FDI and Technology Transfer

The Centre is analysing foreign direct investment (FDI) inflows to introduce specific provisions in the new industrial policy and the FDI Policy for ensuring such funds result in enhanced technology transfer, local value-addition and innovation.

According to the August 2017 discussion paper by the Department of Industrial Policy and Promotion, while the FDI policy had largely aimed at attracting investment, benefits of retaining investments and accessing technology have not been harnessed to the extent possible.

FDI policy requires a review to ensure that it facilitates greater technology transfer, leverages strategic linkages and innovation.

In the current FDI policy, the explicit condition specifying that value addition facilities are set up within India along with transfer of technology is limited to mining and mineral separation of titanium bearing minerals and ores where 100% FDI is allowed through the government-approval route.

There have been concerns regarding an overweening emphasis on the quantum of FDI and not as much focus on the quality of the funds.

A recent study initiated by the Institute for Studies in Industrial Development found that it was acquisitions which provided the sustenance for the rise in FDI flows during 2016-17, raising doubts about capacity addition.

India received record FDI inflows of $60.1 billion during 2016-17.

Referring to the Centre’s ‘Make In India’ sectoral achievement reports, the study said they were lacking close scrutiny of the reported (FDI) inflows or the nature of foreign investments — including whether the inflows were for greenfield projects, mergers and acquisitions or for other purposes.