Tamil Nadu receives investment proposals
Context:
Tamil Nadu secures an impressive investment commitment exceeding ₹6.64 lakh crore through 631 Memoranda of Understanding (MoUs) at the inaugural Global Investors Meet (GIM 2024), with potential job creation for nearly 27 lakh individuals across various sectors.
Relevance:
GS-03 (Growth and Development)
Key Highlights:
- Key Investors and Proposals: Major investment proposals include Tata Power (₹70,800 crore), Adani Group (₹42,768 crore), Sembcorp (₹36,238 crore), Leap Green Energy Pvt. Ltd. (₹17,400 crore), and Chennai Petroleum Corporation Limited (₹17,000 crore).
- Government Assurance and Support: Chief Minister M.K. Stalin assures single-window clearances for projects and announces the formation of a special committee, led by Industries Minister T.R.B. Rajaa, to monitor and facilitate the progress of these investments.
- Sectoral Breakdown of Investments: The proposed investments span across sectors such as advanced electronics manufacturing, green energy, non-leather footwear, automobiles, e-vehicles, defence and aerospace, data centres, global capability centres, information technology, and digital services.
- Regional Development and Policy Unveiling: The Chief Minister emphasizes that the distributed investments will ensure balanced regional development. He releases the Tamil Nadu Public-Private Partnership Policy and inaugurates TANFUND, aiming to bridge the gap between start-ups and potential investment partners.
- Global Outreach for Investments: Industries Minister T.R.B. Rajaa reveals plans for the Chief Minister to lead delegations to Davos and Spain to attract foreign investments, highlighting the State’s attractiveness as an investment destination on the global stage.
Foreign Direct Investment (FDI): Catalyst for Economic Growth
- Foreign Direct Investment (FDI) entails an investment made by a firm or individual in one country into business interests situated in another. This form of investment enables the investor to acquire a direct business interest in a foreign country, offering various avenues for investment, such as establishing subsidiaries, acquiring or merging with existing foreign companies, or engaging in joint ventures with foreign counterparts.
- Beyond being a pivotal driver of economic growth globally, FDI has emerged as a significant non-debt financial resource fostering the economic development of India. Unlike Foreign Portfolio Investment (FPI), where foreign entities mainly buy stocks and bonds without gaining control over the business, FDI allows for a more direct influence.
Components of FDI:
- Equity Capital: This involves the foreign direct investor’s acquisition of shares in an enterprise located in a country other than their own.
- Reinvested Earnings: This component comprises the direct investor’s portion of earnings retained by affiliates, not distributed as dividends or remitted to the investor.
- Intra-Company Loans: These encompass the borrowing and lending of funds between direct investors (or enterprises) and their affiliate enterprises, either on a short- or long-term basis.
Routes of FDI:
- Automatic Route: Under this route, foreign entities do not need prior approval from the government or the Reserve Bank of India (RBI). In India, FDI up to 100% is permitted in non-critical sectors through the automatic route, exempt from security clearance by the Ministry of Home Affairs (MHA). However, investments in sensitive sectors such as defense, media, telecommunication, satellites, private security agencies, civil aviation, and mining, as well as any investment from Pakistan and Bangladesh, require prior government approval or security clearance from MHA.
- Government Route: In this route, foreign entities must seek approval from the government. The Foreign Investment Facilitation Portal (FIFP), administered by the Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry, streamlines the single-window clearance process for applications submitted through the approval route.
