FOREIGN DIRECT INVESTMENT (FDI): DETERMINANTS AND GROWTH ...
AN OVERVIEW ON FOREIGN DIRECT INVESTMENT (FDI)
Transcript of AN OVERVIEW ON FOREIGN DIRECT INVESTMENT (FDI)
AN OVERVIEW ON FOREIGN DIRECT INVESTMENT (FDI)
Sunil Reddy Sama [email protected]
Date: 16.09.2017
By
SBS Hyderabad
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History of FDI in India
Introduction
Advantages
Disadvantages
Types of FDI
Who can invest
Where to invest
Prohibited Sectors
Objectives
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History of FDI in India
• What is FDI
• How FDI came to India
• Do we require FDI
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Augmenting of domestic capital
Productivity
Employment
Technical Know-how
Infrastructure
Special Tax Privileges
Economic Growth
Advantages of FDI
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Disappearance of cottage and small scale industries
Contribution to the pollution
Exchange crisis
Cultural erosion
Political corruption
Currency convertibility
Inflation in the Economy
Disadvantages of FDI
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Regulated by Foreign Exchange Management(Transfer or Issue of security by a person resident outside India) Regulations,2000
Notification No.FEMA 20/2000-RB dated 3rd May,2000
Latest FDI Policy announced by Government is effective from 12th May,2015
Relevant Regulations and Notifications
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Types…
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Horizontal FDI
Vertical FDI
Platform FDI
Types of FDI
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Incorporating a wholly owned subsidiary or company anywhere
Acquiring shares in an associated enterprise
Merger or an acquisition of an unrelated enterprise
Participating in an equity joint venture with another investor or
enterprise
Methods of FDI
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FDI Route
Automatic Route
Government Route
FDI Routes
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A Non-resident entity
Overseas Corporate Bodies (OCB’s) – w.e.f. 16th September,2003
A SEBI registered Foreign Venture Capital Investor (FVCI)
Qualified Foreign Investors (QFI’s) investment in equity shares
Citizen or entity of Bangladesh - only government route
Citizen or entity of Pakistan - only government route other than defence,space,atomic energy and sectors prohibited
NRI of Nepal and Bhutan - on repatriation basis
Who can invest in India
Type of holding Individual holding Aggregate holding
Limits FII/FPI- 10% of the capital of the company
FII/FPI/QFI – 24% of the capital of the company
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FDI in an Indian Company
Micro and Small Enterprises
An Industrial Undertaking - 24% of it’s paid-up share capital with prior approval of Foreign Investment Promotion Board (FIPB)* of Government of India
* As per Finance Budget-2016,FIPB
Entities into which FDI can be made(1/3)
Size of the enterprise Goods Services
Micro Enterprises Up to Rs.25 lakh Up to Rs.10 lakh
Small Enterprises Rs.25 lakh to Rs.5 crore Rs.10 lakh to Rs.2 crore
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FDI in Partnership Firm/Proprietary Concern
NRI or PIO resident outside India on non-repatriation basis Inward Remittance or out of NRE/FCNR(B)/NRO account
Not eligible for repatriation outside India
Investment restricted in some sectors
Investments with repatriation option
Investments by non-residents other than NRIs/PIO
Entities into which FDI can be made(2/3)
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FDI in Limited Liability Partnership (LLP) - From 20th May,2011 FDI is allowed in LLP registered and formed under the LLP Act,2008
FDI in Venture Capital Fund (VCF)
FDI in Trusts - other than VCF not permitted
FDI in other entities - not permitted
Entities into which FDI can be made(3/3)
Nature of VCF VCF as Trust VCF as Company
Person resident outside India (NR Entity/Individual including an NRI)
Can invest in such domestic VCF subject to approval of FIPB
Can invest in such domestic VCF through automatic route of FDI scheme
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100 % investment allowed
Automatic Route
NBFC’s engaged in 18 activities listed
*Other Financial Services-RBI,SEBI,IRDAI,PFRDAI,NHB or any other as specified by Government of India in
this regard.
FDI in Other Financial Services*
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Instruments
Capital
Equity (Fully paid/ Partly
paid) CCPS ADR/GDR
Debt
CCD FCCB
Types of Instruments
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Real Estate and construction of farm houses
Lottery
Gambling and Betting including casinos etc.
Nidhi Company
Chit Funds
Activities / Sectors not opened to private sector investment including Atomic Energy and Railway Transport (other than Mass Rapid Transport Systems)
Trading in Transferable Development Rights (TDR’s)
FDI-Prohibited Sectors(1/2)
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Manufacturing of cigars, cheroots, cigarillos and tobacco products
Agriculture (excluding Floriculture, Horticulture, Development of seeds, Animal Husbandry, Pisciculture and cultivation of vegetables, mushrooms etc.,
Plantations (other than Tea, coffee, rubber, cardamom, palm oil tree and olive oil tree plantations)
Foreign Technology collaboration in any form including licensing for franchise, trademark, brand name, management contract is also completely prohibited for Lottery Business, Gambling and Betting Activities
FDI-Prohibited Sectors(2/2)
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S. Sunil Reddy PH: +91 9010612252 [email protected]
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