TEAM MEMBERS ROLL NUMBERS

ABHIJEET DHOLE 9003

ARUNA JAIN 9025

PRANALI CHANDARANA 9118

PRASAD SHETTY 9120

RUCHIKA RUIA 9187

 Introduction to FDI
• FDI occurs when an investor based in one country (the home country)
acquires an asset in another country (the host country) with the
intent to manage the asset
• Foreign direct investment (FDI) is a measure of foreign ownership of
productive assets, such as factories, mines and land. Increasing
foreign investment can be used as one measure of growing economic
globalization
• As such, it may take many forms, such as a direct acquisition of a
foreign firm, construction of a facility, or investment in a joint
venture or strategic alliance with a local firm with attendant input of
technology, licensing of intellectual property
CLASSIFICATION/
TYPES OF FDI
TYPES
 METHODS OF FDI
• The foreign direct investor may acquire 10% or more of the voting
power of an enterprise in an economy through any of the following
methods:
• By incorporating a wholly owned subsidiary or company

• By acquiring shares in an associated enterprise

• Through a merger or an acquisition of an unrelated enterprise

• Participating in an equity joint venture with another investor or

enterprise
 ROUTES FOR FDI
• 1st route:Automatic Route

• No prior Government approval is required if the investment to be made

falls within the sectoral caps specified for the listed activities.

• Only filings have to be made by the Indian company with the concerned
regional office of the Reserve Bank of India (“RBI”) within 30 days of
receipt of remittance and within 30 days of issuance of shares.
2nd Route: FIPB Route

• Investment proposals falling outside the automatic route would require prior
Government approval. Foreign Investment requiring Government approvals
are considered and approved by the Foreign Investment Promotion Board
(“FIPB”).

3rd Route: CCFI Route

• Investment proposals falling outside the automatic route and having a project
cost of Rs. 6,000 million or more would require prior approval of Cabinet
Committee of Foreign Investment (“CCFI”). Decision of CCFI usually conveyed
in 8-10 weeks. Thereafter, filings have to be made by the Indian company
with the RBI
 ENTRY OPTIONS
• A foreign company planning to set up business operations in India has
the following options :
• AS AN INCORPORATED ENTITY
• By incorporating a company under the Companies Act,1956 through
• Joint Ventures; or
• Wholly Owned Subsidiaries
• Foreign equity in such Indian companies can be up to 100%
depending on the requirements of the investor, subject to any equity
caps prescribed in respect of the area of activities under the Foreign
Direct Investment (FDI) policy
AS AN UNINCORPORATED ENTITY

• As a foreign Company through

• Liaison Office/Representative Office
• Project Office
• Branch Office
Private Sector Banking 100 % Drugs & Pharmaceuticals 100 %

Non-Banking Financial 26 % Road and highways, Ports 100%

Companies and harbours

Insurance 74 % Hotel & Tourism 74%-100%

Telecommunications 100 % Mining 100 %

Services

Petroleum Refining- 100 % Advertising 100 %

Private Sector

Housing and Real Estate 100 % Films 100 %

Trading 51% -100% Airports 74 %

Power 100 % Pollution Control & Mng. 100 %

Coal & Lignite 51%-100% Mass Rapid Transport 100
Systems

Air transport Services 100% Special Economic Zones 100

(no foreign airlines -NRIs, 49%
others
 100%
Automatic FDI FIPB
•Route Route
•Greenfield
Airports • Cigarettes

• Construction • Courier Services

• Gems and • Tea Sector
jewellery
• Trading items
• Power from small scale
• Drugs & sector
Biochemicals
No Entry!!!
 Benefits offered by India

• Quality of its human capital

• The size of its market

• The rate of growth of its market

• Political stability
 Advantages Of FDI In India
• FDI encourages domestic investment by providing:
– New markets
– Demand for inputs
– New technology

