FOREIGN DIRECT

INVESTMENT

Foreign direct investment (FDI) is a type of investment that involves the injection of foreign funds into an enterprise that operates in a different country of origin from the investor.

6/19/2013 FDI GROUP NO.-1 2

OUTWARD

INWARD

BY

MOTIVE

GREENFEILD

INVESTMENT

HORIZONTAL

FDI

BY

TARGET

BY

DIRECTION

TYPES OF FDI

EFFICIENCY

SEEKING

MARKET

SEEKING

RESOURCE

SEEKING

VERTICAL

FDI

India is the 2nd most important FDI destination (after China) for transnational corporations during 2010–2012 according to a survey conducted by UNCTAD

FDI in India in 2010 was $44.8 billion, and in 2011 there was an increase of 25% to $50.8 billion.

The sectors which attracted higher inflows were telecommunication, construction activities and information technology.

Mauritius, Singapore, US and UK were among the leading sources of FDI for India.

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• India: Fourth largest economy in terms of Purchasing Power Parity.

• Tenth most industrialized economy.

• FII inflows for the period 2003 –2008 was more than US $35 billion, a good sign for the economy.

• India is still quite behind China with China majorly accepting more of Green Field Investments.

FDI GROUP NO.-1 4 6/19/2013

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Atomic Energy

Housing and Real Estate business

Trading in Transferable Development Rights

Manufacture of cigars , cheroots, cigarillos and

cigarettes , of tobacco or of tobacco substitutes.

Agricultural

Lottery Business

Gambling & Betting

Business of Chit Fund

Nidhi Company

Economic Growth

Trade

Employment and skill

levels

Technology diffusion and knowledge

transfer

Linkages and spillover to

domestic firms

6/19/2013 FDI GROUP NO.-1 6

1. Economic growth- A remarkable inflow of FDI in various

industrial units boosts the economic life of country and has a

remarkable effect on the economic growth.

2. Trade- FDI opens a wide spectrum of opportunities in the

trading of goods and services both in terms of import and

export production with the manufacture of superior quality

products.

3. Employment and skill levels- FDI brings in a number of

employment opportunities by aiding the setting up of

industrial units.

4. Technology diffusion and knowledge transfer- FDI helps

in the outsourcing of knowledge especially in the Information

Technology sector in India. The foreign countries bring in

technological advancements in the foreign country.

5. Linkages and spillover to domestic firms- Firms enter into

joint ventures with various domestic firms with both the

companies getting the benefits. 6/19/2013 FDI GROUP NO.-1 7

Inflation increases

Positive pressure on prices

FDI has an adverse effect on competition.

FDI will be make the host country lose control

over domestic policy.

Certain foreign policies are adopted that are

not appreciated by the workers of the recipient

country.

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FDI GROUP NO.-1 9

AUTOMATIC ROUTE PRIOR PERMISSION

INVESTING IN INDIA

•Inform RBI within 30 days of

inflow/issue of shares

• Pricing: FEMA Regulations

•Unlisted – CCI

•Listed – SEBI

• Cap of Rs.600Crore

By exception

•Approval of Foreign

Investment Promotion

Board needed.

•Decision generally

within 4-6 weeks

6/19/2013

4,029 6,130 5,035 4,322 6,051

8,961

22,826

34,843

41,873 37,745

34,847

46,553

10,257

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

Amount of FDI Inflows %agegrowth over

2 per. Mov. Avg. (Amount ofFDI Inflows %age growthover)

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Source: dipp.nic.in/English/Publications/

Figures in $millions

6/19/2013 FDI GROUP NO.-1 11

0.8 0.91

2.14 2.06

3.55

2.62

1.43

2.5

0

0.5

1

1.5

2

2.5

3

3.5

4

2004 2005 2006 2007 2008 2009 2010 2011

FDI as % of GDP

• It was highest in year 2008 i.e. 3.55 % .

• It decreased to 1.43 % in year 2010.

• In year 2011, it increased to 2.5 % .

Source: dipp.nic.in/English/Publications/

19%

12%

7%

6% 5% 5%

4% 4%

37%

SERVICES SECTOR

CONSTRUCTIONDEVELOPMENTTELECOMMUNICATIONS

COMPUTER SOFTWARE& HARDWAREDRUGS &PHARMACEUTICALSCHEMICALS (OTHERTHAN FERTILIZERS)POWER

AUTOMOBILE INDUSTRY

http://dipp.nic.in/English/Publications/SIA_Newsletter/2012/feb2012/monthSector.ht

6/19/2013 FDI GROUP NO.-1 12

100%=176760.71$mn

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For Single Brand Retail Trading (SBRT) sector –

only 51% FDI permitted and no FDI in Multi

Brand – subject to approvals and conditions such

as:

FDI in (MBRT) is prohibited.

