UNIT IV
Role of Government
Fiscal policy:
Meaning:
Fiscal policy is associated with increased government revenues and the generation of government spending. To generate income and bear spending, governments formulate policies called budgetary or fiscal policies. Therefore, fiscal policy is related to government spending and government revenue. Fiscal policy determines the size and pattern of government-to-economy and economy-to-government spending flows. So, broadly speaking, fiscal policy is
"That part of national economic policy, which is mainly related to the balance of the central government."
In other words, fiscal policy refers to government policy on taxation, public spending, and public borrowing.
Main objectives of India's fiscal policy
1. Effectively mobilize resources to ensure development:
An important purpose of fiscal policy is to ensure rapid economic growth and development. This goal of economic growth and development can be achieved by mobilizing resources in the right way. India's central and state governments have used fiscal policy to mobilize resources. Financial resources can be mobilized by:-
2. Taxation:
Through effective fiscal policy, the government aims to mobilize resources with both direct and indirect taxes.
3. Public savings:
Resources can be mobilized through public savings by reducing government spending and increasing the surplus of businesses in the public sector.
4. Personal savings:
Through effective financial measures, such as tax incentives, governments can source resources from the private sector and households. Financial resources can be mobilized through government bonds, government loans by issuing government bonds, loans from domestic and foreign stakeholders, and deficit finance.
5. Efficient allocation of limited financial resources:
Central and state governments have attempted to efficiently allocate available resources. These resources will be allocated to development activities, including spending on railroads and infrastructure. Non-development activities, on the other hand, include spending on defence, interest payments, subsidies and more. Socially desirable service. Therefore, India's fiscal policy is designed in a way that encourages the production of desirable commodities and discourages socially undesirable commodities.
6. Reducing income and wealth inequality:
Fiscal policy aims to achieve equity or social justice by reducing income inequality between different sectors of society. Direct taxes, such as income tax, are levied more on the wealthy than on the low-income. Indirect taxes are also high for semi-luxury and luxury items that are mainly consumed by the upper middle class and upper class. The government is investing a significant portion of its tax revenues in implementing poverty alleviation programs to improve the condition of the poor in society.
7. Price stability and inflation control:
One of the main goals of fiscal policy is to curb inflation and stabilize prices. This requires monetary action, and the government is constantly aiming to curb inflation by reducing budget deficits, introducing tax-saving schemes, and productive use of financial resources.
8. Job creation:
Responsible governments make every possible effort to increase employment in the country through effective fiscal measures. Investing in infrastructure has resulted in direct and indirect employment. Lowering taxes and tariffs on small industry (SSI) units encourages more investment and, as a result, creates more jobs. The Government of India is implementing various rural employment programs to solve problems in rural areas. Similarly, the self-employed system is adopted to provide employment to technically qualified people in urban areas.
9. Balanced regional development:
Another main purpose of fiscal policy is to bring about balanced regional development. From the government, there are various incentives to launch projects in the underdeveloped areas, such as cash subsidies, tax concessions, obligations in the form of tax exemptions, and loans at concession rates.
10. Reduce the balance of payments deficit:
Fiscal policy seeks to encourage exports through financial measures such as income tax exemption on export income, central customs exemption, sales tax and octroi exemption. Forex is also protected by providing financial benefits to import substitutions, such as imposing tariffs on industries and imported goods.
Foreign exchange obtained from exports and saved by import substitution helps solve the balance of payments problem. In this way, balance of payments disadvantages can be corrected by imposing tariffs on imports or subsidizing exports.
There are three sources from where the government makes money. The first two are sources of income and the last one is the sale of debt and capital assets.
1. Income or tax revenue:
This is a tax that the government collects in the form of corporate tax, personal income tax, customs duty, excise tax, etc.
2. Tax-exempt income:
These include interest on bonds held, dividends from PSUs, and grants. They are a source of income, meaning they do not have to be repaid and are less than tax revenue.
3. Receipt of capital:
These are government loans such as market loans, short-term loans, external commercial receipts, etc.
Union budget structure:
The government is accountable to Congress for financial management and efficient use. Due to the bicameral parliament, especially the constitutional advantage, all financial acts are processed and passed by national representatives. However, proposals for budget tax development, government accounting and expenditure decisions are made by government ministries and integrated into the Treasury. The federal budget submitted to Congress consists of a general and rail budget, a grant request, an account vote, a supplementary grant request, an expenditure bill, and a financial bill.
