Topic: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.
6. Need for a dedicated law for National security screening of Foreign Direct Investment (FDI) as Foreign Exchange Management Act (FEMA) fails to comprehensively address national security concerns. Analyse. (250 words)
Why the question:
The article explains that there is no clear law for national security screening of inward FDI in India. Thus the question.
Key Demand of the question:
Analyse the need for a dedicated law for National security screening and its concerns pertaining to the national security aspects.
Directive:
Analyze – When 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:
Start with some relevant data such as – As per some media reports, India may ease restrictions on FDI by Chinese companies. They will be allowed to invest up to 25 percent in a company through an automatic route. Last year India tightened its FDI policy. It was aimed at preventing an opportunistic takeover of Indian firms, hit by COVID-19 pandemic induced lockdown.
Body:
The answer body must have the following aspects covered:
- Firstly explain how India regulates foreign investments?
- Explain the objectives of FEMA, Shortcoming of FEMA especially the fact that National security is unrelated to FEMA. Therefore, India needs a separate law for national security screening of inward FDI just like many other western countries.
- Present the different types of legitimate threats from foreign acquisitions.
Conclusion:
Suggest that National security and capital control are separate and independent policy objectives. Separate legislation for national security screening of inward FDI will be prudent.
