The ‘Foreign Direct Investment’ policy in India is regulated by

[amp_mcq option1=”the Ministry of Commerce and Industry” option2=”the Reserve Bank of India” option3=”the Ministry of External Affairs” option4=”the Securities and Exchange Board of India” correct=”option1″]

This question was previously asked in

UPSC Combined Section Officer – 2019-20

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The correct option is A. The Foreign Direct Investment (FDI) policy in India is primarily regulated by the Ministry of Commerce and Industry.

– Foreign Direct Investment (FDI) policy in India is framed and reviewed by the Government of India.
– The Department for Promotion of Industry and Internal Trade (DPIIT), under the Ministry of Commerce and Industry, is the nodal department for formulating FDI policy. It is responsible for the calculation, announcement, and implementation of FDI policies, including permissible sectors, entry routes (automatic or government approval), and caps.
– While the Reserve Bank of India (RBI) is the administrator of the Foreign Exchange Management Act (FEMA), 1999, and handles the operational aspects related to FDI inflow and outflow (like prescribing procedures, reporting requirements, etc.), the overarching policy framework is laid down by the government, specifically DPIIT.
– The Ministry of External Affairs deals with foreign relations and diplomacy, not domestic economic policies like FDI regulation.
– The Securities and Exchange Board of India (SEBI) regulates the securities markets and portfolio investments (like Foreign Portfolio Investment – FPI), but not the core FDI policy.

FDI can come through two routes: Automatic Route (where no prior government approval is needed) and Government Route (where prior approval from the concerned ministry/department is required, routed through the Foreign Investment Facilitation Portal).

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