The annual financial statements are the main budget document. It details receipts and payments that hold government accounting: integrated funds, reserves, and public accounting.
The Emergency Fund, on the other hand, is freely available to the President of India in case it could occur if the government had to bear urgent and unexpected spending. Parliamentary approval is then obtained for such expenditures and repayments from the Integrated Fund, and the amount spent is recovered in reserves. In addition to the normal government spending associated with the integrated fund, certain other transactions go into the government account. In this regard, the government overlooks transactions related to funded funds, small savings, and other deposits and acts like a banker.
Monetary Policy:
Monetary policy concerns the steps taken to regulate the money supply, costs, and credit availability in the economy. It also deals with the distribution of credit between users and between users, and deals with both bank lending and borrowing rates. In developed countries, monetary policy has been effectively used as an anti-circular policy to overcome depression and inflation. Various means of monetary policy are changes in the supply of currencies, fluctuations in banking and other interest rates, open market operations, selective credit management, and fluctuations in reserve requirements.
In India, following the recommendations of the Urgit Patel Commission report, the Reserve Bank has launched a disinflationary "glide path" targeting CPI inflation of less than 8% and CPI inflation of less than 6% by January 2015. Was officially announced. The agreement on the monetary policy framework between the Government and the Reserve Bank of India dated February 20, 2015 is a combination of the consumer price index (CPI-C) – in the medium term, (a) until January 2016. Less than 6%, (b) 4% (+/-) 2% after fiscal year 2016-17. Price stability is a necessary (if not sufficient) prerequisite for sustainable growth and financial stability. The relative emphasis assigned to price stability and growth goals in the implementation of monetary policy changes from time to time in response to the evolving macroeconomic environment. Financial stability is important for the smooth transmission of monetary policy, and therefore regulatory and monetary market policies, including macro-health policies, are often published with monetary policy under Part B of the Monetary Policy Statement14.
There are several direct and indirect means used to implement monetary policy.
INDUSTRIAL POLICY:
Overview:
Industrial policy is a formal declaration by the government, which outlines general policy for industry. There are two main parts to industrial policy. The first part generally deals with the ideology of current political power, while the other part provides a framework for specific rules / principles. The main purpose of industrial policy is to increase industrial production, thereby promoting industrial growth, which leads to economic growth through optimal use of resources. Modernization; Balanced industrial development; Balanced regional development (by providing concessions to the industrial development of underdeveloped regions); Balanced development of basic and consumer industries. Collaborative development of large companies, SMEs and cottage companies. Determination of areas of activity under the private and public sector. Strengthen the heartfelt relationship between workers and managers and the proper use of domestic / foreign capital.
Importance of industrialization:
Industrialization is the most important requirement for the country's rapid economic development. Industrialization not only helps the development of industry, but also promotes the social sector of agriculture, trade, transportation, foreign trade, services and economy. It improves employment opportunities, national income, per capita income, and the standard of living of the masses. Therefore, industrial policy is needed to establish a healthy tradition of industrialization and to guide, regulate and manage industrial development (if necessary). A country's industrial policy is influenced by the ideologies and principles of the governments involved. Industrial policy helps the country to prosper in a self-sufficient manner by laying the structure and foundation for industrial development. Therefore, the government's industrial policy. It must be clearly defined, clear and progressive. You also need to adhere to it and take it seriously.
Meaning of industrial policy:
Industrial policy refers to such a formal declaration by the government through the general policies of the industry adopted by the government. It will be published. Any industrial policy can initially consist of two main parts: the ideology of government. This is the governing rules and principles that determine the nature of industrialization and, secondly, provide a particular framework behind existing ideologies. In this way, industrial policy is a comprehensive concept that provides policy guidance and overview for the establishment and functioning of industry.
Need, purpose and importance of industrial policy:
The necessity, purpose and importance of industrial policy can be explained in the following points.
Industrial policy helps to fully develop the country's natural resources. Helps identify, collect, and use resources properly. It promotes an increase in the national income of the country.
2. To boost industrial production:
The main purpose of industrial policy is to increase the country's industrial production. It provides the impetus for the rapid development of the industry and the growth of the industry.
3. Modernization:
Industrial policy encourages modernization to increase industrial production and productivity. It envisions the use of modems and the latest production technology in the industrial sector. Promote maximum production with minimum production cost.
