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All FIIs are required to obtain an initial registration with Securities &Exchange
Board of India (SEBI).For granting registration SEBI takes into account track record
of FII.
All registered FIIs can invest in equity market in shares ,debentures, mutual funds.
One major market regulations pertaining FIIs is ONE FII cannot hold more than 10
% of total issued capital.SEBI also regulates that one company should not contribute
more than 30 % share the portfolio of FII.
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However in July 1991 there were fundamental changes in policy. The important
reforms were:permitting large firms including foreign firms' substantial expansion and
diversification;
allowing foreign firms upto a maximum of 51 per cent in high priority industries;
Foreign investments allowed in 22 consumer goods industries subject to the
conditions of dividend being ploughed back;
de-reserving ready-made garments manufacturing and
opening the industry to large-scale undertakings including foreign companies,
subject to the export obligation of 50% and investment limit of Rs. 30 million were
other significant policy changes relating to FDI flow.
Realizing the importance of large investments special incentives have been offered
for attracting FDI in these sectors in infrastructure industries like, power generation,
telecommunications, petroleum exploration, petroleum refining, transportation
(roads, railways, ports, shipping and air services),.
Adnatages of FDI
FDI is usually preferred over other forms of external finance because it is non-debt creating;
non-volatile,and
its returns depend on the performance of the projects financed by the
investors.C:\Users\J S Cheema\Pictures\FDI-logo21-300x300.png
FDI facilitatesinternational trade by promoting transfer of knowledge,
skills,
technology.
In a world of cut throat competition and rapid technological change,FDI's catalytic &
complimentary role can be very valuable.
India is also being seen as the global destination for R&D, engineering design and
prototype development and a manufacturing hub for high technology products.
Adequate natural resources and raw materials- Iron ore, Coal, bauxite, Fruits and
Vegetables.
A middle class of 250 million persons growing by 20 million annually - major
consumer of consumption goods, white goods and other durables.
Judicial System- Established rule of law and a vibrant three tiered democracy
Foreign Technology TransferForeign technology is encouraged by the Government both through FDI and through
foreign technology collaboration agreements.
Approvals are not required in respect to all those foreign technology agreements
which involve:
Electricity Distribution
Mass Rapid Transport System
Roads & Highways
Toll Roads
Vehicular Bridges
Ports & Harbours
Hotel & Tourism
Townships, Housing, Built-up Infrastructure and Construction Development Project
Greenfield Airports
Gujarat, Andhra Pradesh, West Bengal and Uttar Pradesh (between $3.6 and $4.6
billion each). Madhya Pradesh and Kerala come next, with $2.4billion and $1.4
billion respectively. Investment in Punjab, Haryana, Himachal Pradesh and Bihar
was tiny, while eleven states received no foreign investment at all.
Disadvantage of FDIPromotion remains controversial and depends on the motive for investment.
If the motive is to capture domestic market (tariff-jumping type of investment) it
may not contribute to export growth.
It puts an impact on local entrepreneur growth.
Special Economic Zones (SEZ's)An SEZ is an export oriented duty free enclave, which is deemed to be outside the
customs territory of India.
Twenty two operational SEZ's in India and over 200 SEZ's are in various stages of
approval and development.
Tax deduction of 100% for 10 years for SEZ developer.
Exemption from dividend distribution tax for SEZ developer.
Exemption of Sales Tax on purchases from Domestic Tariff Area for both developer
and a SEZ unit.
Exemption from Service Tax for both developer and a SEZ unit.
15 year corporate tax exemption on export profits to a SEZ unit.
No minimum export obligation.
A 100% permitted under the automatic route for SEZ development.
Branches of foreign companies in SEZ's are eligible to undertake manufacturing
activities.
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Nanotechnology
100% FDI permitted without prior approval.
Manufacturing
India is seen as the global destination for R&D, engineering design and prototype
development and a manufacturing hub for high technology products.
expansion in core sectors in India such as Steel
Chemicals and petrochemicals
Consumer durables
IT hardware and telecom
Transportation
Tourism-
India has fast emerged as one of the most enticing destinations for the global leisure
traveler.
100% FDI is also allowed in hotels, which includes restraints, beach resorts and other
tourist complexes providing accommodation and/or catering and food facilities to
tourists.
The tourism sector in India is expected to grow at 8% per annum, between 2007 and
2016.
As travelers surge into India, the demand for rooms, across segments, has
skyrocketed.
Media/Broadcasting
Food Proces
Sources & ReferenceDepartment of Industrial Policy and Promotion (Government of India)
www.google.com