Economic Modernization and Finance Panelist Hrishikesh D. Vinod [email protected].
FDI, Vinod
Transcript of FDI, Vinod
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FDI
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FDI
Attracting long-termforeign capital to
supplement domesticinvestment efforts,
particularly in infrastructurend export competitive sectors
Developing attractive
Configurations of
locational advantages
at global level
Promoting technology
and other linkages to
enhance domestic industry
competitiveness
Creating skilled employmentOpportunities and Importof world Class managerial
practices
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PROMISES
Investments
Quality of employment
Generation of employment
Better value to end customers
Franchising opportunities to localentrepreneurs
Cost benefit Implementation of IT
Growth of infrastructure
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Does Foreign Direct Investment Help
Emerging Economies? In developing nations
Equity investments as a percentage of gross
national income have been flat in recent years .
Debt flows, however, have picked up since 2002
after plunging to zero in the previous two years.
FDI as a share of GDP has grown rapidly,
becoming the largest source of capital moving fromdevelo ed nations to develo in ones
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Is FDI Always Good?Is FDI Always Good?
Offers attractive benefits
FDI may flow to riskier destinations.
During crises capital flight cant be ruled
out.
Too much FDI may not be beneficial.
Possibility that the most solid firms will
be financed through FDI.
Complements the host countrys
institutions and human capital
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DRAWBACKS
Small kirana merchants (CPM)
Cut throat competition
Increase in real estate prices Unfair trade practices may cause
Predatory Pricing.
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Investing in India Entry Routes
Automatic RoutePrior Permission
(FIPB)
Investing in India
General ruleNo prior permission
requiredInform Reserve Bankwithin 30 days ofinflow/issue of share
By exceptionPrior Government
Approval needed.Decision generallyWithin 4-6 weeks
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SECTORAL ANALYSIS
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Drugs &Pharma
Hotels &Tourism
Foreign Investment Policy
DefenceIndustry
TelecomServices
Townships
FDI up to 100 % permitted on automaticroute for non-licensable and non-recombinant DNA technology category
FDI up to 100% permitted on automaticroute
FDI up to 26% permitted subject tolicensing
FDI up to 74% in ISPs with gatewaysand limit raised from 49% to 74% inradio paging and end-to-end bandwidth
FDI up to 100% permitted in integrated
townships and settlements
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NBFCs
Banking
Foreign Investment Policy (contd.)
Insurance
Broadcasting
MRTS
FDI up to 100 % permitted onautomatic route
FDI up to 49 % permitted
FDI up to 26% permitted on theautomatic route subject to licensing
FDI up to 49% permitted in uplinkinghub and up to 20% in DTH
FDI up to 100% permitted, including
associated real estate development
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India The New Trillion DollarEconomy and Opportunities
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India: FDI Outlook
Third most attractive investment destination
Among the top 3 investment hot spots for
the next 4 years Most Preferred Off shoring destination
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FDI Outflow
India's FDI outflow to exceed inflow in2007-08
In 2007-08 overseas investment fromIndia will be around $15 billion
The number of outbound M & A deals hasincreased sharply over the past six yearsfrom about 37 in 2001 to more than 170 in2006.
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Sectors prohibited for FDI
Arms & Ammunition
Railways
NuclearPower
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Why is FDI attracted inIndias Retail Sector
The Indian retail market -- one of India's fastestgrowing industries -- is expected to grow fromUS$ 350 billion to US$ 600 billion by 2010.
According to Euromonitor International, theIndian Retail market will grow in value terms bya total of 39.6 per cent between 2006 and 2011,averaging growth of almost 7 per cent a year.
Modern retail formats have grown by 25-30 percent in India in the last year and could be worth
US$ 175-200 billion by 2016.
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RETAIL sector
The Government allows 100 per cent FDI in cash andcarry through the automatic route
51 per cent in single brand
Besides, the franchise route is available for big operators
Now, the Government also proposes further liberalisationin the retail sector allowing 51 per cent FDI in consumerelectronics, sports goods, stationery and buildingequipment
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More than 5 million outlets Per capita space (97% < 500 sq.ft.) Only 3 % organised
97% unorganisedwhy? No supply chain management No Third Party Logistics Restrictions to FDI funding
ORGANISED
UNORGANISED
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International retailers in India:
Strategies Franchise
International company gives name and technology tolocal partner. Gets royalty in return
In case master franchise is appointed for region or
country, he has right to appoint local franchisees Nike, Pizza Hut, Tommy Hilfiger, Marks and Spencer,
Mango
Manufacturing
Company sets up Indian arm for production Bata India. It also has right to retail in India
I t ti l t il i I di
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International retailers in India:
Strategies
Distribution International company sets up local distribution office
Supply products to Indian retailers to sell
Also set up franchised outlets for brand Swarovski, Hugo Boss
Wholesale trading
100% FDI permitted
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78 80 85 90 91 92 93 94 95 96 97 98 99 00 01 02
75
150
225
300
375
FDI in retailallowed
US$
bn
Total wholesale and retailtrade
Retail sales grew @ 19.6% CAGR for the next 4 yearsafter the introduction of FDI in 1992 .
Years
DOUBLE
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Thank you