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The government’s ban on Foreign Direct Investments (FDI) through the automatic route from land border sharing neighboring countries though well-intended may come with unintended consequences. Analyse.

Topic:  Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

5. The government’s ban on Foreign Direct Investments (FDI) through the automatic route from land border sharing neighboring countries though well-intended may come with unintended consequences. Analyse.(250 words)

Reference: The Hindu 

Why this question:

The spokesperson of the Chinese Embassy has said that, India’s recent policy to curb opportunistic takeovers of domestic companies goes against the World Trade Organisation (WTO) principles.

Key demand of the question:

Explain the effect of the government’s ban on Foreign Direct Investments (FDI) through the automatic route from land border sharing neighboring countries, also discuss the associated consequences.

Directive:

AnalyzeWhen asked to analyse, you have to examine methodically the structure or nature of the topic by separating it into component parts and present them as a whole in a summary.

Structure of the answer:

Introduction:

Briefly state the context of the question.

Body:

To start with, discuss the changes in the Foreign Direct Investment (FDI) policy. Under the revised FDI policy, prior government approval is mandatory for FDI from countries which share a land border with India. The new policy states that when an entity of a country, which shares land border with India or where the beneficial owner of an investment into India is situated in or is a citizen of any such country, can invest only under the Government route. India shares land borders with Pakistan, Afghanistan, China, Nepal, Bhutan, Bangladesh and Myanmar. Discuss the possible advantages and disadvantages associated with the policy.

Conclusion:

Conclude with way forward.