FDI & FII

BY

AMIT AMBAVADEKAR SANKET BHAMBAL SASHANK CHOUGHULE GAURAV DUKARE SHAHIR JAGDALE KAVITA JAVANJAL PRAJAKTA MEDHEKAR TRUPTI KHOT MONAL DESAI APEKSHA DEVKAR VRUSHALI BHOJANE MEGHANA SUDHAKARAM

4 10 20 31 38 42 55 48 24 27 12 56

INDIAN ECONOMY
Tenth largest Economy in the world GDP growth - 9.5% 2010 - 6.5% 2011 - 2012 grow by 6.9% (world bank)

Capital: .Cash or goods used to generate income either by investing in a business or a different income property.

TYPES OF FOREIGN CAPITAL

FDI

FII

Foreign Direct Investment

What is FDI ? Foreign direct investment ( FDI ) is direct investment by a company in production located in another country either by buying a company in the country or by expanding operations of an existing business in the country. Why FDI ? To take advantage of cheaper wages in the country. Special investment privileges such as tax exemptions offered by the country. To gain tariff-free access to the markets of the country or the region.

Foreign Direct Investment, or FDI, is a type of investment that involves the injection of foreign funds into an enterprise that operates in a different country of origin from the investor. It usually involves participation in management, joint venture, transfer of technology and expertise. India before FDI (1948-1990) India opens gate : Liberalization Privatization Globalization India (1991 onwards)

Benefits of FDI
Economic Growth

Linkages and spillover to domestic firms

Technology diffusion and knowledge transfer

Employment and skill levels

Trade

FDI Path To Enter In An Economy

Investing in India

Automatic route

Prior Permission route

No prior permission required

Only information to the RBI within 30 days of inflow/ Issue of shares

Prior Government Approval needed Decision generally Within 4-6 weeks

FDI limits Illustrative list

Automatic Route (Illustrative)
Prior Approval (Illustrative) Negative List (Illustrative)

NBFC (minimum capitalization norms) IT / ITes Financial services(a)

Existing Airports

100%

Asset Reconstruction Companies 49% Titanium Minerals 100%

Agriculture (b) Atomic energy Retail trading (except single brand up to 51%)

Telecom Sector (74% cap)(a)

Insurance (49 % cap)(a) Real Estate(a)

Broadcasting (a)
Cigars & Cigarettes 100% Courier Print Media
(a)

100% 26%

Lottery, betting and gambling

Chit fund, Nidhi company Trading in Transferable Development Rights

Special Economic Zones

Infrastructure Shipping Manufacturing sector

Single brand retailing 51%

Hotels and tourism

WHY FDI NEEDED ?

For better quality, productivity. Better infrastructure in retail as well as those for food & perishable products. Economic growth. Better employment and skill levels. To share good foreign relation. To bringing new technology in country. Fill gaps in companys product lines in a global industry Reduce costs- R&D, production and distribution Foreign funds guide the investment flow Speed-up and initiate the domestic fund flow

FDI in India
A recent UNCTAD survey projected India as the second most important FDI destination (after China) for transnational corporations during 20102012. The sectors which attracted higher inflows were services, telecommunication, construction activities and computer software and hardware.

Mauritius, Singapore, the US and the UK were among the leading sources of FDI.

FDI in India
In 2008-09, FDI stood at $31.3 billion. FDI in 2009-10 was $25.8 billion

In 2010-11, FDI into India declined to $19.43 billion, a significant decrease from both 2008 and 2009
Foreign direct investment (FDI) in India may cross $35 billion in 2011-2012 as against $19.4 billion in the last financial year

TOP INVESTING COUNTRIES

2% 5% 7% 4% 4% 3%

2%

Mauritius Singapore USA UK

9%

Netherlands Japan

11% 53%

Cyprus
Germany UAE France

Financial Sector
(Financial and non-financial) FDI equity inflows: Rs 123,706 crore ($27,668 million)

Computer Sector
2. Computer (software & hardware) FDI equity inflows: Rs 48,135 crore ($10,821 million) This industry fetched 3636 numbers of foreign collaborations out of which, 125 are technical and 3511 are financial in nature. Also it received US$ 8.9 billion which constitute 11.43% of the total FDI inflows during the period during 2005-2007. Among Indian locations Mumbai received 22.44% of investment followed by Bangalore (10.8%), and Chennai (9.90%).