4. Balanced industrial development:
Industrial policy envisions a country's balanced industrial development. It also promotes balanced development in various sectors of the economy.
5. Balanced regional development
Industrial policy helps the country to develop a balanced region. Industrial policy may include provisions regarding the provision of facilities or concessions for the rapid development of an industrially backward region / region of a country.
6. Coordination between basic and consumer industries
Balanced development of basic and consumer industries is essential for economic growth. Industrial policy, on the one hand, encourages the development of basic and major industries, and on the other hand, attention is also paid to the development of the consumer industry. Therefore, with balanced and collaborative development of both types of industry, it provides a pace for economic growth.
7. Coordination between small and large industries
Industrial policy plays an important role in the coordinated development of small or domestic and large industries. These industries can help each other through the provisions of industrial policy.
8. Area determination
Industrial policy determines the areas of business under the public and private sectors. Through national industrial policy, we can set the right direction for the private sector.
9. Heartfelt labour-management relations
Comprehensive industrial policy is needed to build a heartfelt relationship between workers and managers. Heartfelt labour-management relations are essential for rapid and sustainable industrialization.
10. Appropriate use of foreign aid / investment
Appropriate industrial policy is supposed to attract foreign capital and entrepreneurs. It helps the country's rapid industrial development. If you think carefully about industrial policy, the disadvantages of "foreign assistance" will be confirmed. Foreign aid can be used for national interests if the country implements appropriate industrial policies.
Key takeaways:
Industrial license:
The industrial license complies with the Industrial Development and Regulatory Act of 1951. The 1956 Industrial Policy Resolution identified three industry categories:
Over the years, policies have been revised in light of the changing industrial scene of the country. Industrial licensing policies and procedures are also liberalized from time to time. To fully realize the potential of the country's industry, this process of change must continue.
In order to achieve the strategic objectives of the industrial sector since the 1990s, some changes need to be made to the industrial approval system. Key policy initiatives and procedural reforms are needed to actively encourage and support Indian entrepreneurs to take advantage of and address new national and global opportunities and challenges. The basis of such a series of measures must be to allow entrepreneurs to make investment decisions based on their own commercial judgment. To achieve technological dynamism and international competitiveness, companies need to be able to respond quickly to the rapidly changing external conditions that characterize today's industry. Government policies and procedures must be coordinated to support the efforts of entrepreneurs. This can only be done if the role played by the government is changed from a role that only exercises control to a role that provides support and guidance by making the basic steps completely transparent and eliminating delays. I can do it.
The wind of change has been with us for some time. The industrial licensing system is gradually shifting from the concept of capacity licensing. The public sector business booking system is evolving towards a more flexible spirit, allowing private sector companies to gradually enter many of these areas on a case-by-case basis. We need to provide more input to these changes, which alone can push the country towards achieving entrepreneurial and industrial potential. This requires a bold and imaginative decision designed to remove the constraints of capacity building and at the same time not endanger the invalidation of national interests.
In the above context, industrial licenses will no longer be abolished for all industries except those specified, regardless of the level of investment. These particular industries are enforced for strategic reasons for safety and social reasons, issues related to safety and preferred environmental issues, the manufacture of products of dangerous nature and the manufacture of elite consumer products. Subject to license. License exemptions are especially useful for many dynamic small and medium-sized entrepreneurs who have been unnecessarily hampered by the licensing system. Overall, the Indian economy will benefit from becoming more competitive, more efficient and modern, and will occupy its legitimate position in the world of industrial progress.
Industrial licensing policy
1) Industrial licenses cover all projects except for a short list of industries related to security and strategic concerns, social reasons, toxic chemicals and top environmental reasons, and the Elite Consumption List items attached as Appendix II. Will be abolished in. Industries that are booked for the small sector will continue to be booked that way.
2) Areas dominated by security and strategic concerns will continue to be reserved for the public sector (list attached as Appendix 1).
3) For projects that require imported capital goods, automatic clearance will be given-
a) If foreign exchange availability is secured through foreign capital-or
b) c.i.f. The required value of imported capital goods is less than 25% of the total value of plants and equipment (after tax), with a maximum value of 2 rupees.
Given the current difficult foreign exchange situation, this scheme [i.e. (iii) (b) will come into effect in April 1992. In other cases, importing capital goods requires a permit from the Industrial Support Office (SIA).
