FDI - General awareness questions on current affairs

1)   Ministries will now have to decide on FDI proposals within ___ days of application, w.e.f 6th June 2017?

a. 60 days
b. 65 days
c. 70 days
d. 75 days
Answer  Explanation 

ANSWER: 60 days

Explanation:
The Union Government on 6 June 2017 said that Ministries will have to decide on FDI proposals within 60 days of the application and any rejection will need concurrence of the Department of Industrial Policy and Promotion (DIPP).

Earlier in May 2017, India had scrapped the 25-year old foreign investment advisory body named Foreign Investment Promotion Board (FIPB). It was scrapped with an aim to attract more FDI by providing quick approvals.

In an office memorandum, the Finance Ministry said subsequent to the abolition of FIPB, concerned administrative ministries have been allotted the work of granting approval for foreign investment in the specific sector.

The Industry Ministry, in consultation with the administrative ministry, will come out with a detailed guideline for processing of the FDI proposals and ensure a “consistency of treatment and uniformity of approach”.

The Standard Operating Procedure will involve the process of inter-ministerial consultation for the examination of FDI proposals, wherever necessary.

FDI approval decisions in majority of the sectors have been relegated to concerned ministry and those relating to private security agencies would be decided by the Home Ministry.

While DEA will be responsible for clearing the proposals of financial services or there is a doubt about the regulator.

The memorandum also says that any FDI proposal related to banks will be approved by the Department of Financial Services.

The memorandum says that FDI proposals by NRIs/EoUs requiring approval of the government will be dealt with by the Department of Industrial Policy and Promotion (DIPP).

In this case, the DIPP will continue to be the administrative ministry for this purpose. DIPP will also be responsible for handling the applications seeking import of capital goods or machinery.

Applications of investments from countries of concern will require security clearance as per the FEMA guidelines and FDI policy. These applications will be processed by the Home Ministry. In this case, the Home Ministry will only process those applications that reach them via automatic route but requiring security clearances, cases pertaining to approval route sectors requiring security clearance will be processed by the concerned administrative ministry.

In cases of FDI application where there will be a doubt about the administrative ministry, DIPP will also be responsible for identifying the ministry where application will be processed.


2)   Which index did India rank 8th on, April 20, 2017?

a. AT Kearney FDI Confidence Index
b. Morgan Stanley Index
c. Moody's Rating
d. ICRA rating
Answer  Explanation 

ANSWER: AT Kearney FDI Confidence Index

Explanation:
India has jumped one spot to rank 8th in the 2017 AT Kearney Foreign Direct Investment (FDI) Confidence Index with 31 percent of the surveyed respondents being more optimistic on economic outlook over the next three years.

Investors see India as a vast and diverse up-and-coming market with plans to increase investments there over the near to medium term.

Investor confidence in India has been growing steadily over the last two years, making it one of the top two emerging market performers on the FDI Index, said the UK-based AT Kearney in the index.

Reform efforts by the current government have improved the country's investment environment.

This includes the national goods and service tax (GST) reform, the largest non- direct tax reform in India in recent years.

India's vast domestic market is an added attraction for foreign companies. Investors are looking at India's phenomenal economic performance as a key selling point.

It is forecast to be the fastest-growing major economy in the world in the coming years, which should provide a variety of investment opportunities to global firms," he said.

Among the investors surveyed, over half said a successful GST implementation would cause them to significantly or moderately increase their investment in India.

More broadly, 70 percent of the respondents plan to maintain or increase their FDI in India in the coming years, according to Kearney.

India's government is considering further policy reforms to further boost FDI inflows. A proposal to loosen FDI regulations on the retail sector is being evaluated, in part to support the country's 'Make in India' initiative and bolster the manufacturing industry, said the consultancy.

The government is eliminating the need for FDI approvals in sectors where licenses are also required, such as defence, telecommunications and broadcasting.


3)   Which companies will soon be allowed to attract 100 percent FDI investment?

a. Cash management companies
b. ATM management companies
c. Both a and b
d. Neither a nor b
Answer  Explanation 

ANSWER: Both a and b

Explanation:
Cash and ATM management companies will soon be allowed to attract 100 per cent foreign direct investment.

They are not required to comply with the Private Security Agencies (Regulation) Act (PSARA).

The clarification will be against the backdrop of the confusion among firms in cash and ATM management relating to compliance with the Act, under which they can receive FDI only up to 49 per cent.

The issue was discussed at a meeting convened by the Prime Minister’s Office (PMO) last month.

There are about a dozen cash management players in the country, including Writer Safeguard, SIS Securitas, CMS, Secure Value, Logicash, Brinks Arya, Securitrans and Scientific Security Management Services.

According to experts, companies managing cash for banks have so far been caught in a policy tangle, with the home ministry insisting that 100 per cent FDI could not be allowed for them if they provide private security guards or armoured vehicles.

