Foreign Direct Investment
In India
Rajesh Sharma
n content
Introduction
Evolution of FDI in India
Types of FDI
Passage to India
Distribution of FDI
FDI Sector & Country wise
FDI in News
Promotion & facilitation
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Introduction
Foreign direct investment is that investment, which is
made
to serve the business interests of the investor in a
company,
which is in a different country from the investor's
country of origin.
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Evolution of FDI in
India
onward
s
More sectors opened; equity caps raised in many other sectors,
2005
condition relaxed FEMA enacted
2000 Upto 100% under automatic route in all sectors except some
negative list
1997 Upto 74/51/50% under automatic route in 112 sectors, in some
cases 100%
1990 Upto 51% allowed under automatic route in 35 priority sector
Pre
1990 Allowed selectively upto 40%
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FDI Policy Liberalization
Types of FDI
2 types of FDI:
-GREENFIELD INVESTMENT
-MERGERS AND ACQUISITIONS
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GREENFIELD INVESTMENT
direct investment in new facilities or the expansion of
existing facilities
Increase competition in the market.
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MERGER AND ACQUISITIONS
Transfer of existing assets from local firms to foreign
firms.
Assets and operation of firms from different countries
are combined to establish a new legal entity.
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Passage To India
Automatic Route:
No prior government or regulatory approval required for
FDI within specified sectoral caps
Approval Route:
FDI upon permission from the FIPB
Acquisition of shares (since 1996)
RBI’s non-resident Indian(NRI) schemes
External commercial borrowings
Prohibited sectors:
FDI not allowed in Gambling, Lottery Business, Atomic
Energy and Retail Trading (Except Single Brand Product
retailing), Railway, Betting
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FDI for industry sector … fully permitted
Manufacturing
100% FDI permitted in all activities under automatic
route except:
Cigar and cigarettes of tobacco - FIPB
Products reserved for Small Scale Sector
FDI less than 24% under automatic route
FDI beyond 24% - FIPB subject to export obligation
Defence products
FDI upto 26% - FIPB subject to licensing of Arms and
Ammunition
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FDI for industry sector … fully
permitted
Mining
Coal – FDI upto 100% as per Coal Mines
(Nationalization) Act 1977
Diamond, Gold, Silver , Minerals – upto 100%
under automatic route as MMRD Act
Atomic minerals – upto 74% in JointVenture with
PSUs – FIPB
Electricity
FDI upto 100% under automatic route in
Generation, Transmission, Distribution and Power
Trading as per Electricity Act 2003
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FDI for service sector…. Largely
permitted
Upto 26%
FM Broadcasting (20%) - FIPB
Uplinking News and CATV Channel - FIPB
Print Media – News Papers & Periodicals -
FIPB
Insurance
Upto 49%
Broadcasting - Cable Network, DTH,
Setting up hardware - FIPB
Stock Exchanges - FIPB
Air Transport Services
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FDI for service sector….largely
permitted
Upto 74%
Telecommunication FIPB (Beyond 49%)
Private sector banks Automatic
Upto 100%
Development of existing airports - FIPB (Beyond
74%)
Publishing scientific magazines - FIPB
Courier services - FIPB
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FDI for agriculture sector….
Floriculture, Horticulture, Development of seeds,
Animal husbandry, Pisciculture, Cultivation of
vegetables, Mushrooms under controlled condition
allowed 100% under automatic route
Tea plantation – 100% with FIPB and divestment of
26% in 5 years
Other activities not allowed.
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FDI Inflow in India(Year Wise )
Source: Economic Survey 2007-
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08
Share of Top Investing Countries FDI Inflows
(April 2000 - Nov 08)
Source: India 2008
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Sectors Attracting Highest FDI Flows
Source: Department of Industrial Policy & Promotion
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From (April 2000 to Nov.2009)
Region – wise Break – up of FDI
received
(April 2000 to Nov.2009)
Regional office of States covered Share In FDI inflows
RBI (%)
Mumbai Maharashtra, Dadra & 25.14
Nagar Haveli, Daman
& Diu
New Delhi Delhi, Parts of UP & 22.68
Haryana
Banglore Karnataka 7.03
Chennai Tamil Nadu & 6.69
Puducherry
Hyderabad Andhra Pradesh 4.12
Ahmadabad Gujarat 2.84
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FDI in News
India will continue to be an attractive destination for FDI
- Anand Sharma ( 19 Nov, 2009. ET)
$50 billion FDI planned annually by 2012 and $100 billion
by 2017
(19 Nov. 2009.Business
Standard)
In first half of 2009-2010 FDI inflows were $15 billion
(The Hindu,
19.Nov. 2009 )
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Investment
Opportunities
Development and management of infrastructure
Food processing, including logistic and support
services, development of cold chain
Manufacturing – relocation into India
R&D – leveraging on abundant skilled manpower
IT & ITES, Software as well as hardware
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Investment Promotion & Facilitation
Promotion
Holding ‘Destination India’ and ‘Invest India’ events
abroad. Events were held at France, Japan, UK,
Finland, Taiwan, Italy, USA, and Davos
Facilitation
Country Focus Desks
Foreign Investment Implementation Authority
Policy review comprising of review of route, Equity
caps and procedures.
Publications, Chat room and Website
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References
Pratiyogita Darpan
Economic Survey
India 2008
Essentials of Business Environment by K. Aswathappa
Business Environment by Francis Cherunilam
Web Portal
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Thank
You
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