India Mulls Foreign Investment Regulatory Mechanism As FDI Inflows Surge— All About It

The government is reportedly considering foreign investment regulatory mechanism for post-investment review and monitoring in the country, Economic Times reported citing sources.

However, the consideration is currently at the discussion level only.

"It has been observed that all countries do oversight on the FDI (foreign direct investment), which is coming into their country. People suggest that in India also, there should be an oversight mechanism. It's a kind of oversight on money, which is coming up in the country as FDI," one of the sources was quoted as saying by news agency PTI.

Such a mechanism could help ascertain that the FDI entering the country is beneficial to the economy and originates from legitimate sources.

India remains a top destination for foreign investors due to its vast 1.4 billion market, stable policies, demographic dividend, good investment returns and skilled workforce.

To draw more foreign investment, the government has implemented various initiatives, including promoting ease of doing business through simplifying procedures and significantly reducing compliance burden for the industry.

It has also liberalised FDI rules across multiple sectors such as space, e-commerce, pharmaceuticals, civil aviation, contract manufacturing, and digital media.

Additionally, the government introduced the production-linked incentive (PLI) scheme targeting 14 sectors, including electronics and white goods.

According to an official cited in the PTI report, the measures to improve ease of doing business, coupled with a zero-tolerance policy towards corruption, and the focused effort on emerging sectors like electronics have helped promote 'Make In India' and boost domestic and foreign investments in the country.

Launched in September 2014, the 'Make in India' initiative aims to attract investment, promote innovation, develop world-class infrastructure, and transform India into a global hub for manufacturing, design, and innovation.

In the last decade, foreign direct investment into India has surged by 119 per cent, totalling $667 billion, up from $304 billion in the previous 10 financial years (2005-14).

Over 90 per cent of these investments have come through the automatic approval route.

Government data shows that FDI in India soared by 47.8 per cent to $16.17 billion in the first quarter of this fiscal year, driven by strong inflows in sectors such as services, IT, telecom, and pharmaceuticals.

India's largest sources of FDI include countries like Mauritius, Singapore, the US, the Netherlands, the UAE, Cyprus, Japan, and Germany.

Key sectors that attract significant foreign investments include services, software and hardware, telecom, pharmaceuticals, and chemicals.

According to experts cited in the PTI report, a dedicated law to deal with national security risks in foreign investment may strengthen India's position with respect to international law by providing a clearly defined legal basis for rejecting investments on national security grounds.

It would not only reduce the risk of international challenges but also showcase that India's actions are transparent, predictable, and aligned with global best practices, according to the experts.

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