Important Points for IC 89 - Management Accounting Exam
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Foreign Direct Investment (FDI) is a direct investment into production or business in a country by an individual or company of another country, either by buying a company in the target country or by expanding operations of an existing business in that country.
There are various ways for FDI such as: Investment in formation of a new corporate in the foreign country in the form of a branch or a subsidiary. It can be set up either in own name or as joint venture with an existing foreign company; With greater invetment in an existing foreign branch or subsidiary; Acquisition of foreign business.
An Indian company may receive Foreign Direct Investment under the two routes: Automatic route or Government route.
Automatic Route: FDI is allowed under the automatic route without prior approval either of the Government or the Reserve Bank of India in all activities/sectors as specified in the consolidated FDI policy, issued by the Government of India from time to time.
Government Route: FDI in activities not specified under the automatic route requires prior approval of the Government which are examined and considered by the Foreign Investment Promotion Board (FIPB), Department of Economic Affairs and Ministry of Finance.
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