Telecommunication Sector
Telecommunications (radio paging, cellular mobile, basic telephone services) FDI equity inflows: Rs 48,313 crore ($10,611 million) Telecommunication sector ranks 2nd in the list of sectors in terms of cumulative FDI.
Out of cumulative FDI inflows , this Sector received an inflow of US$ 8.2 billion, which is 8.4% of the total FDI inflows during last few years. New Delhi attracts highest percentage (32.58%) of FDI inflows after 2005.

HOUSING INDUSTRY
Housing and real estate
FDI equity inflows: Rs 43,288 crore ($9,655 million)

Construction Sector
Construction (including roads & highways) FDI equity inflows: Rs 42,160 crore ($9,491 million) The amount of FDI till Dec. 2008 is US$ 4.9 billion which is 6.15% of the total inflows received . In India Delhi, Mumbai, and Hyderabad receives maximum amount (viz. US$ 1245.61, 1000.5, and 943.22 billion) of investment. Out of the total technology transfers ,9 technical and 223 financial collaborations have been approved till December 2008

Power Sector
FDI equity inflows: Rs 27,848 crore ($6,156 million)

Auto Mobile
Automobile industry FDI equity inflows: Rs 28,037 crore ($6,199 million) FDI inflows during Jan 2005 to Dec. 2009 is US$ 3.2 billion which is 4.09% of the total inflows received. It ranks 5th in the list of sectors in terms of cumulative FDI approved from August 1991 to Dec 2008. In India Mumbai, New Delhi and Ahmedabad received major chunks of investment i.e. 36.98%, 26.63% and 9.47%).

Metal Sector
Metallurgical Industries FDI equity inflows: Rs 18,724 crore ($4,286 million)

Petroleum Sector
Petroleum & Natural Gas FDI equity inflows: Rs 13,763 crore ($3,159 million)

EDUCATION SECTOR
100% FDI is allowed in education sector.

India with the added advantage of having large pool of skilled people with secondary and tertiary level of education attracts foreign firms in science, R & D, and high technology products and services.

RECOMMENDATIONS
The government should provide additional incentives to foreign investors to invest in states where the level of FDI inflows is quite low. Government should ensure the equitable distribution of inflows among states and must give more freedom to states, so that they can attract inflows at their own level. Government must target at attracting specific types of FDI that will be able to generate spillovers effects in the overall economy like investing in human capital, R&D activities, environmental issues, productive capacity, sectors with high income elasticity of demand.

FDI Investment Sectors

Prohibited Activities Atomic energy Arms and ammunition Lottery business Betting and Gambling Aircraft and warships Coal lignite Fully Permitted Activities Cigar and cigarettes of tobacco Coal, Roads & Highways Diamond, Gold, Silver , Minerals Atomic minerals Electricity Hotel, hospitals

Major Investments
Companies Walmart,Marks Intel Corp. British & cairn Sector Retail I.T Oil & Energy Investment US$ 10 Billion US$ 40 Billion US$ 2 Billion

Essar power
Toyota

Power sector
Automobile

US$ 2 Billion
US$ 10.51 Billion

Panasonic

Telecommunication US$ 200 million

FDI in China
Foreign direct investment in China is also know as Renminbi

Foreign Direct Investment.

China is the second largest receiver of Foreign Direct Investment. FDI INTO China fell by over one-third in 2009 due the global

financial crisis (global macroeconomic factors)

In 2012, China received more FDI than US ($59.1 billion and $57.4 billion, respectively).

China also has best infra structure in the world

The retail sales growth tick up to 14.2% in Sept compare to in Aug

Major success Starting from a baseline of $19billion just 20yrs ago FDI in china has grown to over $300b in the first 10 years. China has continued its massive growth and is the leader among all developing nations in terms of FDI India allows higher levels of foreign direct investment in most sectors as compared to China but the neighbouring country draws much more FDI. A striking feature of China's FDI regime is its focus on agriculture and basic raw materials. A number of bills and measures to improve Indias investment environment have been introduced in Parliament, but they are making little progress amidst lack of sufficient consensus for immediate reforms.

A RECENT UNCTAD SURVEY PROJECTED INDIA

India as the second most important FDI destination (after China) for transnational corporations during 20102012. The sectors which attracted higher inflows were

Services,
Telecommunication, Construction Activities And Computer Software And Hardware.

FDI ADV & DISADV

Advantages
GROWTH AND DEVELOPMENT: Long lasting and stable capital flow Higher productivity Employment generation TECHNOLOGY : ACESS TO NEW GOODS AND SERVICES Increase in economic growth. Employment. Different variety of product. Agricultural sector will increase. Import & export will increase.