Companies that make devices such as currency authenticators and sorting and currency counting machines will also benefit from this clarification.

Several players, including TVS Electronics and ITI, are in such businesses.

Cash Management companies handle over Rs 40,000 crore of cash per day.

The government in 2015 permitted 100 per cent FDI under the automatic route for white label ATM operations with an aim to promote financial inclusion.

FDI into the country grew 22 per cent to USD 35.85 billion during April-December of 2016-17.

Foreign investment is considered crucial for India, which needs around USD 1 trillion for overhauling its infrastructure such as ports, airports and highways to boost growth.

A strong inflow of foreign investments also helps improve balance of payments and strengthen the rupee against other global currencies, especially the dollar.


4)   What is the percentage of FDI through automatic route at present according to the Budget?

a. 60 percent
b. 70 percent
c. 80 percent
d. 90 percent
Answer  Explanation 

ANSWER: 90 percent

Explanation:
Foreign Direct Investment is an investment to own a stake or control ownership in a business linked to one country.
It is made by an individual or company from another country.

FDI offers direct control either ‘organically’- where a company expands the operations of its business in a foreign country, or ‘inorganically’ where a company buys a company in a foreign country.

FDI was first introduced in India under the period of radical economic change, the year 1991, where India saw its economy open under Liberalisation Privatisation and Globalisation.

It was under Manmohan Singh as FM.

It was introduced under the Foreign Exchange Management Act (FEMA) and has since been a critical monetary source for economic development and business expansion.

There are two routes by which India gets FDI:

  • Automatic route, where FDI is allowed without prior approval by the government or RBI
  • Government route, where a prior approval is required– Foreign Investment Promotion Board (FIPB) oversees this route.
In 2014, under PM Modi’s Make in India initiative, the FDI policy for 25 sectors was liberalised.

In defence, FDI beyond 49 percent and up to 100 percent has been permitted through the government approval route.

There is 100 percent FDI under the government route for trading, including e-commerce.

The government has permitted 74 percent FDI under automatic route in existing pharmaceutical ventures, after which an approval will be required to continue beyond 74 percent and up to 100 percent.

The government has allowed 100 percent FDI in India-based airlines, but a foreign carrier can only own up to 49 percent stake in the venture and the rest can come from private investors including those overseas.

Last year’s budget allowed 100 percent foreign investment in processed food retailing on the condition that it was manufactured in India.

Budget 2016 eased FDI in the insurance and pension sectors through the automatic route, from 26 percent to up to 49 percent.

Presently, infrastructure, automobile, services, railway, pharmaceuticals, telecom, aviation, computer hardware and software are some key sectors for FDI.


5)   India has crossed which milestone between April 2000 and Sept 2016?

a. 300 billion FDI
b. 400 billion FDI
c. 300 billion GDP
d. 400 billion GDP
Answer  Explanation 

ANSWER: 300 billion FDI

Explanation:
India crossed the $300 billion foreign direct investment (FDI) milestone between April 2000 and September 2016.

  • It has succeeded in firmly establishing its credentials as a safe investment destination in the world. Thirty-three per cent of the FDI came through the Mauritius route.
This is because the investors wanted to take advantage of India’s double taxation avoidance treaty with the island nation.

India received $101.76 billion from Mauritius between April 2000 and September 2016.

The cumulative FDI inflows during the period amounted to $310.26 billion.

The inflows in the first half of the current financial year were $21.62 billion, according to data compiled by the Department of Industrial Policy and Promotion.
  • The other big investors have been from Singapore, the US, UK and the Netherlands.
  • According to the World Investment Report 2016, global FDI flows rose by 38 per cent to $1.76 trillion, the highest level since the global economic and financial crisis began in 2008.

  • About Indian economy FDI Flows

  • Liberalisation of the FDI policy framework has benefitted India.

  • Major national development programmes that made India the destination for foreign funds include:

  • Start Up India
  • Stand Up India
  • Make in India
  • Digital India
  • Skill India
  • Besides increasing competitiveness, it has boosted investment.
  • India last crossed the $300 billion mark at a time when the global economic slowdown has had a dampening impact on FDI flows.


6)   India is the fourth largest FDI source for which Arab nation?

a. Iran
b. Iraq
c. Qatar
d. None of the above
Answer  Explanation 

ANSWER: Qatar

Explanation:
India currently ranks 4th in terms of FDI to the Arab kingdom according to Qatar Financial Centre/QFC. QFC us a completely onshore business and financial centre under the Qatar government. A multi-city roadshow has been organised to boost investments in the Gulf state currently

  • Many domestic companies have invested USD 450 million in the Arab nation in the past 7 years, creating 2,000 jobs in Qatar
  • A total of 21 Indian companies have invested in Qatar between January 2010 and May 2016- USD 225 million was invested in Doha alone
  • Indian companies invested in Qatar included LIC, TCS, L&T, ICICI Bank, HDFC, SBI, Voltas and Shapoorji Pallonji.
  • Qatar has invested in world class infrastructure and aims to grow in the run-up to the 2022 FIFA World Cup and also attain the Kingdom’s 2030 vision for sustainable growth
  • Non-hydrocarbon exports are growing at a healthy rate of 12 percent, a positive sign for growth from India
  • Investments are in diverse areas such as IT, BFSI and professional services.


