Presentation on FDI in INDIA

Presented By: Neha Malhotra Mandeep Kaur

Introduction to Topic:
FDI is also known as Direct Business Investment. According to IMF FDI is manual on Balance of Payments is an investment involving a long term relationship and reflecting a lasting interest and control of residual entity in one economy in an enterprise resident in an economy other than that of the direct investors. Such investment involve both initial transactions between the two entities and all subsequent between them and among foreign affiliates.

Features of FDI
Investment made by a foreign company in a home country. The foreign co. may invest either by opening its branch or by having a subsidiary in the home country. Subsidiary can be wholly owned subsidiary or joint venture or may acquire stake in business. Profit is the prime motive. Investor retain control over investment and management of firm concerned. On the winding up of firm, the assets may he repatriated to the country of origin

Categories of FDI
There are three main categories of FDI: Equity capital Reinvested earnings Other capitals

Types of FDI
TYPES of FDI
Other location advantages

Market Seeking
Efficiency seeking

Foreign Capital in India

In the earlier phase of planning foreign capital was looked upon as a means to supplement domestic investment. Many concessions and incentives were given to foreign investors. Later on, however the emphasis shifted to encouraging technological collaboration between Indian entrepreneur and foreign entrepreneur. In the more recent times efforts are on to invite free flow of foreign capital. It would be instructive in the background to examine the governments policies towards foreign capital.

Govt. policies towards foreign capital

Foreign capital once admitted will be treated at par with indigenous capital. Facilities for remittance of profit abroad will continue. As a rule, the major interest in ownership and effective control of an undertaking should be in Indian hands. If an enterprise is acquired compensation will be paid on a fair and equitable basis. Government would not object to foreign capital having control of a concern for a limited period and each individual case will be dealt with on its merits.

Three distinct phases of foreign capital

First phase lasted till 1965and was characterised by a liberal attitude towards foreign capital. Second phase begin with the mid 1960s the liberal attitude of state yielded place to strict controls and broad policy was to restrict the area of operation of foreign capital Third phase begin with the adoption of economic reforms programme since July, 1991 has adopted a more liberal attitude toward foreign capital and has aimed at attracting a free flow of FDI.

Policy changes 1991-2005

The various changes in the policy can be broadly classified into four categories: Choice of Product Choice of Market Choice of Ownership Structure Simplification of Procedure