Topic: Foreign Direct

Investment Regulatory
Restrictiveness Index

STUDENT NAME: Abhishek Kumar Singh

DATE: 26.11.2020
CLASS: Sem 3
SECTION: A1
SUBJECT FACULTY: Asst. Prof. Navya Jain
SUBJECT CODE: BBA LLB 213
 INTRODUCTION
• The FDI Regulatory Restrictiveness Index (FDI Index) measures statutory restrictions on foreign
direct investment in 22 economic sectors across 69 countries, including all OECD and G20 countries. The FDI
Index is also available for many countries for the following years: 1997, 2003, 2006, 2010-2019.

• The FDI Index is not a full measure of a country’s investment climate. A range of other factors come into play,
including how FDI rules are implemented. Entry barriers can also arise for other reasons, including state
ownership in key sectors. A country’s ability to attract FDI will be affected by factors such as the size of its
market, the extent of its integration with neighbours and even geography.

• Nonetheless, FDI rules are a critical determinant of a country’s attractiveness to foreign investors.
Furthermore, unlike geography, FDI rules are something over which governments have control. FDI
restrictions tend to arise mostly in primary sectors such as mining, fishing and agriculture, but also in media
and transport.
• FDI restrictiveness is an OECD index gauging the restrictiveness of a country’s foreign direct investment (FDI)
rules by looking at four main types of restrictions: foreign equity restrictions; discriminatory screening or
approval mechanisms; restrictions on key foreign personnel and operational restrictions. Implementation
issues are not addressed and factors such as the degree of transparency or discretion in granting approvals are
not taken into account.

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 MEASURING FDI RESTRICTIVENESS

The FDI Index gauges the restrictiveness of a country’s FDI rules by looking
at the four main types of restrictions on FDI:
 Foreign equity limitations
 Screening or approval mechanisms
 Restrictions on the employment of foreigners as key personnel
 Operational restrictions,
e.g. restrictions on branching and on capital repatriation or on land
ownership

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 FDI Index: What does it measure?
Statutory restrictions: All discriminatory measures affecting foreign investors,
covering both market access and national treatment:
• Equity restrictions by sector or overall, for acquisitions or greenfield projects
• Screening above a threshold or foreign equity share
• Restrictions on key personnel: managers, directors, experts
• Operational restrictions: land ownership, profit/capital repatriation, branching, reciprocity,
discriminatory minimum capital requirements etc.

What is not covered?

• Degree of implementation/circumvention
• State monopoly or participation in a sector
• Special treatment accorded to a group of investors, whether by activity (e.g. exporting) or
country of origin
• Restrictions based purely on national security or prudential measures

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 22 sectors covered
• Agriculture • Distribution –Wholesale
• Forestry • Distribution -Retail
• Fishery • Transport (surface, water, air)
• Mining & Quarrying (incl. oil extract.) • Hotels & restaurants
• Manufacturing -Food & Other • Media (broadcasting and other media)
• Manufacturing -Oil Ref. & Chemicals • Communication (fixed & mobile telecoms)
• Manufacturing -Metals, Machinery and Other • Financial services -Banking
Minerals
• Financial services -Insurance
• Manufacturing -Electric, Electronics and Other
Instruments • Financial services -Other financial services

• Manufacturing -Transport Equipment • Business Services (accounting, legal, architecture,

engineering)
• Electricity (generation, distribution)
• Real estate
• Construction

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• In the above data it is assumed that in year 2019-20 India will make
28%
• As in 3 months India made $16.3, so if a simple calculation is done
then at the end India will make 16.3 x 4 = $65.2

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India 9th largest recipient of FDI in 2019, will continue to
attract investments: UN

• India received USD 51 billion in foreign investment in 2019 and was the world's
9th largest recipient of foreign direct investments (FDI) in 2019, according to a
report by the UN's trade body.

The UN Conference on Trade and Development (UNCTAD) said in a report on

Monday that a lower but positive economic growth in India in the post-COVID19
pandemic period and India's large market will continue to attract market-seeking
investments to the country.

The World Investment Report  with 51 billion dollars of inflows during the year, an
increase from the 42 billion dollars of FDI received in 2018, when India ranked 12
among the top 20 host economies in the world.

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 Top 10 Countries That Attracted the
Most Foreign Direct Investment in 2019
• 10- Germany, $40 billion
• 9- Canada, $47 billion
• 8- India, $49 billion
• 7- France, $52 billion
• 6- Hong Kong, $55 billion
• 5- United Kingdom, $61 billion
• 4- Brazil, $75 billion
• 3- Singapore, $110 billion
• 2- China, $140 billion
• 1- United States, $251 billion
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