Industrial Development Bureau according to the availability of foreign exchange resources.
i. Outside of cities with a population of 1 million or more, there is no need to obtain industrial approval from the central government, except for industries subject to compulsory licenses. For cities with a population of over 1 million, non-polluting industries such as electronics, computer software and printing are located 25km outside. In the surrounding area, except for the previously designated industrial area. Flexible location policies will be adopted for such cities that require industrial revitalization (population over 1 million). Land use regulation and environmental law zoning will continue to regulate industrial areas. Appropriate incentives and investment design for infrastructure development are used to promote industrial decentralization, especially in rural and rear regions, and to reduce urban congestion.
ii. A system of controlled manufacturing programs that runs on a case-by-case basis does not apply to new projects. Existing projects with such programs will continue to be managed by them.
iii. Existing units will be provided with new broadband features that will allow you to create articles at no additional investment.
iv. The license exemption applies to all significant expansions of existing units.
v. The mandatory conversion clause no longer applies to term loans from financial institutions for new projects.
Procedural results
vi. All existing registration schemes (DE license registration, exempt industry registration DGTD registration) will be abolished
vii. From now on, entrepreneurs only need to submit a memorandum of information about new projects and major expansions.
viii. The list of Annex n and Annex m is communicated in the Indian Trade Classification (Harmony System).
Indian Industrial License:
Government attention is reserved only for industries that may affect public health, security, and national security. In India, industrial licenses are regulated by IDRA, 1951 Act and approved by the Secretary of Industry Support (SIA). License committee. The provisions of the law restrict licensed industrial operators from manufacturing new goods unless the license is renewed or a replacement license is obtained, including new goods.
The industries that require an industrial license to manufacture in India are:
An industrial business that attracts restrictions on industries and locations with mandatory licenses. The license terms also apply to extensions of existing industrial units.
Industries subject to compulsory licenses in India:
Companies planning to establish an industry in India that produces any of the following items must obtain a compulsory license.
Recent Developments in the Indian Economy:
The economic environment of Indian business is changing rapidly, mainly due to changes in government economic policy. At the time of independence, the Indian economy was basically agriculture and its industrial base was weak. To accelerate industrial growth and solve a variety of economic problems, the government has taken several steps, including state ownership, economic planning and a reduction in the role of the private sector for certain categories of industry. The government has adopted several controls on the functioning of private sector enterprises. All these efforts have resulted in different reactions. Gross national product, per capita income, capital goods sector and infrastructure development increased. However, industry growth was slow, inflation increased, and the government faced a serious foreign exchange crisis in the 1980s.
As a result, the Government of India introduced a fundamental change in economic policy in 1991. This policy in most cases abolished industrial licenses, allowed private participation in most industries, withdrew investment in many public sector industrial enterprises, and was fairly economical. The Foreign Investment Promotion Commission was established to channel foreign investment in India. Let's talk about development under three heads.
(A) Liberalization, (b) Privatization, and (c) Globalization.
(A) Liberalization:
Liberalization refers to the process of eliminating unnecessary controls and restrictions on the smooth functioning of a company. Included:
(I) Abolition of industrial license requirements in most industries.
(II) Freedom to determine the scale of business activities.
(III) Freedom of price fixing of goods and services.
(Iv) Simplify import / export procedures.
(V) Tax rate reduction. And
(VI) Simplified policy to attract foreign capital and technology to India.
Through this liberalization process, the Indian economy was opened and began to interact extensively with the world. This has made it easier for foreign companies to enter India. This has resulted in even more fierce competition and efficiency. Ultimately, liberalization includes high growth rates, easy availability of goods at competitive prices, healthy and prosperous stock markets, high foreign exchange reserves, low inflation rates, strong rupees, good labour relations, etc. Helped to achieve.
(B) Privatization:
Privatization refers to reducing the role of the public sector by involving the private sector in most activities. The policy reforms announced in 1991 literally stopped the expansion of the public sector, and the private sector recorded rapid growth during the post-liberalization period. The issues of privatization are:
(I) Reduce the number of industries reserved for the public sector from 17 to 8 (later reduced to 3) and introduce selective competition in the reserved areas.
(II) Stop investing in shares of selected public sector industrial enterprises to procure resources and encourage broader participation of the general public and workers in ownership of businesses.
