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FDI

in

INDIA

introduction
The Foreign Direct Investment means cross border
investment made by a resident in one economy in an enterprise in another economy, with the objective of establishing a lasting in the investee economy.

THE PURPOSE FOR WHICH THE COUNTRIES SEEK FDI


Domestic capital is inadequate for the purpose of economic growth. Foreign capital is usually essential, at least as a temporary measure, during the period when the capital market is in the process of development. Foreign capital usually brings it with other scarce productive factors like technical knowhow, business expertise and knowledge.

FOREIGN DIRECT INVESTMENT IN INDIA


Foreign Direct investment was introduced in 1991 It was introduced as Foreign Exchange

Management Act (FEMA), driven by our former


Finance minister Manmohan Singh. Starting from a baseline of less than $1 billion in 1990

FORMS OF FDI
Greenfield Investment Mergers &Acquisition Horizontal FDI Vertical FDI

ADVANTAGES OF FDI IN INDIA


Economic Growth Increase trade Superior quality products Increase employment opportunity Outsourcing of knowledge Increase investment by joint-ventures Reduce intermediaries involvement Bringing down prices at retail level and calm inflation

Contd
Bigger market for small and medium enterprises and better branding. Bring foreign investment and global practices Induce better competition Introduce cost effective manufacturing technology Handling issues and challenges faced by two wheeler industry in India including fuel technology, development of nurturing practices for working manpower

DISADVANTAGES OF FDI IN INDIA


Limited employment generation to semiilliterate people Fear of lowering of prices drain out the countrys share of revenue to foreign countries

loss of market share by domestic organization

Cont
Small retailers and other Kirana Stores

may close down


Supermarkets will establish their monopoly in the Indian market Domestic companies may lose their ownership

Loss of control by Government

7 MAJOR SECTORS ATTRACTING FDI IN INDIA


Infrastructure Automotive Retail and consumer products Technology Financial service

Life sciences
Cleantech

SECTOR WHERE FDI IS NOT ALLOWED IN INDIA


Atomic energy Lottery business Gambling and betting Business of chit fund Nidhi company Agriculture and Plantation activities Housing and Real Estate business Trading in Transferable Development Rights(TDRs) Manufacture of cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes.

THE KEY CHANGES PROPOSED UNDER THE FDI LIMITS ARE AS FOLLOWS
Before the proposal Sector/Activity % of FDI /Equity Entry Route % of FDI / Equity Entry Route Higher limits of foreign investment in "state of-the-art" manufacturing would be considered by the CCS Automatic Route After the proposal

Defense Sector

26%

Government Route

No Change

Insurance Sector

26%

Automatic Route

49%

Telecom Services

74%

Automatic up to 49% Government route beyond 49% and up to 74%

100%

Automatic up to 49% Government route beyond 49% and up to 100%

Tea Plantation

100%

Government Route

100%

Automatic up to 49% Government route beyond 49% and up to 100%

Cont
Sector/Activity Asset Reconstruction Company Petroleum & Natural Gas Before the proposal 74% of paid-up capital of ARC (FDI+FII) 49% After the proposal Automatic up to 49% Government route beyond 49% and up to 100% Automatic Route Government Route 100%

Government Route

49%

Commodity Exchanges

49% (FDI & FII) + [Investment by Registered FII under Portfolio Investment Scheme (PIS) will be limited to 23% and Investment under FDI Scheme limited to 26% ]

Government Route (For FDI)

49%

Automatic Route

Power Exchanges

49% (FDI &FII) FDI limit of 26 per cent and an FII Government Route limit of 23 per cent of the (For FDI) paidup capital

49%

Automatic Route

Cont
Before the proposal Sector/Activity % of FDI /Equity Entry Route % of FDI / Equity Entry Route After the proposal

Credit Information Companies

49% (FDI & FII)

Government Route 74%

Automatic Route

Courier Services

100%

Government Route 100%

Automatic Route

Single Brand product retail trading

100%

Government Route 100%

Automatic up to 49% Government route beyond 49% and up to 100%

PROCEDURES FOR RECEIVING FDI IN INDIAN COMPANY


Automatic Route Government Route

A two-stage reporting procedure of Automatic Route or Government approval


1. On receipt of money for investment The report to the Regional Office of RBI containing details such as: Name and address of the foreign investors Date of receipt of funds and their rupee equivalent Name and address of the authorized dealer through whom the funds have been received, and

Details of the Government approval, if any;

Cont
2. On issue of shares to foreign investor
A report in Form FC-GPR (Foreign Collaboration General Permission Route should be filed with the Regional Office of RBI with required documents

AUTHORITIES DEALING WITH FOREIGN INVESTMENT


Foreign Investment Promotion Board (FIPB Secretariat for Industrial Assistance (SIA): Foreign Investment Implementation Authority (FIIA).

Investment Commission
Project approval Board

Reserve Bank of India

THE TOP 10 NATIONS INVESTING IN INDIA


Mauritius - Investment: Rs 247,092 crore ($55,203 million)

Singapore - Investment: Rs 58,090 crore ($13,070 million)


United States of America - Investment: Rs 42,898 crore ($9,529 million) The United Kingdom - Investment: Rs 29,451 crore ($6,643 million) The Netherlands - Investment: Rs 25,799 crore ($5,739 million)

Cont
Japan - Investment: Rs 25,001 crore ($5,511 million) Cyprus - Investment: Rs 22,702 crore ($4,982 million)

Germany - Investment: Rs 13,607 crore ($3,051 million)


France - Investment: Rs 11,244 crore ($2,484 million) United Arab Emirates - Investment: Rs 8,683 crore ($1,910 million)

SUGGESTION
We suggest that FDI is beneficial to our country since we are developing. Every activity has its own benefits and drawbacks. The important is which one is dominating. According to our point of view FDI is welcomed one due to the reasons such as High employment opportunities Growth of government revenue by bringing the foreign currencies into India. Increasing exports. International standard products

Thank you

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