External Sector: FDI, FPI & BoP
Economy Advanced · बाह्य क्षेत्र: FDI, FPI और BoP · 18 facts
FDI (Foreign Direct Investment): Investment where a foreign entity acquires 10% or more stake in a business; long-term, involves management control.
FPI (Foreign Portfolio Investment): Investment less than 10% stake; in stocks and bonds; short-term; can be withdrawn quickly (hot money).
FEMA 1999 (Foreign Exchange Management Act): Governs FDI and FPI; replaced FERA (Foreign Exchange Regulation Act) 1973; civil offences under FEMA vs criminal under FERA.
Top FDI source countries (India): Mauritius (largest, due to Double Tax Avoidance Treaty), Singapore, USA, Netherlands, Japan.
Top FDI recipient sectors (India): Computer software & hardware, services, trading, telecommunications, automobile industry, pharmaceuticals.
Balance of Payments (BoP): Records all financial transactions between India and rest of world; includes Current Account + Capital and Financial Account.
Current Account: Exports-imports of goods (trade balance), services (invisibles), investment income, unilateral transfers (remittances).
Current Account Deficit (CAD): India chronically runs a CAD because it imports more goods (especially oil) than it exports; remittances help offset it.
India's forex reserves (2024): ~$670 billion; 4th largest in world after China, Japan, Switzerland; provides ~12 months import cover.
EXIM Bank (Export-Import Bank of India): Established 1982; promotes cross-border trade and investment; provides lines of credit to foreign governments.
ECB (External Commercial Borrowing): Loans raised by Indian companies from foreign sources; regulated by RBI; capped at certain amounts to prevent excessive debt.
NRI Deposits: FCNR (B) — Foreign Currency Non-Resident Bank; NRE — Non-Resident External (repatriable, tax-free); NRO — Non-Resident Ordinary (for India income).
India's remittances: World's largest recipient; approximately $120 billion in FY2023-24; major sources: USA, UAE, UK, Singapore; reduces CAD pressure.
Dunkel Draft/WTO (1995): India joined WTO in 1995; bound to open trade; challenged by dumping from China; uses anti-dumping duties.
India's trade deficit (2023): ~$265 billion (imports $720B - exports $455B); oil and electronic goods are main drivers of import bill.
Make in India (2014): Initiative to boost manufacturing and FDI; 25 focus sectors; aimed at increasing manufacturing's share from 16% to 25% of GDP.
PLI (Production Linked Incentive) Scheme: Launched 2020; incentivizes domestic manufacturing in 14 sectors; aims for Rs 30 lakh crore output over 5 years.
SWIFT system: Global interbank communication; India's IFSC Code for international wire transfers; RBI manages India's international banking connections.