(III) Improving business performance through the Ammo system, which gives management greater autonomy while taking responsibility for specific outcomes. In India, as a result of these steps, India's private sector business has expanded significantly in the post-liberalization phase. You can see the expansion as the total capital of the top 500 private companies has risen from RS. Rs from 1,39,806 rupees in 1992-93. 2,34,751 chlores in 1994-95 (68% increase in just two years).
In other words, it is a reduction in ownership of the owners of state-owned enterprises. Government-affiliated companies can be converted to private companies in two ways:
Form of privatization
Purpose of privatization
(C) Globalization:
Globalization means "integrating" a country's economy with the world economy. This means a free flow of goods and services, capital, technology and labour across borders. To achieve these globalization objectives, the government has adopted a variety of measures, including reducing tariffs, eliminating quantitative restrictions or quotas on imports and exports, promoting foreign investment, and encouraging foreign technology. These measures are expected to achieve higher growth rates, increased employment potential, and reduced regional inequality.
Outsourcing as a result of globalization:
The most important outcome of the globalization process is outsourcing. In the outsourcing model, a company in one country hires an expert from another country to do the job. This was previously done by domestic internal resources.
The best part of outsourcing is the ability to work at lower rates from great sources available from anywhere in the world. Services such as legal advice, marketing and technical support. As information technology has grown over the past few years, outsourcing of contract operations from one country to another has increased significantly. All economic activity has expanded globally as the means of communication have expanded its reach.
Various business process outsourcing companies or call centres have been developed in India that have voice-based business process models. Activities such as accounting and bookkeeping services, clinical advice, banking services and even education are outsourced from developed countries to India.
The most important advantage of outsourcing is that even large multinationals and SMEs have access to superior services at lower rates compared to their own standards. Skills set in India are considered to be the most dynamic and effective in the world. Indian professionals are the best in their work. Low wages and highly skilled professionals make India the most lucrative destination for global outsourcing in the later stages of reform.
Export / Import Policy:
An import / export policy or foreign national trading policy may be a set of guidelines and directions established by the DGFT on matters associated with the import / export of products in India.
Foreign trade:
India's policy is guided by imports and exports, known as the EXIM policy for short by the Government of India, and is regulated by the Foreign Trade Development and Regulation Act of 1992.
The DGFT (Directorate General of Foreign Trade) is the main governing body for matters related to the Exim policy. The main purpose of the Foreign Trade (Development and Regulation) Act is to provide development and regulation of foreign trade by promoting imports into India and increasing exports from India. The Foreign Trade Act has replaced the previous law known as the 1947 Import and Export (Control) Act.
EXIM policy:
India's EXIM policy includes various policy-related decisions made by the government in the area of foreign trade. That is, exports and imports from the country, especially related export promotion measures, policies and procedures. Trade policies are prepared and announced by the central government (Ministry of Commerce). India's import and export policy, also commonly known as foreign trade policy, aims to develop export potential, improve export performance, encourage foreign trade and improve the balance of payments.
History of India's EXIM policy:
In 1962, the Government of India appointed a special Exim Policy Committee to review the Government's previous import and export policies. The committee was later approved by the Government of India. V.P. Singh, then Minister of Commerce, announced the Exim policy on April 12, 1985. Initially, the EXIM policy was introduced for three years with the main purpose of boosting India's export business.
EXIM Policy Purpose: -
The government imports non-essential items EXIM policy. At the same time, we are doing our best to promote exports. Therefore, the Exim policy has two aspects. Import policies related to import regulation and control, and export policies related not only to export promotion but also to regulation. The main purpose of the government's EXIM policy is to maximize exports. Exports need to be promoted so that unregulated exportable items that are specifically needed in the country do not affect the domestic economy. Therefore, export control is exercised on a limited number of items that require supply positions to regulate exports for the greater benefit of the country. In other words, the main purpose of the Exim policy is:
1. Accelerate the economy from low-level economic activity to high-level economic activity by making the economy a vibrant, global-oriented economy, and derive maximum profit from the expansion of global market opportunities.
2. Stimulate sustainable economic growth by providing access to essential raw materials, intermediates, parts, consumables and capital goods needed to boost production.
3. Increase the strength and efficiency of Indian agriculture, industry and services techno-local, thereby increasing competitiveness.
4. Create new jobs.
5. Give opportunities and encourage the achievement of internationally recognized quality standards.
6. Providing high quality consumer products at reasonable prices.
Foreign direct investment (FDI) is when a company manages ownership of an entity in another country. With FDI, foreign companies are directly involved in their day-to-day operations in other countries. This means that they not only have money, but also knowledge, skills and technology.
