Foreign Direct Investment

Foreign Direct Investment (FDI) is normally defined as a form of investment made in

order to gain unwavering and long-lasting interest in enterprises that are operated outside
of the economy of the shareholder/ depositor. In FDI, there is a parent enterprise and a
foreign associate, which unites to form a
Multinational Corporation (MNC). In
order to be deemed as a FDI, the
investment must give the parent enterprise
power and control over its foreign affiliate.

Foreign Direct Investment in India

In India, Foreign Direct Investment Policy allows for investment only in case of the
following form of investments:

• Through financial alliance

• Through joint schemes and technical alliance
• Through capital markets, via Euro issues
• Through private placements or preferential allotments

Foreign Direct Investment in India is not allowed under the following industrial
sectors:

• Arms and ammunition

• Atomic Energy
• Coal and lignite
• Rail Transport
• Mining of metals like iron, manganese, chrome, gypsum, sulfur, gold, diamonds,
copper, zinc

FDI In India Across Different Sectors

Hotel & Tourism

Hotels include restaurants, beach resorts and business ventures providing accommodation
and food facilities to tourist. Tourism would include travel agencies, tour operators,
transport facilities, leisure, entertainment, amusement, sports and health units.

100 per cent FDI is permitted for this sector through the automatic route.
Trading
For trading companies 100 per cent FDI is allowed for

• Exports
• Bulk Imports
• Cash and Carry wholesale trading.

Power
For business activities in power sector like electricity generation, transmission and
distribution other than atomic plants the FDI allowed is up to 100 per cent.

Drugs & Pharmaceuticals

For the production of drugs and pharmaceutical a FDI of 100 per cent is allowed, subject
to the fact that the venture does not attract compulsory licensing, does not involve use of
recombinant DNA technology.

Private Banking
FDI of 49 per cent is allowed in the Banking sector through the automatic route provided
the investment adheres to guidelines issued by RBI.

Insurance Sector
For the Insurance sector FDI allowed is 26 per cent through the automatic route on
condition of getting license from Insurance Regulatory and Development Authority
(IRDA).

Telecommunication

• For basic, cellular, value added services and mobile personal communications by
satellite, FDI is 49 per cent.
• For ISPs with gateways, radio-paging and end to end bandwidth, FDI is allowed
up to 74 per cent. But any FDI above 49 per cent would require government
approval.

Business Processing Outsourcing

FDI of 100 per cent is permitted provided such investments satisfy certain prerequisites.

NRI's And OCB's

They can have direct investment in industry, trade and infrastructure

Up to 100 per cent equity is allowed in the following sectors

• 34 High Priority Industry Groups

• Export Trading Companies
• Hotels and Tourism-related Projects
• Hospitals, Diagnostic Centers
 • Shipping
• Deep Sea Fishing
• Oil Exploration
• Power
• Housing and Real Estate Development
• Highways, Bridges and Ports
• Sick Industrial Units
• Industries Requiring Compulsory Licensing
• Industries Reserved for Small Scale Sector

E – BUSSINESS
E-business (electronic business), derived from such terms as "e-mail" and "e-commerce,"
is the conduct of business on the Internet, not only buying and selling but also servicing
customers and collaborating with business partners. One of the first to use the term was
IBM, when, in October, 1997, it launched a thematic campaign built around the term.
Today, major corporations are rethinking their businesses in terms of the Internet and its
new culture and capabilities. Companies are using the Web to buy parts and supplies
from other companies, to collaborate on sales promotions, and to do joint research.
Exploiting the convenience, availability, and world-wide reach of the Internet, many
companies, such as Amazon.com, the book sellers, have already discovered how to use
the Internet successfully.

Increasingly, much direct selling (or e-tailing) is taking place on the Internet of computer-
related equipment and software. One of the first to report sales in the millions of dollars
directly from the Web was Dell Computer. Travel bookings directly or indirectly as a
result of Web research are becoming significant. Custom-orderable golf clubs and similar
specialties are considered good prospects for the immediate future.

With the security built into today's browsers and with digital certificates now available
for individuals and companies from Verisign, a certificate issuer, much of the early
concern about the security of business transaction on the Web has abated and e-business
by whatever name is accelerating.

IBM considers the development of intranets and extranets to be part of e-business. e-

business can be said to include e-service, the provision of services and tasks over the
Internet by application service provider
balance of payments (BOP)
Definition

Set of accounts that record a country's international transactions, and which (because
double entry bookkeeping is used) always balance out with no surplus or deficit shown
on the overall basis. A surplus or deficit, however, can be shown in any of its three
component accounts: (1) Current account, covers export and import of goods and
services, (2) Capital account, covers investment inflows and outflows, and (3) Gold
account, covers gold inflows and outflows. BOP accounting serves to highlight a
country's competitive strengths and weaknesses, and helps in achieving balanced
economic-growth.