FOREIGN INVESTMENT INFLOWS IN INDIA

Historical background
Foreign investment inflows started in early 1990s,when India began to liberalize the economic policies and started opening the Indian market to foreign investment.

By Rajat Jhingan

FIPB
Introduction The government of India has set up a special Board known as the Foreign Investment Promotion Board. This specially empowered Board in the office of the Prime Minister, is the only agency dealing with matters relating to FDI as well as promoting investment into the country. It is chaired by Secretary Industry (Department of Industrial Policy & Promotion). Objective Its objective is to promote FDI into India by undertaking investment promotion activities in India and abroad by facilitating investment in the country through international companies, nonresident Indians and other foreign investors.

By Rajat Jhingan

What is FDI?
FDI is investment by foreign entity in which they invest in a country through physical means. By Physical means , it means the FDI can buy some physical property either through acquisition or buying some stack in the company.

By Rajat Jhingan

FDI ADVANTAGES V/S DISADVANTAGES

Advantages Inflow of equipment or technology Competive advantage or innovation Financial resources for expansion Employment generation Access to low cost resources for investor Access to new market Disadvantages Loss of control repatriation of profits by investor Possible exploitation of resources Effect on local culture Effects on natural environment

By Rajat Jhingan

Foreign Institutional Investor

An investor or investment fund that is 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. The term is used most commonly in India to refer to outside companies investing in the financial markets of India.
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FDI,FII and FPI

FDI V/s FII V/s FPI FDI: It is the investment in capital goods such as machineries. FII: It is the investment mainly in stocks and debentures and govt. securities FPI: Investments by individuals, firms, or public bodies (eg. national and local governments) in foreign financial instruments (eg. government bonds). Portfolio investment is across national borders and/or across currencies.
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CLASSIFICATION OF FDI
FDI INFLOW- INVESTMENT WHICH COUNTRY RECEIVES
FROM OTHER COUNTRY

Total amount of FDI inflows in year 2008-2009 was 73110 crore(US$17210 million). Cumulative amount of FDI inflows from 1990 to sept. 2008 was 403838 crore(US$96425 million).

FDI OUTFLOW- INVESTMENT WHICH COUNTRY MAKES IN

OUTER COUNTRY

Overseas investment from INDIA were over $15 Billion in 200708.

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INVESTING IN INDIA ENTRY ROUTES

ENTRY MODE

AUTOMATIC ROUTE

PRIOR PERMISSION

NO PRIOR PERMISSION

PRIOR GOVT PERMISSION

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Benefits of Foreign Direct Investment to INDIA

FDI in India has in a lot of ways enabled India to achieve a certain degree of financial stability, growth and development. This money has allowed India to focus on the areas that may have needed economic attention, and address the various problems that continue to challenge the country.

FDI has helped the Indian economy grow, and the government continues to encourage more investments of this sort. Foreign direct investment helps in the creation of new jobs in a particular country.

By Rajat Jhingan

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Benefits of Foreign Direct Investment to INDIA

Foreign direct investment also permits the transfer of technologies.

It also helps in increasing the salaries of the workers.

This enables them to get access to a better lifestyle and more facilities in life. It has normally been observed that foreign direct investment allows for the development of the manufacturing sector of the recipient country. Foreign direct investment can also bring in advanced technology and skill set in a country. There is also some scope for new research activities being undertaken. By Rajat Jhingan

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SHARE OF TOP INVESTING COUNTRIES FDI EQUITY INFLOWS

COUNTRY 2007-2008 (April-March) RUPEES in crores (USD in millions) 2008-2009 (April-Sept.) Cumulative Inflows (April 2000 to Sept. 2008) %age to total inflow in terms of rupees 44

MAURITIUS

44483 (11096) 30052(7014) 140425 (32649)

SINGAPORE
U.S.A U.K NETHERLANDS JAPAN

12319 (3073)
4377 (1089) 4690 (1176) 2780 (695) 3336 (815)

7382(1751)
5190(1229) 3010(695) 3088(714) 849(198)

25508 (6108) 7.99

25147 (5762) 7.88 22074(5058) 15010(3419) 10185(2324) 6.92 4.70 3.90

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SECTORS ATTRACTING HIGHEST FDI INFLOWS

2007-2008 2008-2009 (April-March) (April-Sept.) RUPEES in crores (USD in millions) Cumulative Inflows (April 2000 to Sept. 2008) %age to total inflow in terms of rupees

SECTORS

SERVICE

26589(6015) 5103(1261) 8749(2179) 6989(1743) 2697(675)

10928(2576) 8753(1954) 6807(1624) 7272(1722) 2537(606) By Rajat Jhingan

66625 (15634)

20.87

TELECOM

25501 (5796) 7.99 17969 (4335) 5.63 20657 (4885) 6.47 12392 (2842) 3.88

HOUSING AND REAL STATE CONSTUCTION ACTIVITY AUTOMOBLIE INDUSTRY

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Impact of recession on FDI

Impact of recession on fdi in INDIA is not very much right now, because INDIA is the 2nd fastest growing economy of the world with huge no. of consumers, that attracts foreign investors more to invest.

There is a sharp decline of 26% in FDIs in INDIA during October and November months as compared to FDIs in same months of last year.
India is rethinking to revise its current policy for foreign investment inflows.

By Rajat Jhingan

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Contd.
Govt. expected FDI of 32 million in the year 2008-2009 as compared to last years 24 Billion USD and from April to September INDIA received more than 17 Billion USD of FDI ,which was just 7 million USD last year from April to September.

More investments are supposed to be in INDIA because MAURITIUS is continuously dominating investments in INDIA.

By Rajat Jhingan

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THANK YOU