7)   Foreign direct investment in the country grew by what percent to USD 10.55 billion during Q1, 2016?

a. 6
b. 7
c. 8
d. 9
Answer  Explanation 

ANSWER: 7

Explanation:
FDI in India grew by 7 percent to USD 10.55 billion during Q1 of 2016-2017. Foreign investment inflows were at USD 9.88 billion in January-March 2015 according to Department of Industrial Policy and Promotion.

  • Sectors which attracted maximum FDI during this period included computer hardware and software, services, telecommunications, power, pharmaceuticals and trading business.
  • In terms of nations, India received the maximum overseas inflows from the US, Singapore, Japan, Mauritius and the Netherlands.
  • Further liberalisation of the foreign investment policies for services sector in the budget means more inflows will come.
  • Government has recently relaxed FDI norms in 8 sectors namely defence, civil aviation, food processing, private security agencies and pharmaceuticals.
  • Foreign investment is critical for India which needs USD 1 trillion for overhauling infrastructure such as ports, airports and highways for boosting growth.
  • Strong inflow of foreign investments will help improve the country’s BOP situation and strengthen the rupee value against other global currencies including the US dollar.


8)   Government has raised FDI level in brownfield pharma to what percent under the automatic route to attract capital and technologies in the pharmaceutical sector?

a. 74
b. 49
c. 50
d. 56
Answer  Explanation 

ANSWER: 74

Explanation:
Government of India has raised FDI limit in pharmaceutical companies to attract and retain latest technologies, capital and follow international best practices.

  • FDI cap in brownfield pharma was recently raised to 74 percent under the automatic route from 49 percent earlier.
  • Beyond 74 percent, foreign investment is permitted under the approval route for attracting capital and technological advancement.
  • Government has also put in place necessary safeguards by providing non-compete clause will not be permitted.
  • Indian promoters will operate in the same line of business in new ventures.
  • Close to 3088 Industrial Entrepreneurs Memorandum were signed between January 2015 and July 2016 envisaging an investment of INR 4.8 lakh crore.
  • Close to 427 IEMs were signed in the electrical equipment sector followed by textiles and food processing.
  • Maximum IEMs were inked in Maharashtra followed by Gujarat, Karnataka and Telangana.


9)   India has retained its ranking as the 10th highest recipient of FDI in 2015, according to which UNCTAD report?

a. World Investment Report 2016
b. World Investment Report 2015
c. World Investing Report 2016
d. World Investing Report 2015
Answer  Explanation 

ANSWER: World Investment Report 2016

Explanation:
India has retained the ranking as the tenth highest recipient of FDI in 2015 receiving USD 44 billion in investment that year compared to US $35 billion in 2014, as per the UN

  • World Investment Report 2016 released by UNCTAD found India also jumped a place in terms of attractiveness as a business destination in 2015 to sixth place with 14 percent of respondents naming it as destination of their choice


10)   Union government on 20th June 2016 changed the FDI policy with the aim of providing major impetus to employment and job creation. FDI beyond 49 percent in Defence Sector was allowed through which route?

a. Approval
b. Automatic
c. Both of the above
d. None of the above
Answer  Explanation 

ANSWER: Approval

Explanation:
Changes introduced in the policy include increase in sectoral caps, bringing more activities under automatic route and easing of conditionality for foreign investment. These amendments seek to further simplify the regulations governing FDI in India.

  • To permit 100 percent FDI under government approval route for trading in respect of food products manufactured in India.
  • FDI beyond 49% has been permitted through government approval route, in cases resulting in access to modern technology. FDI limit for defence sector has also been made applicable to Manufacturing of Small Arms and Ammunitions covered under Arms Act
  • 100 percent FDI allowed under automatic route for Teleports, Direct to Home, Cable Networks and Mobile TV.
  • Moreover, infusion of FDI beyond 49% in a company not seeking permission from Ministry will result in change in the ownership pattern.
  • To permit 100% FDI under automatic route in Brownfield Airport projects. In Scheduled Air Transport Service and regional Air Transport Service, it has now been decided to raise FDI limit to 100%. For NRIs, 100% FDI will continue to be allowed under automatic route.
  • FDI up to 49% is now permitted under automatic route in this sector and FDI beyond 49% and up to 74% would be permitted with government approval route.


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