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•Foreign investment comprising FDI and portfolio investment represents non-debt liabilitieswhile loans – external assistance, external commercial borrowings (ECBs) and tradecredit – and banking capital including deposits are debt liabilities. In India, FDI ispreferred over portfolio growth as the FDI growth tends to be more stable than portfolioand other forms of capital growth. Rupee denominating debt is preferred over foreigncurrency debt, and medium- and long-term debt is preferred over short-term debt.Since 2000, significant changes have been made in the FDI policy regime by thegovernment to ensure that India becomes an increasingly attractive and investor-friendlydestination.The current phase of FDI policy is characterized by negative listing, which permits FDIfreely in all sectors except a few sectors indicated through a negative list. Under thecurrent policy regime, there are three broad entry options for FDIs. In a few sectors,FDI is not permitted (negative list); in another small category of sectors, foreigninvestment is permitted only till a specified level of foreign equity participation; and thethird category, comprising all the other sectors, where foreign investment up to 100 percent of equity participation is allowed.The third category has two subsets – one consisting of sectors where automatic approvalis granted for FDI (often foreign equity participation less than 100 per cent) and theother consisting of sectors where prior approval from the Foreign Investment ApprovalBoard (FIAB) is required. FDI policy changes increasingly reflect the requirements ofindustry and are based on stakeholders’ consultation. Upfront listing of negative sectorshas helped focus on reform areas, which are reflected in buoyant FDI inflows.The cumulative amount of FDI inflows from April 2000 to December 2011 stood atUS$240.06 billion, out of which FDI equity inflows amounted to US$157.97 billion asshown in Table 2-3. FDI inflows declined globally in 2009 and 2010. While India wasable to insulate itself from the decline in global inflows in 2009-10, FDI flows moderatedin 2010-11.Table 2-3: FDI inflows into IndiaFinancial Year As per international Growth FDI equity inflows Growthpractices (US$ billion)* (US$ billion)# (per cent) (per cent)2003-04 4.32 -14 2.19 -192004-05 6.05 +40 3.22 +472005-06 8.96 +48 5.54 +722006-07 22.83 +146 12.49 +1252007-08 34.84 +53 24.58 +972008-09 (P) 41.87 +20 27.33 +112009-10 (P) 37.75 -10 25.83 -52010-11 (P) 32.90 -13 19.43 -252011-12 (April-Dec.) 35.35 24.19April 2000-Dec. 2011 240.06 157.97Notes: * As per Reserve Bank of India estimates;#As per Department of Industrial Policy & Promotion estimates.(Source: Office of the Economic Adviser, DIPP)58