Why in News ?

Foreign direct investment through automatic approval in the defence sector hiked from 49 per cent to 74 per cent and it includes National Security Clause. FDI Hike In Defence aims at productivity with in the country.

FDI Hike In Defence and New Policy

• Foreign investment in the Defence Sector shall be subject to scrutiny on ground of National Security
  • Government reserves the right to review any foreign investment in the Defence Sector that may affect national security
  • It has been explicitly mentioned as defence is a sensitive sector.
• Foreign Direct Investment through automatic approval in the defence sector from 49 per cent to 74 per cent
  • Under the existing policy the defence industry can bring FDI up to 49 per cent under the automatic route
  • Above it under government route reasons to be recorded.
  • The increase will attract more FDI and India can play a pivotal role in defence sector. 

What are the Benefits ?

• The government wants foreign original equipment manufacturers to shift operations to India, and also encourage private players to play a larger role.
• Expanding India’s presence in international supply chains.
• Defence sector to act as an engine for boosting manufacturing in the country.
• Also aiming to achieve a turnover of Rs 1.75 lakh crore, including exports worth Rs 35,000 crore, by 2025.

Overall FDI

• FDI into India rose 10 per cent to $42.69 billion in the year ended March 31, 2020
• $38.74 billion in the previous year despite the global slowdown
• Cayman Islands showing the biggest jump in bringing cash in to India a 302% hike.
•  Singapore, Mauritius, Netherlands, US and Japan  are the major contributors to Indian FDI.
  • Singapore and Mauritius remained the major source countries, accounting for about 50 per cent of total FDI flows.
  • FDI from the US was $ 3.40 billion.
• Implication of Hike
  • Slowdown in the global economy and growing global investment concerns due to disruptions in supply chains, India was able to sustain the pace of FDI in 2019-20
  • Also India was the 9th largest recipient country globally in 2019.
• Which Sector getting Highest FDI ?
  • FDI equity flows went to the services sector, including communication services, retail and wholesale trade, financial services, computer and business services and the manufacturing sector.
  • The manufacturing sector got $ 8.15 billion, communication services $ 6.83 billion and retail trade $ 4.91 billion.

Source : Indian Express

Topic

GS III : Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth

Current Affairs Compilation : 11 September 2020