The adoption of the market economy heralded a new era in which States came to occupy a strategic position in India’s market led economy. The Centre has even gone to the extent of encouraging states to negotiate loans / FDI with overseas banks / institutions directly since the 1990s. With the Centre’s grants in aid no longer being seen as the only source for financing their expenditure, States compete to attract FDI. And positively so, the Centre is not being seen as an obstacle but as a facilitator. Still, approval for FDIs is centralized with the DPIIT being the nodal Ministry at the centre for FDI approvals. In many cases, the DPIIT has to transfer the proposal for FDI licensing to the other central Ministries in whose Rules of Business the subject matter of proposal may fall. In proposals where land border issues or security issues arise, the concurrence of other nodal ministries may also be sought.
As per the above passage, which of the following assumption(s) can be made?
- Opening up of financial opportunities for states has improved fiscal federalism in India.
- Opportunities for states to attract the FDI in India are limited.
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