Disadvantages
Will affect merchants in India. Economically backward class people will suffer. Inflation will increase. Working people safety & policies not mentioned properly. Effect on natural environment

Foreign ownership
Domestic firms may suffer.

FDI IS PERMITTED
AGRICULTURE (EXCEPT TEA)

0%
REAL ESTATE [EXCEPT NRI] LOTTERY, GAMBLING

NEWSPAPER AND MEDIA

26%
DEFENSE PETROLEUM REFINING

BANKING/ INSURANCE

AVIATION

49%

TELECOM

CABLE NETWORK / DTH

RECENT NEWS ON FDI

RECENT NEWS ON FDI

The bill of 51% Multibrand in retail was presented in Lok Sabha and Rajya Sabha on Wednesday and Friday, respectively. Effect BSE Sensex zoomed 4.5% last week to end at 19339.90, while the NSE Nifty also gained 4.5% to close the week at 5879.85 The rupee strengthened on Tuesday closed at 54.68/69 per dollar versus its previous close of 54.77/78

I am not against the idea of FDI as, foreign loans and FDI are two options through which a developing country can improve its economy. Due to lack of resources, development cannot take place. So, developing nations have to take loans or depend on FDI

BSP Chief MAYAWATI

Sushma Swaraj BJP

Bring FDI in POWER, in AIRLINES etc. We are not opposed to that. But we can sell our RICE & DAL. We dont need Wal-Mart to do it for us & Fight For The Poor Not For The Rich, Fight For The Country Not For Multinationals, Fight For Small Not Big

Foreign firms did not source the raw materials from Indian suppliers. Ask McDonald's about their Fries they never buy potatoes from local Indian farmers, saying the potatoes are too small here

LOKSABHA
In the LokSabha, the UPA needs 273 votes to cross the half-way mark The Centre may have succeeded in defeating the motion opposing foreign supermarkets in the Lok Sabha after a well-choreographed walk out by SP and BSP, but a similar exercise will not be enough to bail the government out in the Rajya Sabha

KAMAL NATH PARLIAMENTARY AFFAIRS MINISTER

If one House has passed it, it passes. It does not need both the Houses to pass it. Thats what is prescribed in the rules

Legal and constitutional experts, however, disagree with this view. According to them, a defeat for the government in the Upper House would mean a disapproval of the policy and a clear direction for its reconsideration

RAJYA SABHA
The UPA has 94 members in the 244member Upper House. The Opposition is claiming the support of at least 112 MPs. The government appeared poised to win the endorsement of Rajya Sabha for foreign direct investment (FDI) in retail as BSP Chief Mayawati announced that her party would back the government in the Upper House

While

KISHORE BIYANI, CEO, Future Group

there may be some issues in bringing FDI in India that the Opposition pointed out during the debate, one can't deny that retail will help in creating more jobs and a robust back-end infrastructure that the industry needs at present,

Walmart
Global retail giant Wal-Mart waiting for years to open its supermarkets in India has been lobbying with US lawmakers since 2008 to facilitate its entry into the Indian market. As per the lobbying disclosure reports filed by Wal-Mart with the US Senate, the company has spent close to $25 million (about . 125 crore) since 2008 on its various lobbying activities, including on the issues related to Enhanced Market Access For Investment In India. In the last quarter ended September 30, 2012, itself, the company spent $1.65 million (about . 10 crore) on various lobbying issues, which included discussions related to FDI in India.

Walmart
In the quarter, Wal-Mart lobbied for its case with the US Senate, the US House of Representatives, the US Trade Representative (USTR) and the US Department of State, as per its latest quarterly disclosure report. The companies are allowed to lobby for their cases in various departments and agencies in the US, but they are required to file their lobbying disclosure reports every quarter with the US Senate. So far in 2012, Wal-Mart has spent over $3 million (. 18 crore) on its various lobbying activities, including those related to India. As per Wal-Marts lobbying disclosure reports, the company has continuously lobbied for its India entry since 2008, except for a few quarters in 2009.

Walmart
BJP leader Ravi Shankar Prasad, alleged in the Rajya Sabha that fears were expressed earlier too about Walmart spending huge money to lobby for entering the Indian market. This has now been proved true. Walmart has in its lobbying disclosure report to the US Senate said it has spent $25m on lobbying and $3 million have been spent in 2012 itself for entering the Indian market. He alleged the report suggested that several palms were greased by the retail chain. Government should tell who was given this bribe. This raises a question mark on the implementation of FDI in retail, Prasad alleged.