• Increased competition makes markets more efficient

• Investments in new sectors simulates the growth of new
industry and new products
• Employment generation
 Disadvantages of FDI in India…
• FDI crowds out domestic investment by:
– Being a monopolistic competitor
– Raises demand for money
– Raises interest rates
• Foreign firms have more:
– Advertising power
– Ability to dominate the market
• Financial inflows raise the exchange rates, making exports
unattractive
• The technology may be too capital-intensive
• Pollution-intensive technologies may be exported from
countries where they are banned
• Political influence to prevent the imposition of rules
regarding the environment
Phases of Indian Economy
 Pre 1991
Command and Control Economy
• Self-Reliance was the buzz word.
• Prohibited the use of foreign brands, but promoted hybrid
domestic brands.
• Retarded domestic technical capability.
• Loss of export opportunities.
• Reduced costs of technology imports.
• Allocation of resources by the Government (budgetary
grants)
• Government took active part in setting priorities for the
economy.
• Nationalization of Banks.
• Limited scope for private participation.
1991 ONWARDS
 1991 ONWARDS
• Inflation had roared to an annual rate of
17 percent.

• Fiscal deficit was very high.

• India was close to defaulting on loans.

 Finance Minister Manmohan Singh said:

“After four decades of planning for

industrialization, we have now reached a
stage where we should welcome, rather fear,
foreign investment. Direct foreign investment
would provide access to capital, technology
and market.”
SECTORAL DISTRIBUTION OF
FDI APPROVALS
FDI INFLOW IN INDIA
INVESTING COUNTRIES
SCENARIO IN ASIAN
ECONOMY
POST 2000
 FDI In India- 2000-09
• In the period 1991 to 2009, 82.7% of the FDI inflows have
been in the last 10 years (2000-2009).

• In the last 5 years, the top ten investing nations in India

constituted 81% of the total FDI.

• Services, computers (software and hardware) and

telecommunications together account for 41% of FDI since
the year 2000.
 Indian Economy
POST 2000
• Improved global sentiment and strong industrial
output numbers in India are increasingly attracting
foreign investors’ role in the country

• India has been ranked at the third place in global

foreign direct investments this year, following the
economic meltdown
World Investment Prospects Survey 2009-2011
FDI Equity Investments in
India
Amount Country 2006-07 2007-08 2008-09 2009-10 Cumulative %age to total
Rupees in (April- (April- (April- (April- Inflows Inflows
crores March) March) March) Nov. ‘09) (April ‘00 to (in terms of
(US$ in Nov. ‘09) rupees)
million)
Ranks
1. MAURITIUS 28,759 44,483 50,794 40,421 201,694 44 %
(6,363) (11,096) (11,208) (8,377) (45,241)
2. SINGAPOR 2,662 12,319 15,727 7,579 41,431 9%
E (578) (3,073) (3,454) (1,576) (9,387)
3. U.S.A. 3,861 4,377 8,002 7,235 35,194 8%
(856) (1,089) (1,802) (1,510) (7,845)
4. U.K. 8,389 4,690 3,840 1,775 24,679 5%
(1,878) (1,176) (864) (370) (5,596)
5. NETHERLA 2,905 2,780 3,922 3,328 19,180 4%
NDS (644) (695) (883) (692) (4,282)
6. JAPAN 382 3,336 1,889 4,979 16,204 4%
(85) (815) (405) (1,034) (3,565)
7. CYPRUS 266 3,385 5,983 6,021 16,070 3%
(58) (834) (1,287) (1,255) (3,527)
8. GERMANY 540 2,075 2,750 2,309 11,798 3%
(120) (514) (629) (481) (2,654)
9. U.A.E. 1,174 1,039 1,133 2,678 6,684 1%
(260) (258) (257) (556) (1,476)
10. FRANCE 528 583 2,098 1,141 6,622 1%
(117) (145) (467) (238) (1,466)
Total FDI 70,630 98,664 122,919 93,354 486,480 -
(15,726) (24,579) (27,329) (19,379) (109,219)
Inflows*
Sectors attracting highest
FDI Equity Inflows (In Rs
crore) 
 Cumulative
2008-09 % of total
SECTOR 2005-06 2006-07 2007-08 (Apr.2000- Jan
(April-Jan '09) inflows*
2009)

