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Foreign direct investment (FDI)
India's economic policies are designed to attract significant
capital inflows into the country on a sustained basis and to
encourage technology collaboration between Indian and foreign
firms. Almost all sectors are opened to foreign investment
with varying percentage of foreign ownership allowed, except
for atomic energy, lottery business, gambling and betting, and
some forms of retail trading.
During April-November in Financial Year 2008-09, India's
FDI inflow amounted to US$19.8 billion, up 78% from the same
period in 2007. The inflow was mainly from Mauritius (US$8.1
billion; 44% of total), Singapore (US$2 billion; 8%), and the
US (US$ 1.3 billion; 8%). The services sector attracted the
highest FDI inflow, followed by computer software and
hardware, and telecommunications.
Under India's foreign investment
policy, two routes are available for foreign investors,
depending upon the industry and the levels of investment
contemplated:
1) Automatic Route
Foreign investment proposals under the automatic route will
not be subject to any government approval, provided the
requisite documents are filed with the Reserve Bank of India
within 30 days of receipt of funds. Qualified sectoral
investment includes hotels & tourism, and courier
services, etc.
2) Foreign Investment Promotion Board (FIPB)
All other proposals for foreign investment, which are not
covered under the automatic approval route, are considered for
approval, on merits, by the FIPB.
Trade Policy
India's government has embarked on economic liberalisation
since 1991 and continued to work towards a more open trade
regime. There has been elimination of quantitative
restrictions, simplification of import licence application and
reduction of import tariffs. Since 1992, the government has
loosened the licensing requirement for imports of capital
goods. In March 2001, the government abolished the system of
special import licences and the restricted list of imports,
leaving only a small negative import list.
The Foreign Trade Policy 2009-14 is the major policy governing
foreign trade in India. In general, no restriction is imposed
on the import and export of most products except for those on
the small negative import list. Nevertheless, all second hand
products except for second hand capital goods shall be subject
to licences, certificates, permits or authorization for import
as stated in the Trade Policy.
Nonetheless, India's government banned Chinese toy imports for
six months starting from February 2009, on grounds of
"public health and safety". Chinese toys have seized
about 60% of India's toy market.
External trade
With slowing global demand, India's exports experienced
the first decline in seven years in October 2008, falling
12.1% YoY. Exports continued to fall in November and December
2008, respectively, by 9.9% and 1.1%. Nevertheless, India's
exports in 2008 totalled US$178.7 billion (up 21.6% YoY) and
imports amounted to US$292.6 billion (up 35% YoY).
India's major import items included (1) petroleum and related
products (US$ 79.6 billion; 33.4% of total), (2) capital goods
(US$ 37.3 billion; 15.6%), (3) electronic goods (US$ 20.3
billion; 8.5%), and (4) chemicals (US$ 18.6 billion; 7.8%),
while major export items included (1) engineering goods
(US$36.6 billion; 23% of total), (2) petroleum products
(US$24.9 billion; 15.7%), (3) gems and jewellery (US$19.7
billion; 12.4%), and (4) textiles and clothing (US$19 billion;
11.9%).
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