FDI is typically done when an investor establishes a foreign business or acquires foreign business assets, including establishing ownership and managing equity in a foreign company.
Where is FDI made?
Foreign direct investment is usually made in an open economy with a skilled workforce and growth prospects. FDI not only brings money, but also skills, technology and knowledge.
Indian FDI
FDI is an important source of funding for India's economic development. Economic liberalization began in India in the wake of the 1991 crisis, and FDI has been steadily increasing since then. India is today part of the Top 100 Business Ease (EoDB) clubs and is ranked number one in the world in the Greenfield FDI rankings.
Route for India to get FDI
The sectors that fall into the "100% Auto Route" category are:
Agriculture and animal breeding, air transport services (irregular and other services in the civil aviation sector), airports (Greenfield + Brownfield), asset reconstruction companies, auto parts, automobiles, biotechnology (Greenfield), broadcast content services (Up-TV channel links and downlinks, broadcast transportation services, capital goods, cash and carry wholesale transactions (including procurement from MSE), chemicals, coal and lignite’s, construction development, hospital construction, credit information companies , Tax-free stores, E-Commercial activities, electronic systems, food processing, jewellery and jewellery, healthcare, industrial estates, IT and BPM, leather, manufacturing, metal and non-metal ore mining and exploration, other financial services, maintenance Service & Repair Organization based on Civil Aviation Services, Oil & Natural Gas, Pharmaceuticals, Plantation Sector, Ports & Shipping, Railway Infrastructure, Renewable Energy, Roads & Highways, Single Brand Retail Trading, Textiles & Garments, Thermal Power, Tourism & Hospitality, White Label ATM Operations.
Sectors that fall into the category of up to 100% automatic routes
The sectors that fall into the "Up to 100% Government Routes" category are:
FDI prohibited
There are several industries where FDI is strictly prohibited on any route. These industries
Influx of FDI
During the fiscal year ending March 2019, India received a record $ 64.37 billion in FDI inflows. FDI inflows were $ 45.14 billion in 2014-15 and $ 55.55 billion the following year.
Rules
Due to the global nature of many business transactions involving subsidiaries and affiliates around the world, the need to enact Regulations (EU) 2019/452 (“Rules”) is increasing. Control of foreign direct investment varies from country to country around the world, but prior to the enactment of this rule, it was a comprehensive foreign direct investment at the coalition level, unlike what was practiced in the coalition's major trading partners. There was no investment screening framework. The purpose of this regulation is not to reduce foreign direct investment (“FDI”), which is essential for the EU's continued economic growth, competition and innovation, but to increase confidence and intervene in the event of a threat to the EU. It is to guarantee that it is possible. Security and public order that may be part of such FDI.
Range
On October 11, 2020, this rule came into direct application in Malta, but the relevant local legislation is still in the pipeline. The scope of this rule is to establish a framework for screening FDI into the Union on the basis of security or public order and morals, and a mechanism for cooperation between Member States and between Member States and the European Commission (“EC”). is. The rule also allows the EC to publish its views on FDI.
FDI and foreign investors
The FDI states in its regulations that "as any type of investment by a foreign investor aimed at establishing or maintaining a lasting and direct connection between the foreign investor and the entrepreneur whose capital becomes available". Defined. Conducting economic activities in Member States, including the management of companies conducting economic activities or investments that enable effective participation in management. " Basically, more simply, FDI can take two different forms.
Creation of productive assets by foreigners [1], for example by the establishment of a new company or establishment. And
For example, the purchase of existing assets by foreigners through M & A or acquisition [2].
A foreign investor is defined in the Regulations as "a natural person in a third country, or a third country business intended to or has made a foreign direct investment". From a regulatory point of view, Member States may maintain, modify or adopt screening mechanisms that they consider to be compatible with their territory, on the basis of security or public order and morals, but the screening mechanisms are transparent and distinguish between third countries. Cannot be done.
