mainly applicable to sectors that are sensitive from a national security point of view, such as defense, telecom, broadcasting, and satellite-based services. The government route is also applicable to sectors that require specialized knowledge and expertise, such as the print media sector. Investments in sectors that require prior government approval are subject to sectoral caps, pricing guidelines, and other conditions, as applicable. The government route is more time-consuming, and the approval process can take several months. In conclusion, both the automatic route and the government route have their advantages and disadvantages. The automatic route is more beneficial for investors as it ensures a hassle-free and speedy investment process, while the government route is applicable for sensitive and specialized sectors. Overall, the government of India has created a favorable investment environment for foreign investors, which is reflected in the increasing FDI .......contd.