In India, foreign direct investment (FDI) is considered as a developmental tool, which can help in achieving self-reliance in various sectors of the economy. The year 2011-12 saw moving further with liberalization of the FDI regime, the government revised FDI limit on FM radio at 26% against the earlier 20%. Likewise, conditions for foreign investment in respect of construction of old-age homes and educational institutions were eased. Further, government allowed 100% FDI in beekeeping, also known as ‘apiculture’.
India in recent times has been in focus of foreign investment due to its complete market size and its capability to sustain and grow even during global economic privation. Till now, FDI has proved to be successful in the sectors of finance, telecom, housing and real estate, construction and power, which have fetched the maximum inflow of FDI in India. However, overseas investment is not allowed in the nuclear, railway, arms, coal and mining sectors.
The widely debated issue in Indian economic and political scenario in 2011 was FDI in multi brand retail, which was considerably put on hold by the UPA government, backed by opposition from the Left. However, single brand retail was opened to 100% FDI, up from 51% earlier. The government is likely to announce in the Budget a timeline for allowing 51% FDI in multi-brand retail, as the retail sector accounts for 22% of India's GDP and with the potential to attract a large amount of foreign money the retail sector could help stabilize the Indian economy. With this, business will be boosted in various sectors of transportation, logistic, supply chain management, agro processing and infrastructure.
Other than this the most awaited decision would be on government’s move to allow the 49% FDI in domestic airlines, which is expected to provide a reprieve for the many airlines that are under financial strain and have been looking at raising funds. Along with this, even the real estate sector is also expecting some policy decision on FDI in real estate that will benefit the Indian market and make them investment friendly. Further, on the insurance sector the government should allow 49% FDI, as this would provide enough incentive to overseas companies to invest in the sector. On the whole, the government should not hold the decision that is remunerative for the country.