Foreign Direct Investment Examination Office
Malta established a domestic foreign direct investment review office (“office”) earlier this year. The purpose of this office is to screen FDI, joint ventures with foreign components, and the transfer or control of shares of existing companies from third countries by the owner or ultimate beneficiary (“UBO”). is. [3]
Related activities and notifications
Notifications from third-country investors must be submitted to the office in the following cases:
Before submitting relevant documents such as memorandums and articles of incorporation and other required forms to the Malta Business Registry, you must complete the forms and submit them to the office. Information submitted through such notices includes, among other things, the ownership structure of foreign investors and the ownership structure of businesses for which FDI is planned or completed, FDI estimates, and foreign investor products, services, and businesses. Operation is included. Businesses for which FDI is planned or completed.
Annual report
In addition, the Regulation also requires Member States to submit to the EC an annual report covering the FDI and previous calendar year Member State screening mechanisms conducted in that Member State by 31 March each year. It is stipulated.
Importance of FDI
Foreign direct investment is important for developing and emerging market countries. Their company needs multinational funding and expertise to expand its international sales. Their countries need private investment in infrastructure, energy and water to increase employment and wages. A UN report warned that climate change would have the greatest impact on them. 26
In 2017, developing countries received $ 67.1 billion, or 47% of the world's total FDI. Investment increased by 9% in the developing world of Asia to receive $ 476 billion7.
Developed countries such as the European Union and the United States also need FDI. Their company does it for a variety of reasons. Most of the investment in these countries comes from mergers and acquisitions between mature companies. The investments of these global companies were to restructure or refocus their core businesses.
Advantages
2. This gives well-managed companies a competitive advantage, regardless of race, colour or belief. Reduce the effects of politics, chronism and bribery. As a result, the smartest money rewards the best businesses in the world. Their goods and services are on the market faster than they would be without unlimited FDI.
3. As FDI diversifies its holdings outside a particular country, industry or political system, individual investors may improve portfolio efficiency (return per unit of risk). In general, a broader investment base reduces volatility across the portfolio and provides stronger long-term returns.
4. The recipient company receives "best practice" management, accounting, or legal guidance from investors. You can incorporate the latest technology, operational practices and financing tools. By adopting these practices, we will improve the lifestyle of our employees. This will improve the standard of living of more people in the recipient country. FDI rewards the best companies in any country. It reduces the influence of local governments on them.
5. Beneficiary countries are seeing an improvement in living standards. The recipient will benefit from the investment and will be able to pay higher taxes. Unfortunately, some countries offset this benefit by offering tax incentives to attract FD.
6. Another advantage of FDI is that it offsets the volatility caused by "hot money". It is then that short-term lenders and currency traders create an asset bubble. They invest a lot of money at once and then sell their investment as fast.
7. It can create a booming cycle that ruins the economy and ends the political system. Foreign direct investment takes time to establish and leaves a more lasting footprint in the country.
Disadvantages
Example
Trade agreements are the best method for countries to encourage more FDI. A good example of this is the North Atlantic Free Trade Agreement, the world's largest free trade agreement. In 2015, FDI between the United States, Canada and Mexico increased to $ 731 billion. That was just one of the benefits of NAFTA.
Four agencies are tracking FDI statistics.
2. The Organization for Economic Co-operation and Development publishes quarterly FDI statistics for member countries. Report on both inflows and outflows. The only stats not obtained are those between the emerging markets themselves.
3. The IMF published its first global survey of foreign direct investment positions in 2010. This annual global survey is available as an online database. It covers investment positions in 72 countries. The IMF was supported by the European Central Bank, Eurostat, the Organization for Economic Co-operation and Development, and the United Nations Conference on Trade and Development.
4. The Bureau of Economic Analysis reports on the FDI activities of foreign-affiliated companies in the United States. It provides financial and operational data for these affiliates. Shows which US companies were acquired or created by foreign companies. It also describes how much US companies have invested abroad.
Conclusion
Foreign direct investment occurs when a company or individual invests and owns at least 10% of the foreign company. 2 When an American tech company opens a data centre in India, FDI takes place. BEA tracks US FDI.
Many developing countries need FDI to promote economic growth and restoration.
FDI has benefited the country through:
References
2) https://www.financialexpress.com/what-is/fiscal-policy-meaning/1771755/.
3) https://www.tutor2u.net/business/reference/fiscal-monetary-policy.
4) https://economictimes.indiatimes.com/definition/index-for-industrial-production.
5) https://www.india-briefing.com/news/industrial-licensing-norms-policy-5473.html/.
6) https://en.wikipedia.org/wiki/Industrial_licensing_in_India.
10) https://www.investindia.gov.in/exim.