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Foreign Direct
Investment in India
(FDI)
 Definition

Foreign direct investment (FDI) occurs

when
an investor based in one country (the
home
country) acquires an asset in another
country ( the host country) with the
intent to manage the asset.
Need of FDI
 Need of FDI
 Improvement of Economical
infrastructure
 Technological Up gradation
 Managing Balance of Payments
 Exploitation of Natural Resources
 Scope of Employment
 Improvement of export
competitiveness
 Benefit to consumers
Why in India?
 Opportunities here
 Stabilized democratic government
 Low penetrated market
 Low labor cost
 Skill population
 Availability of resources
 Supportive policies and rules
Glimpses on FDI
 Phases of Indian Economy
1947-1991
 Command and Control Economy
– Allocation of resources by the Government
(budgetary grants)
– Government took active part in setting
priorities for the economy
– Self-Reliance was the buzz word
– Nationalization of Banks
– Limited scope for private participation
 Phases of Indian Economy
1991-2000
 Liberalization and Globalization of
Indian Economy
– Increased emphasis on private sector
participation
– Limited extent of FDI participation
– Gradual improvement in the enabling
environment
 Phases of Indian Economy
post 2000
 Political Coalitions have started
providing stable government
 Government to get out of owning
and managing businesses:
Disinvestment Policy
 Gradual relaxation in the FDI Policy
Ways of Entrance
 ROUTES FOR FOREIGN DIRECT
INVESTMENT
Routes available for FDI:

 Automatic Route - No prior Government approval is

required if the investment to be made falls within the
sectoral caps specified for the listed activities. Only
filings have to be made by the Indian company with the
concerned regional office of the Reserve Bank of India
(“RBI”) within 30 days of receipt of remittance and within
30 days of issuance of shares.
 Continued..
FIPB Route - Investment proposals falling outside the
automatic route would require prior Government
approval. Foreign Investment requiring Government
approvals are considered and approved by the Foreign
Investment Promotion Board (“FIPB”). Decision of the
FIPB usually conveyed in 4-6 weeks. Thereafter, filings
have to be made by the Indian company with the RBI
 Continued..
CCFI Route - Investment proposals falling outside
the automatic route and having a project cost of Rs.
6,000 million or more would require prior approval of
Cabinet Committee of Foreign Investment (“CCFI”).
Decision of CCFI usually conveyed in 8-10 weeks.
Thereafter, filings have to be made by the Indian
company with the RBI
- Investment proposals falling within the automatic
route and having a project cost of Rs. 6,000 million or
more do not require to be approved by CCFI
 Types of FDI
There are two types of FDI:
 Greenfield investment : It is the
direct investment in new facilities or the
expansion of existing facilities. It is the
principal mode of investing in
developing countries.
 Mergers and Acquisition : It occurs
when a transfer of existing assets from
local firms takes place.
Fields of Working
 Sector Wise Limits of
investments
 Banking - 74%
 Non-banking financial companies (stock
broking, credit cards, financial consulting,
etc.) - 100%
 Insurance - 26%
 Telecommunications - 74%
 Private petrol refining - 100%
 Construction development - 100%
 Coal & lignite - 74%
 Trading - 51%
 Electricity - 100%
 Pharmaceuticals - 100%
 Continued….
 Transportation infrastructure - 100 %
 Tourism - 100%
 Mining - 74%
 Advertising - 100%
 Airports - 74%
 Films - 100%
 Domestic airlines - 49%
 Mass transit - 100%
 Pollution control - 100%
 Print media - 26% for newspapers and current
events, 100 % for scientific and technical
periodicals
 FDI in major sectors in
India
The major sectors of the Indian economy
that have benefited from FDI in India
are -
 Financial sector (banking and non-
banking).
 Insurance
 Telecommunication
 Hospitality and tourism
 Pharmaceuticals
 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.
 Gambling and Betting
 Lottery Business
 Atomic Energy
 Agriculture (with certain exceptions) and Plantations (Other
than Tea plantations
Impact of FDI
 Impacts of FDI
 Availability of scared resources
 Social
 Economical
 Revenue to Government
 Relationship with the world
 Positioning in global market
Global Perspective
 Global Perspective

 Open market, no restrictions

 Investment opportunities

 Technical know how

 International recognition
Suggestions
Thank You
Questions and Answer