What is lobbying
Originally, the word suggested someone who waited in the halls or lobbies to talk with legislators. To lobby means to influence or persuade public officials to

take a desired action, usually to pass (or defeat) legislation

Simply putting lobbying happens when an organization hires

someone to speak to politicians on its behalf

It is legal in US and Canada

FDI IN RETAIL- ADVANTAGES

Generates huge employment Increased investment in technology The huge tax revenue generated. The consumer gains from the wide variety of

choices and

a more diversified basket.

Future of FDI in Retail in India

The Indian retail market is estimated

to be worth about $500 billion

currently and is pegged to cross the $1-trillion mark by 2020, given the

rising personal income and growing

consumer spending trends. According to a report by global

consultancy major A T Kearney, the

organized retail is expected to reach 25% of the overall market by 2020.

How FDI will affect Indian economy

The government has also decided to liberalize the broadcast sector which will apply to segments like broadcast carriage services providers, including Direct-to-Home, Multi-Service Operators (MSOs) and Cable TV in order to bring uniformity in the segment. Till now, FDI for Cable TV and DTH were allowed up to 49%. News channels and FM radio will not be affected with the new reforms and will continue 26% FDI. The Indian economy will be affected by these reforms immensely. Allowing FDI of 51% stake for multi-brand retailers will be creating job opportunities in the location of their stores as well as in the procurement chain. The government has allowed liberalization of broadcast sector by 74 % FDI which will allow the broadcasting companies to expand much faster.

FUTURE PROSPECTS
Raising the level of investment Cheaper production facilities Availability of new technology Long term cash liquidity Healthy Competition will be boosted and there will be a check on the prices (inflation) Create transparency in the system Benefits to consumers Revenue to government Foreign reserves will increase. More development in infrastructure. Helps to the financially weak firm to survive {kingfishers airline}.

Foreign Institutional Investment (FII)

FII denotes all those investors or investment companies that are not located within the territory of the country in which they are investing.

SEBIs definition of FIIs presently includes foreign pension funds, mutual funds, charitable/endowment/university funds etc. as well as asset management companies and other money managers operating on their behalf. An investor or investment fund that is from or registered in a country outside of the one in which it is currently investing. Institutional investors include hedge funds, insurance companies, pension funds and mutual funds. It is used most commonly in India to refer to outside companies investing in the financial markets of India

How FII Started In India?

India opened its stock market to foreign investors in

September 1992
Since 1993, received portfolio investment from foreigners in the form of foreign institutional investment in equities. This has become one of the main channels of FII in India for foreigners.

In order to trade in Indian equity market foreign corporations

need to register with SEBI as Foreign Institutional Investor (FII).

WHY FII NEEDED?

FII flows supplements, domestic savings and domestic investment. Effect of capital inflows to the equity market. Raised the price-earning ratio. Built our reputation in the international community.

Instrumental in capital formation.

WHO CAN BE REGISTERED AS AN FII?

How To Apply
An application for registration has to be made in Form A, the format of which is provided in the SEBI(FII) Regulations, 1995 and submitted with under mentioned documents in duplicate addressed to SEBI as well as to Reserve Bank of India (RBI) and sent to the following address within 10 to 12 days of receipt of application. a) Certified copy of relevant clauses (clauses permitting the stated activities) of Memorandum of Association, Article of Association or Article of Incorporation. b) Audited financial statement and annual report for the last one year (period covered should not be less than twelve months) Address for application The Division Chief FII Division Securities and Exchange Board of India, 224, Mittal Court, 'B' Wing, 1st Floor, Nariman Point, Mumbai - 400 021. INDIA.

REGISTRATION PROCESS

What are Foreign Investors looking for? Good projects

Demand Potential Revenue Potential Stable Policy Environment/Political Commitment Optimal Risk Allocation Framework

Factors Affecting Foreign Investment

Rate of interest Speculation Profitability

Costs of production
Economic conditions Government policies Political factors

64

ADVANTAGES
Enhanced flows of equity capital Managing uncertainty and controlling risks. Improving capital markets. Equity market development aids economic development. Improved corporate governance.

DISADVANTAGE
Problems of Inflation. Problems for small investor. Adverse impact on Exports. Hot Money.

Participatory Notes
Participatory Notes are issued by registered Foreign Institutional Investors (FIIs) to all those overseas investors who wish to invest in the Indian stock markets without registering themselves with SEBI.

