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What is the News?
The Government releases data regarding the Foreign Direct Investment – FDI inflows in India from April to January 2021.
FDI inflows in India from April 2020 to January 2021:
- India attracted a total FDI inflow of US$ 72.12 billion from April to January 2021.
- Significance: It is the highest ever for the first ten months of a financial year. Further, it is 15% higher than the similar FDI inflow of 2019-20 (US$ 62.72 billion).
- Top Investor Countries: Singapore is the top FDI investor. It is followed by the USA and UAE.
- Sectors: Computer Software & Hardware emerges as the top sector with 45.81% of the total FDI equity inflow. This is followed by Construction (Infrastructure) Activities (13.37%) and Services Sector (7.80%) respectively.
- FDI is the category of international investment. It reflects the objective of obtaining a lasting interest from a resident entity in one economy to an enterprise in another economy.
- Further, the lasting interest implies the existence of a long-term relationship between the direct investor and the enterprise. This has a significant degree of influence on the management of the enterprise.
Components: FDI consists of three components:
- Firstly, Equity capital: It is the FDI purchase of shares of an enterprise in a country other than its own.
- Secondly, Reinvested earnings: It comprises the direct investors’ share (in proportion to direct equity participation) of earnings not distributed. Such retained profits by affiliates are reinvested.
Note: The earnings of the share are distributed to the investor in the form of dividends by affiliates, or earnings not remitted.
- Thirdly, Intra-company loans or intra-company debt transactions: It refers to short- or long-term borrowing and lending of funds between direct investors (or enterprises) and affiliate enterprises.