Rationalization of FDI Policy

Rationalization of FDI Policy has been undertaken by the Indian government by expanding the automatic route to several more sectors. Rationalization of FDI Policy has been done by the Indian government in order to increase the flow of FDI into the country.

Foreign direct investment in India:

The liberalization of the regulations of foreign direct investment by the government of India has helped to generate the interest of the foreign investors in the country.

This has helped to turn the country as one of the best destinations for the inflow of foreign direct investment (FDI) from across the world. Foreign firms are establishing fully owned enterprises and joint ventures in various sectors like tourism, food processing, pharmaceuticals, computer software, chemicals, financial services, and telecommunications.

Various measures of Rationalization of FDI policy:

The various measures of Rationalization of FDI Policy are that the Indian government has extended the automatic route of approval to many new sectors, dispensed the need for approvals by government agencies for foreign direct investment, and also allowed foreign direct investment in many new sectors. Further, a measure of Rationalization of FDI Policy is that foreign direct investment up to 100% is allowed under the automatic route in activities like horticulture, animal husbandry, vegetable cultivation, aqua- culture, floriculture, and pisciculture.

Other measures of Rationalization of FDI Policy include the norm that with prior permission of the Indian government foreign direct investment up to 100% is allowed in Tea Plantation on the condition that 26% of the company's equity will be divested in the favor of the Indian public within five years. Also the Indian government has allowed foreign direct investment up to 100% into projects of construction development, housing, townships, and infrastructure built- up.

Effects of Rationalization of FDI Policy in India:

The effects of Rationalization of FDI Policy in India has been that it has opened up many new sectors of the country's economy for foreign direct investment, simplified the process of foreign direct investment in the country, and also led to increase in the inflows of foreign direct investment in the country.