Indian Economy·Prelims Strategy

FDI Policy and Trends — Prelims Strategy

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Version 1Updated 5 Mar 2026

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Prelims Strategy

Focus on memorizing specific sectoral caps (defense 74%, insurance 74%, banking 74%) and recent policy changes with exact years. Create a timeline of major policy milestones: 1991 liberalization, FEMA 1999, Press Note 3 of 2020, defense sector liberalization 2020.

Practice elimination techniques by understanding the logic behind sectoral restrictions - strategic sectors have caps while manufacturing typically allows 100% FDI. Pay special attention to recent amendments and their rationale, as UPSC frequently tests current developments.

Memorize institutional roles: DPIIT (policy formulation), RBI (implementation), FIFP (government route approvals). Common traps include confusing FDI with FPI, mixing up sectoral caps, and incorrect policy dates.

Use mnemonics for sectoral caps and create comparison charts for automatic vs government route procedures.