Other name of P note is offshore derivative instruments.

Investing through P-Notes is very simple and hence very popular amongst foreign institutional investors.

BANK WHO ARE REGISTERED IN INDIA WITH SEBI ISSUE PARTICIPATORY NOTES. Morgan Stanley Credit Lyonnais Citigroup Goldman Sachs Macquarie Standard Chartered

Advantages of P notes
Convenient for foreign investors, because participatory notes are

like contract notes transferable by approval

P-note provide high degree of anonymity. Some of the entities want their investment through P notes to take

advantage of the tax laws of certain preferred countries.

It is important source of investment in Indian capital market It strengthen rupee against the dollar.

FII Inflows

FDI VS FII
FDI
Long term investment. Abiding interest in mgt.

FII
Short term investment Fleeting interest in mgt.

It is stable It is not stable Investment once done cannot be taken Investment done can be sold on the back because of contract. same day. Investment comes directly by merging It need to be registered in stock with Indian company. exchange when investing in India. Leads to technology transfer, access to FII results in only capital inflows markets and management inputs FDI flows into the primary market Entry and exit is relatively difficult FII flows into the secondary market Entry and exist is relatively easy

FDI IS GIVEN MORE IMPORTANCE OVER FII

Most beneficial form of foreign investment for the economy as a whole FDI is more desirable than portfolio investment because the

investments there under are made directly in the capital of the

company and not in the secondary market FDI helps in increasing production and employment , FII does not affect production and employment .

FDI IS GIVEN MORE IMPORTANCE OVER FII

Most beneficial form of foreign investment for the economy as a whole FDI is more desirable than portfolio investment because the

investments there under are made directly in the capital of the

company and not in the secondary market FDI helps in increasing production and employment , FII does not affect production and employment .

REGULATION OF FDI INVESTING IN INDIA

ENTRY STRATEGIES
LIASION OFFICE
PROJECT OFFICE

BRANCH OFFICE

FIIs REGULATION IN INDIA

INDICATIVE PARAMETERS BY SEBI
APPLICATION PROCEDURE APPLICATION FEE VALIDITY PERIOD

GRANT OF CERTIFICATE

FII Position limits in Index options contracts

FII position limit in all index options contracts on a particular underlying index is Rs. 250 Crore or 15 % of the total open interest of the market in index options, whichever is higher, per exchange. This limit is applicable on open positions in all option contracts on any underlying index. FII Position limits in Index futures contracts FII position limit in all index futures contracts on a particular underlying index is Rs. 250 Crore or 15 % of the total open interest of the market in index futures, whichever is higher, per exchange. This limit is applicable on open positions in all futures contracts on a particular underlying index. In addition to the above, FIIs can take exposure in equity index derivatives subject to the conditions that :

 Short positions in index derivatives (short futures, short calls and long puts) cannot exceed (in notional value) the FIIs holding of stocks. Long positions in index derivatives (long futures, long calls and short puts) can not exceed (in notional value) the FIIs holding of cash, government securities, TBills and similar instruments. FII Position Limits in Interest rate derivative contracts At the level of the FII The notional value of gross open position of a FII in exchange traded interest rate derivative contracts is US $ 100 million. In addition to the above, FIIs can take exposure in exchange traded in interest rate derivative contracts to the extent of the book value of their cash market exposure in Government Securities.

CURRENT TRENDS OF FIIS IN INDIA..

FII

share holding in holding in Indian firms is approaching all time high of 22% as overseas institutional investors stepped up purchases during the quarter ended September 30, 2012. Have to hold the bonds for 1-3 years depending on the category of bonds. the government ceiling for foreign investors in government bonds is $20b and $46b in corporate bonds. The government of India has introduced an additional limit of $5b each in government and corporate bonds to stabilize the Indian rupee. Indian government opens its stock market to individual foreign investors to boost foreign capital inflow. FII and retail investors will be more active and the market will see long term money and steadier up move. A lot of PN holders registering as FIIs and most of the hedge funds are likely to get registered as FIIs

 PN use has increased from 17 FII issuing it in 2005 to over 2 dozens investors now. Indian government opens its stock market to individual foreign investors to boost foreign capital inflow in order to stop Indian rupee from further depreciation. Kingfisher Airlines Ltd. Which is in stake sale talks with Abu Dhabis Etithad Airways and other investors capping FII investment at 3%, carrying space for foreign investors to buy as much as 46% of Kingfisher. India allows foreign investment of up to 49% in local carriers. FII currently holds 2.46% of KFA., 4.81% of Jet Airways and 2.86% of Spice Jet. Government decides to allow FII in insurance companies may not actually fulfill the capital needs of the sector but will help some large companies in diluting stake through public listening. The ceiling for overall investment for FIIs is 24% of the paid up capital of the Indian company and 10% for NRIs. The limit is 20% of the paid up capital in the case of public sector banks, including SBI.

