8 August 2022

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Highest forex inflows for FY 2021-22 on account of various correctional steps taken by Government


Central Government’s initiative on FDI policy reforms have resulted in increased FDI inflows in the country. India has received its highest ever FDI inflow of INR 6,31,050 crores in Financial Year 2021-22. Further, FDI Equity inflow in Manufacturing sectors has increased to INR 1,58,332 crore in Financial Year 2021-22 from INR 89,766 crore (FY 2020-21), which is an increase of 76%.

The Government has put in place a liberal and transparent policy for attracting Foreign Direct Investment (FDI), wherein most sectors, except certain strategically important sectors, are open for 100% FDI under the automatic route. Subject to the provisions of the FDI Policy, foreign investment in 'manufacturing' sector is under automatic route. Manufacturing activities may be either self-manufacturing by the investee entity or contract manufacturing in India through a legally tenable contract, whether on Principal to Principal or Principal to Agent basis. Further, a manufacturer is permitted to sell its products manufactured in India through wholesale and/or retail, including through e-commerce, without Government approval.

Further, Reserve Bank of India has undertaken several measures to enhance forex inflows. The measures include exemption of incremental Foreign Currency Non-Resident (Bank) [FCNR(B)] and Non-Resident (External) Rupee (NRE) deposits from Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR). RBI allows FPI in commercial paper and non-convertible debentures with an original maturity of up to one year. The limit for external commercial borrowings (ECBs) under the automatic route is increased temporarily. There is increase in the all-in cost ceiling under the ECB framework by 100 basis points, subject to the borrower being of investment grade rating.

Tags : FDI inflow Increase Measures

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