FOREIGN DIRECT INVESTMENT

PRESENTED BY:ASHISH DALMIA SUNIL PANDE SHUBHANSHU GUPTA HARSHIL SHAH

AGENDA

What FDI means??? FDI v/s Portfolio Investment FDI routes Components of FDI FDI impact on host countries FDI drawbacks to host countries Determinants of FDI Why India??? Policy framework for FDI in India Deterrants to FDI in Indian economy

WHAT IT MEANS???

As per IMF, FDI is defined as Investment that is made to acquire a lasting interest in an enterprise operating in an economy The investors purpose is to have an effective voice in the management of the enterprise The essence is the. transmission to the host country of a package of capital, managerial, skill and technical knowledge FDI is a driving force for equated financial growth wherein the foreign direct investor either sets up a branch or a subsidiary in the recipient country. FDI literally implies the Net inflows of investment to acquire a lasting management interest in an enterprise operating in an economy.

FDI V/S PORTFOLIO INVESTMENT

Portfolio investment occurs when individual investors invest, mostly through stockbrokers, in stocks of foreign companies in foreign land in search of profit opportunities It does not seek management control unlike FDI Portfolio investments are more volatile then FDI Portfolio investments generally have a short term perspective unlike FDI Portfolio investments provide only the capital whereas FDI offers access to internationally available technologies and management know - how

FDI ROUTES

Acquiring stock of the existing foreign enterprises to participate in the management of the concerned enterprise

Establishing abroad new subsidiary with 100% ownership Participating in a joint venture through stock holdings

COMPONENTS OF FDI

Equity Capital
Reinvested Earnings Intra-Company Loans or Intra-Company Transaction

FDI IMPACT ON HOST COUNTRIES

Financial resources Investments Direct Indirect Technology skill and knowlegde base Technology generation Technology transfer and dissemination Launching and stimulating local R&D Building export competitiveness

FDI DRAWBACKS TO HOST COUNTRIES

Fall in Domestic Savings

Fall in Tax Revenues

Imbalances of Rural & Urban Development Unsuitable for Labour-surplus economies Repatriation pressure on Foreign Exchange Reserves Influence on Political Decisions

Increased Dependence on External Investment

Input-Benefit Irony

DETERMINANTS OF FDI

Policy Framework:- Includes Core FDI regime Trade policy regime Economic stability of a country

Investment facilitation factors:- Includes Investment promotional measures Investment activities

WHY INDIA????

Stable country Consumer Market Economy Agriculture Industry Tourism Capital market IT and related services BPOs Foreign Trade

POLICY FRAMEWORK FOR FDI IN INDIA

Rules for FDI flow in India Automatic route Government approval Entry Strategy Direct setup Subsidiary company setup Authoritative Agencies FIPB FIPC

DETERRENTS TO FDI IN INDIAN ECONOMY

Bureaucratic control and procedures Infrastructural bottlenecks

Outmoded labour laws

Danger of fiscal trap Reservations of items for SSI

STEPS TO IMPROVE FDI IN INDIA

Liberalisation of infrastructural and export sector Strengthening authoritative agencies Enactment of promotion law Development of infrastructural facilities

THE ROAD AHEAD..

Make the environment conducive for FDI to foster economic growth Investment in industry, in infrastructure and above all, in people will act as a propellant to initiate growth Reforms need to be in place Simplification and modernization of laws, rules and regulations, elimination of controls and bans and introduction of modern and professional regulatory systems will result in increasing the flow of FDI.

THANK YOU