Services
2399 21047 26589 23045 78742
(Financial & 22%
(543) (4664) (6615) (5061) (181189)
non-financial)

Computer
6172 11786 5623 6944 39111
Software & 11%
(1375) (2614) (1410) (1599) (8876)
Hardware

Telecommunic 2776 2155 5103 10797 27544

8%
ations (624) (478) (1261) (2374) (6216)

667 4424 6989 6224 19606

Construction 6%
(151) (985) (1743) (1483) (4646)

630 1254 2697 1792 11648

Automobile 4%
(143) (276) (675) (441) (2678)

Housing and 171 2121 8749 10632 21794

6%
Real estate (38) (467) (2179) (2408) (5119)

386 713 3875 4079 13709

Power 4%
(87) (157) (967) (924) (3130)

6540 7866 4686 3608 10956

Metallurgical 3%
(147) (173) (1177) (850) (2613)

Chemicals
1731 930 920 2561 9442
(Other than 2%
(390) (205) (229) (579) (2244)
fertilizers)

Petroleum & 64 401 5729 1196 8509

3%
Natural Gas (14) (89) (1427) (263) (2043)
 Impact of FDI on banking,
insurance
• Owing to at least a decade of reforms, the banking sector in India has
seen remarkable improvement in financial health and in providing jobs.

• The insurance sector has also been fast developing with substantial
revenue growth in the non-life insurance market.

• The investment pattern with regard to foreign direct investment (FDI) and
inflows from non-resident Indians remains resilient and FDI inflows into
the country grew by an impressive 145% between fiscal 2006 and 2007
and by a respectable 46.6% between fiscal 2007 and 2008
 FDI norm may be relaxed
• As part of its efforts to liberalise the foreign direct investment
(FDI) policy, the government has mooted a proposal under
which foreign investments of over Rs 1,200 crore would need
the clearance of the Cabinet Committee on Economic Affairs
(CCEA). Currently, FDI proposals of over Rs 600 crore require
CCEA clearance.

• The government also proposes to exempt further FIPB

approval for the proposals that have not made initial foreign
investment even after being cleared earlier.
LATEST TRENDS IN
FDI POLICY
LATEST TRENDS IN FDI POLICY
• FDI inflows up 13% in December at $1.5 b
cumulative basis between April-November 09
Services sector (financial and non-financial services):$3.4 billion
Telecom sector:$2.2 billion
Housing and real estate :$2.2 billion
Power and automobile sectors:$1.2 billion, and $934 million, respectively
Computer software and hardware :$575 million
Metallurgical industries :$309 million
Petroleum and natural gas :$219 million
 LATEST TRENDS IN FDI
POLICY
• Govt may not Consider FDI in Multi-Brand
Retail

• Govt Approves Rs 4,551-cr FDI Proposals

Federal Agency for State Property Management of the Russian
Federation to buy 20 per cent stake in telecom service provider Sistema-
Shyam for Rs 3,051 crore.
PepsiCo’s proposal for infusion of Rs 928-crore equity into its Indian
subsidiary has been referred to the Cabinet Committee on Economic
Affairs (CCEA)
 LATEST TRENDS IN FDI
POLICY
• Govt clears Rs 2,500 cr FDI plan from Mauritius-
based Indium

• Consolidation of FDI policy

• Relaxation on 3 yrs lock in period in Realty sector

 LATEST TRENDS IN FDI
POLICY
• FDI contribution to GDP increases from
0.75% in 2006 to 2.49% in 2009

• Govt has approved 190 New FDI Proposals

this Year
During the year 2009, (up to November), 238 proposals were received
Out of the 238 proposals, the government has approved 190, while 13
were rejected and 6 were withdrawn or closed
THANK YOU