← All questionsGS3 · 2016 · Indian Economy ·FDI: Need, MoU Gap and Remedies
QUESTION 2
GS3
12.5 marks

Justify the need for FDI for the development of the Indian economy. Why is there a gap between MOUs signed and actual FDIs? Suggest remedial steps to be taken for increasing actual FDIs in India.

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9 min
200 words
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What the examiner wants

Justify FDI's role, explain why signed MoUs rarely turn into investment, and suggest fixes.

Justify... Why... SuggestAnswer exactly what the question asks.

Demand-wise check

  1. 1Need: savings-investment gap, technology, jobs, exports, current account financing≈45 words
  2. 2MoU-actual gap: land acquisition, environment and other clearances, policy uncertainty and retrospective tax, slow dispute resolution, infrastructure gaps, inflated summit MoUs≈45 words
  3. 3Remedies: single-window clearance, land banks, stable tax policy, faster contract enforcement, PLI, bilateral investment treaties≈45 words

Open in about 30 words and close in about 30.

Answer plan

Need for FDIReasons for gap with casesRemediesConclusion

Where marks usually go

  • Answering only one of the three parts
  • No example of a stalled MoU

Draw this

  • Funnel: MoU announced → clearances → land → actual investment

Value addition

  • CasePOSCO's 2005 Odisha MoU of about Rs 52,000 crore (then India's largest FDI proposal) was abandoned in 2017 over land and clearances.POSCO Odisha project
  • LawTaxation Laws (Amendment) Act 2021 withdrew the retrospective tax demands arising from the 2012 amendment (Vodafone, Cairn).Parliament, 2021
  • DataFDI inflows hit a record USD 84.8 billion in 2021-22.DPIIT

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