Products to be under the same brand in one or

more countries if are sold outside India.

”Single Brand‟ products should be branded

during manufacturing.

The foreign investor should be the owner of the

brand.

FDI in SBRT is permitted to 100% and up to 51%

in MBRT with Government approval.

Fresh agricultural produce, including fruits,

vegetables, flowers, grains, pulses, fresh poultry,

fishery and meat products, may be unbranded.

FDI in MBRT may be permitted up

to51% and 100% in SBRT.

Minimum amount to be brought in, as FDI, by

the foreign investor, would be$100 million.

At least 50% of total FDI brought in shall be

invested in “back-end infrastructure”.

In respect of proposals involving FDI beyond

51%, 30% sourcing would mandatorily have to be

done from SMEs.

In case of “Single Brand” The foreign investor

should be the owner of the brand

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EXISTING POLICY

PRESENT POLICY

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Job opportunities in areas like marketing, agro-processing,

packaging, transportation, etc. will be created.

Farmers will get a good price for their crops and their

exploitation will stop.

Infrastructure facilities, refrigeration technology,

transportation, etc. will be renovated.

Foreign companies will create an improved and efficient

supply-chain in the Indian market.

6/19/2013 FDI GROUP NO.-1 16

• Contract farming-imposed on farmers with strict

adherence to quality & schedule.

• Will affect 50 million merchants in India

• Market places are situated too far which increases

traveling expenses.

• FDI may lead to rise of inflation.

• Multiple Indian companies are well entrenched into the

Indian market with their organized multi brand retail

offerings who may face tough challenges.

• FDI in retail nowhere claims that the consumer will spend

less from his/her pocket. The prices will largely remain the

same.

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32%

19% 6%

5%

5%

4%

1%

1%

28%

Mumbai

New Delhi

Bangalore

Chennai

Ahmedabad

Hyderabad

Kolkata

Chandigarh

others

6/19/2013 FDI GROUP NO.-1 18

Source.isca.in/IJMS/Archive/v1i2/5.ISCA-RJMgtS-2012-020.pdf

37.4%

10.2% 9.6%

7.2%

6.1%

4.4%

25.2% MAURITIUS

SINGAPORE

UNITED KINGDOM

JAPAN

U.S.A

NETHERLANDS

OTHERS

100%=176760.69

6/19/2013 FDI GROUP NO.-1 19

Source.isca.in/IJMS/Archive/v1i2/5.ISCA-RJMgtS-2012-020.pdf

• The government should provide additional incentives to foreign

investors to invest in states where the level of FDI inflows is quite low.

• Ensure equitable distribution of inflows among states and give

freedom to states to attract inflows at their own level.

• Attract specific types of FDI that will be able to generate spillovers

effects in the overall economy like investing in human capital, R&D

activities, environmental issues, productive capacity, sectors with high

income elasticity of demand.

• The policy makers should focus more on attracting diverse types of

FDI and should design policies where foreign investment can be utilized

as means of enhancing domestic production, savings, and exports and

also as medium of technological learning and diffusion and also in

providing access to the external market.

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• The increased flow of FDI in a country has given a major boost to the

country's economy.

• FDI has provided better access to technologies for the local economy.

• FDI has lead to indirect productivity gains through spillovers.

• MNC’s have increased the degree of competition in host-country markets

which will force existing inefficient firms to invest more in physical or

human capital.

• Service sector has been the most sought after sector in India for FDI.

• India, with its skilled labor and manpower has the potential to overtake

China as the most preferred destination for Foreign Investments.

6/19/2013 FDI GROUP NO.-1 21

• http://rbidocs.rbi.org.in/rdocs/Content/PDFs/FDIST_110412.pdf Accessed

on 24 Oct

• http://www.indiainbusiness.nic.in/investment/for_dir_investment.htm

Accessed on 26 Oct

• http://planningcommission.gov.in/ Accessed on 6 Nov

• http://finmin.nic.in/capital_market/capital_market.asp Accessed on 6 Nov

• http://www.randstad.com/the-world-of-work/employment-rises-in-indias-

service-sector?c=4374 Accessed on 11 Nov

• http://business.mapsofindia.com/india-gdp/sectorwise/services-sector

growth-rate.html Accessed on 8 Nov

6/19/2013 FDI GROUP NO.-1 22

PRESENTED BY:-

• UTKARSH GARG (121)

• SANGAM LALSIVARAJU (138)

• SUGANDHA ARORA (140)

• DHRUV MAHAJAN (141)

• MANASVI BANSAL (143)

PRESENTED TO:-

PROF. K. M. KUMAR

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