Contd..
FII as per Fridays data were net buyers in equities and debts segments both, according to data released by SEBI. In equity segment: Gross Buying : Rs. 4719.30 crore Gross Sales : Rs. 3152.00 crore Net : Rs. 1567.20 crore In Debt Segment: Gross Buying: Rs. 337.60 crore Gross Sales : Rs. 101.90 crore Net : Rs. 235.70 crore Net Investment in the year 2012: Equity: 103272.7 crores Debt : 33285 crores Total : 136557.9 crores (2012 FII net investment)

The RBI monitors ceiling on FII/NRO/PIO investment in Indian companies on daily basis. For effective monitoring of foreign investment ceiling limits, RBI has fixed cut-off points that are 2% points lower than the actual ceilings. Example: for instance the cut-off point is fixed at 8% for companies in which NRIs/PIOs can invest up to 10% of the companies paid up capital. The cut-off limit for public sector banks (including SBI) is 18%. The number of registered FIIs is more than 1754.

Comparison between FII inflows & Industrial Growth Rate

YEARS RATE (%) 2006 2007 2008 2009 2010 NET FII INFLOWS INDUSTRIAL GROWTH

32254.08 70940.05 -530517.70 85367.2 140497.2

7.4 7.6 9.8 6.3 5.8

Companies in which FII investment is allowed up to 30% of their paid up capital

Aptech Ltd Ferro Alloys Corporation Ltd Asian Paints (India) Ltd Garware Polyester Ltd Capital Trust Ltd GIVO Ltd (formerly KB&T Ltd) Container Corporation of India Orchid Chemicals and Pharmaceuticals Ltd etc.

Companies in which FII investment is allowed up to 40 % of their paid up capital

Balaji Telefilms Limited Jyoti Structures Ltd Padmini Technologies Ltd Pent media Graphics Ltd

Hero Honda Motors Ltd Maars Software International Ltd Visual Soft Technologies Ltd UTV Software LTD etc.

Companies in which FII Investment is allowed up to 49% of their paid up capital 1. Blue Dart Express Ltd 2. CRISIL 3. HDFC Bank Ltd 4. Hindustan Unilever Ltd 5. Infosys Technologies Ltd 6. Dr. Reddys Laboratories 7. Reliance Industries Ltd and Reliance Petroleum ltd 8. United Breweries Ltd etc. Companies in which NRI/FII investment is allowed up to 49% of their paid up capital is 1. ICICI Bank Ltd. Companies where 22% FII investment limit has been reached and further purchases are allowed with prior approval of RBI are 1. ACC Ltd 2. Digital Global Soft Ltd

Future of FIIs in India

RBI

may ease norms for FII inflows to boost stagnant bonds market. RBI is also considering to allow repo facility for commercial papers and certificate of deposits. The finance minister predicts that with FII inflow and forex reserves the current account deficit should be contained at around 3% of the gross domestic product (GDP). Sustaining the growth momentum and achieving an annual average growth of 9-10 % in the next five years. Simplifying procedures and relaxing entry barriers for business activities and providing investor friendly laws and taxation system.

Future of FIIs in India

Boosting agricultural growth through diversification and development of agro processing industry. Developing world-class infrastructure for sustaining growth in all the sectors of the economy. It should develop infrastructure of India called ruthless efficiency and reduce bureaucracy by streamlining government procedures to make them more transparent and effective. Allowing foreign investment in more areas. Effecting fiscal consolidation and eliminating the revenue deficit through revenue enhancement and expenditure management.

Conclusion
FDI has provided better access to technologies for the local economy. FDI has lead to indirect productivity gains through spillovers. Multinational firms have increased the degree of competition in hostcountry markets which will force existing inefficient firms to invest more in physical or human capital. Service sector has been the most sought after sector in India for Foreign Direct Investments.

India, with its skilled labor and manpower has the potential to overtake China as the most preferred destination for Foreign Investments.
Hence measures must be taken in order to ensure that the flow of FDI in our country continues to grow.