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EFFORTS BYNIKHIL SHARMA AMREEN SHAHID AKSHAY CHAWLA SHAILJA SINGH MANALI SOMANI SMRITI KHATTAR ANKITA SINGH TRISHA AGGARWAL
Forbidden Territories:
FDI is not permitted in the following industrial sectors: Arms and ammunition. Atomic Energy. Railway Transport. Coal and lignite. Mining of iron, manganese, chrome, gypsum, sulphur, gold, diamonds, copper, zinc.
Approval by FIPB
Under Foreign Investment Promotion
by RBI.
FDI up to 100% for new and
Board
Required for the project that do not
existing industries, JVs firms are permitted under automatic route for all items except for those where approval from SEBI or FIPB is required.
studies the project and conveys its decision within 30 days of submitting application.
Preference is given to projects in high
priority area.
INDUSTRIAL POLICY
The Government s Liberalization and Economic Reforms Program was initiated in July 1991, under the new Industrial Policy Resolution. It has substantially
reduced the industrial licensing requirements removed restrictions on expansion facilitated easy access to foreign technology and foreign direct investment.
while some sectors do have sectoral caps such as Banking (74%) Insurance (26%) Telecom (49%) Aviation (74%) Single brand retail (51%) etc. Government is looking forward to allow FDI in media as well as to facilitate the entry of foreign newspapers or Indian editions of foreign newspapers being printed. FDI in multi brand retail and banking &insurance are another sector that is thought to be strengthened by the government.
Investment in India
Government of India recognizes the key role of Foreign Direct Investment (FDI) in economic development not only as an addition to domestic capital but also as an important source of technology and global best practices. The Government of India has put in place a liberal and transparent FDI policy.
States respectively.
Acc. To DIPP, India recorded an 11 percent increase in FDI in
2007-2008; that number increased to US$27 billion in 20082009, highlighting India's ability to remain resilient and attract investment despite the global slowdown.
Almost a third share of the investment in India is by NRI. Total NRI FDI inflows for 2010 stood at US$ 320.05 million. Many wealth managers such as Barclays recommend that banking, infrastructure and real estate would be major avenues for foreign investment in 2011.
These 3 regions have accounted for 62% of total FDI for last 10 years. Other upcoming regions are:
Gujarat-US$ 6,382 million Tamil Nadu-US$ 5,309 million
Pros.
Play a complementary role in overall capital formation Employment generation and productivity enhancement Encourages the transfer of management skills, intellectual property, and technology Improves Forex position of the country
Promotion of the competition within the local input market Development of the human capital resources Increase in exports Increases tax revenue
Cons.
A company may lose out on its ownership to an overseas company Government has less control over the functioning of the company that is functioning as the wholly owned subsidiary of an overseas company FDI entering and taking the control of already established market, where local companies are meeting the requirements of the market Invest in machinery and intellectual property, not in wages
Merchant banking Underwriting Portfolio Management Services Investment Advisory Services Financial Consultancy Stock Broking Asset Management Venture Capital Custodial Services Factoring Credit Reference Agencies Credit rating Agencies
Leasing & Finance Housing Finance Foreign Exchange Brokering Credit card business Money changing Business Micro Credit Rural Credit
(B) Minimum Capitalization Norms for fund based NBFCs: i) For FDI up to 51% - US$ 0.5 million to be brought upfront ii) For FDI above 51% and up to 75% - US $ 5 million to be brought upfront iii) For FDI above 75% and up to 100% - US $ 50 million out of which US $ 7.5 million to be brought upfront and the balance in 24 months (C) Minimum capitalization norms for non-fund based activities: Minimum capitalization norm of US $ 0.5 million is applicable in respect of all permitted non-fund based NBFCs with foreign investment
Proposals for FDI beyond 49% shall be considered by FIPB on case to case basis.
FDI IN Pollution Control and Management FDI up to 100% in both manufacture of pollution control equipment and consultancy for integration of pollution control systems is permitted on the automatic route. Call Centers in India FDI up to 100% is allowed subject to certain conditions. Business Process Outsourcing BPO in India FDI up to 100% is allowed subject to certain conditions.
5,623 (1,410) 7,329 (1,677) 733 (149) 5,103 (1,261) 11,727 (2,558) 3,055 (612)
4. 5.
2,801 (566)
7% 6%
6. 7. 8. 9. 10.
AUTOMOBILE INDUSTRY POWER METALLURGICAL INDUSTRIES PETROLEUM & NATURAL GAS CEHMICALS (other than fertilizers)
1,254 (276) 713 (157) 7,866 (173) 401 (89) 930 (205)
5,212 (1,152) 497 (101) 4,382 (985) 777 (159) 113 (23) 869 (174) 247 (50)
15,564 (3,489) 14,789 (3,349) 11,618 (2,746) 11,046 (2,567) 9,814 (2,184)
4% 4% 3% 3% 3%
4,686 (1,177) 4,157 (961) 5,729 (1,427) 1,931 (412) 920 (229) 3,427 (749)
Challenges
India is focusing on maximizing political and social stability along with a regulatory environment. In spite of the obvious advantages of FDIs, there are quite a few challenges facing larger FDIs in India, such as: 1. Resource challenge 2. Equity challenge 3. Political challenges 4. Federal Challenges
Cont
India must also focus on areas of
Poverty reduction. Trade liberalization. Banking and insurance liberalization.
Challenges facing larger FDI are not just restricted to the ones mentioned above, because trade relations with foreign investors will always bring in new challenges in investments.
2. Secretariat for Industrial Assistance(SIA): Acts as gateway to industrial assistance to India. Assists entrepreneurs and investors in setting up projects. Liaises with govt. bodies to seek necessary clearance.
Cont
3. Foreign Investment Implementation Authority(FIIA): Quick implementation of FDI approvals. Resolution of operational difficulties faced by foreign investors. Gather feedback from foreign investors. 4. Other authorities: Investment commission. Project approval Board RBI
Cont
Formulation of policies relating to Intellectual Property Rights in the fields of Patents, Trademarks, Industrial Designs and Geographical Indications of Goods and administration of regulations, rules made there under ; Administration of Industries (Development & Regulation) Act, 1951 Promoting industrial development of industrially backward areas and the North Eastern Region including International Co-operation for industrial partnerships and Promotion of productivity, quality and technical cooperation.
Case Study
Cont
Posco had claimed that its project in Jagatsinghpura would bring unemployment down from 9.9 lakh to a mere 1.2 lakh. It would further downstream industries like automobile, shipping and construction
India will derive significant benefits from the POSCO India project, as it will create an estimated 48,000 direct and indirect jobs in the region. In addition, the construction phase will create about 467,000 man years of employment for the local population.
ArcelorMittal
The world s largest steel maker, ArcelorMittal has planned to invest about $26 Billion in its proposed greenfield steel manufacturing projects in India. This Luxembourg-based company plans to setup two steel plants with capacity of 12 million tonne each in Orissa and Jharkhand. It has also signed a MoU to build a third plant with a capacity of 6million tonne in Karnataka at an investment of Rs 30,000 crore ($6.4 billion).
Cont
This Project will generate more than 50,000 employment in Orrisa & Jharkhand. Meanwhile, Mr Mittal had also indicated to abandon his two projects in Orissa and Jharkhand due to problem in land acquisition. The project is still under consideration and is expected to start in first or second quarter 0f year 2011.