Why is News? 

Maharashtra and Karnataka accounted for 51 per cent of the foreign direct investment (FDI) inflows into the country during the FY25, according to the latest data of the Department for Promotion of Industry and Internal Trade (DPIIT). 

What is FDI? 

• FDI means investment from a foreign company or individual into another country’s business. 
• It involves buying stakes, setting up subsidiaries or branches, or forming joint ventures. 
• It is different from FPI (Foreign Portfolio Investment), which only deals with buying shares or bonds.

Types of FDI 

• Horizontal FDI: Same business is set up abroad (e.g., McDonald's opening in France). 
• Vertical FDI: Invests in supply chain companies abroad (e.g., BMW investing in parts supplier). 
• Conglomerate FDI:  Invests in unrelated business sectors (e.g., Apple investing in fashion).

Methods of FDI 

• Greenfield: Building a new business from scratch in another country. 
• Brownfield: Buying or merging with an existing foreign business. 

Importance of FDI 

• Brings money, technology, jobs, and better management. 
• Helps build infrastructure like roads, factories, and power plants. 
• Improves exports and tax revenues. 
• Encourages economic growth and development. 

FDI in India

• FDI is allowed through two routes: 
  • Automatic Route (no approval needed) 
  • Government Route (approval needed) 
• Since 2014, India has received $667.4 billion in FDI. 
• Top investing countries: Mauritius, Singapore, USA, Netherlands, Japan. 
• Top sectors: Services, Software & Hardware, Trading, Telecom, Automobile.