SYNOPSIS

ON
STUDY ON THE ROLE OF FDI (FOREIGN DIRECT
INVESTMENT) IN INDIA

Submitted in Partial Fulfillment of the Requirement For

Award of The Degree of
Master of Business Administration

INSTITUTE OF MANAGEMENT TECHNOLOGY

GHAZIABAD

Submitted by

Name: Prashant
Roll no: 1621000389
Course: MBA (Finance)

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STUDY ON THE ROLE OF FDI (FOREIGN DIRECT INVESTMENT)
IN INDIA

This is well known saying “knowledge without application is a waste”.

So it is very necessary to provide the practical knowledge along with the theoretical
knowledge. It is very easy to study the fundamental of management. But is somehow to
implement them with in the through of the actual atmosphere of business. No doubt
classroom study is in important part for the knowledge of Business Environment, but
practical exposure provide some extra knowledge about the rhetorical concept.

My project is directed towards “FOREIGN DIRECT INVESTMENT”. For this I have

conducted the survey and find out the relevant information.

INTRODUCITON TO FDI

Foreign direct investment (FDI) has played an important role in the process of globalization
during the past two decades. The rapid expansion in FDI by multinational enterprises since
the mid-eighties may be attributed to significant changes in technologies, greater
liberalization of trade and investment regimes, and deregulation and privatization of markets
in developing countries like India. The analysis is fully based on secondary data collected
through different website and journals. The project aims at providing information of present
FDI policy, year wise FDI inflows, sector wise FDI inflows, countries contribution to
maximum of FDI inflows, state wise FDI inflows, trends and patterns of FDI inflows in
different sector, FDI comparison between India and China and so on.

Foreign Direct Investment (FDI) broadly encompasses any long-term investments by an

entity that is not a resident of the host country. Typically, the investment is over a long
duration of time and the idea is to make an initial investment and then subsequently keep
investing to leverage the host country’s advantages which could be in the form of access to
better (and cheaper) resources, access to a consumer market or access to talent specific to the
host country - which results in the enhancement of efficiency. This long-term relationship
benefits both the investor as well as the host country. The investor benefits in getting higher
returns for his investment than he would have gotten for the same investment in his country
and the host country can benefit by the increased know how or technology transfer to its
workers, increased pressure on its domestic industry to compete with the foreign entity thus
making the industry improve as a whole or by having a demonstration effect on other entities
thinking about investing in the host country.

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Literature Review

Bruce A. Blonigen
This paper surveys the recent burgeoning literature that empirically examines the foreign
direct investment (FDI) decisions of multinational enterprises (MNEs) and the resulting
aggregate location of FDI across the world. The contribution of the paper is to evaluate what
we can say with relative confidence about FDI as a profession, given the evidence, and what
we cannot have much confidence in at this point. Suggestions are made for future research
directions.

Hugo Rojas-Romagosa
Foreign Direct Investment (FDI) flows have increased substantially in the past two decades.
These developments have motivated the appearance of a large number of empirical papers
that test the expected benefits that FDI inflows are assumed to bring to the host countries. We
survey the recent theoretical and empirical literature, but restrict our attention to the
productivity changes that are induced by increased FDI inflows. We review both the
aggregate productivity effects, as well as the spillover effects of FDI on local firms.

Giorgio De Saints
This paper studies the dynamics of expected stock return and volatility in emerging financial
market. We find clustering predicts ability and persistence in conditional volatility and others
have documented for mature market. However, emerging market exhibit higher volatility and
conditional probability of large price changes then mature market exposure to high country
specific risk does not appear to be rewarded with higher expected return. We deduct a risk
reward relation in Latin America but not in Asia.

Karimullah
The article examines the impact of foreign institutional investor s FII equity investment
behavior in the Indian stock market. It attempts to find out the two-way causality between
foreign institutional investors (FIIs) behavior and performance of Indian stock market for the
period of January 1997 to June 2007.this article seeks to examine the idea that financial
liberalization induces increased efficiency in the financial market as permission of FIIs
equity investment is an important example of financial liberalization. Return in the stock
market is used as proxy for the efficiency of the stock market in India .granger causality test
has been applied to test the bidirectional causality. Apart from net investment of FIIs, the
purchase and sales behavior of FIIs are analyzed separately. The results indicate that stock
market performance is a major determinant of both the FIIs purchase and sales behavior. But
we did not find strong evidence that the variations in the stock market indices are determined
by FIIs investment behavior.

Blockholder, Market efficiency and managerial myopia

This paper shows holders can add value even if they cannot interview in a firm’s operations.
Blockholders have strong incentive to monitor the firm’s fundamental value, since they can
sell their stakes upon bad news. By trading on their private information (following the “Wall

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Street rule”) they cause prices to reflect fundamental value rather than current earnings. This
in turn encourages managers to invest for long term growth rather than short term profits.
Contrary to the view that the U.S.’s liquid markets and transient shareholders exacerbate
myopia, this paper shows that they can encourage investment.

Robert Lensink and Oliver Morrissey

This paper contributes to the literature on FDI and economic growth. We deviate from
previous studies by introducing measures of the volatility of FDI Inflows. As introduced into
the model, these are predicted to have a negative effect on growth. We estimate the standard
model using cross-section, panel data and instrumental variable techniques. Whilst all results
are not entirely robust, there is a consistent finding that FDI has a positive effect on growth
whereas volatility of FDI has a negative impact. The evidence for a positive effect of FDI is
not sensitive to which other explanatory variables are included. In particular, it is not
conditional on the level of human capital (as found in some previous studies). There is a
suggestion that it is not the volatility of FDI per se that retards growth but that such volatility
captures the growth-retarding effects of unobserved variables.

STATEMENT OF THE PROBLEM

Problem Statement
The project study has covered broadly the comparison between the future of FDI along with
its impact both on the India economy as well as on the pocket of middle class people. The
project also covers the advantage & disadvantage of FDI such as style of business in respect
to infrastructure changes, improvement in goods and services and cost effect and impact of
FDI in retail sector, and how the job opportunity increasing by FDI in India.

There are many factors that influence the economic condition. One of them is FDI. Hence
there is a need to study the impact of FDI on the change in economy. A large number of
changes that were introduced in the country’s regulatory economic policies heralded the
liberalization era of the FDI policy regime in India and brought about a structural
breakthrough in the volume of the FDI inflows into the economy maintained a fluctuating
and unsteady trend during the study period. It might be of interest to note that more than 50%
of the total FDI inflows received by India came from Mauritius, Singapore and the USA.

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OBJECTIVE OF THE STUDY

The objective of this study is the impact of FDI on developing economies such as India and
current situation of FDI in India, study the current trend of FDI on the global platform,
country that have most important economic value and how companies analyze economies
and accordingly investing those countries and in which sector.
1. To know the performance of Indian stock market.
2. To know the impact of FIIs on Indian stock market.
3. To know the impact of FDIs on Indian stock market.
4. To study the trends and patterns of flow of FDI.
5. To evaluate the impact of FDI on the economy.

RESEARCH METHODOLOGY :

TYPES OF RESEARCH:
This project will be considered as an analytical research. Analytical Research is defined as
the research in which, researcher has to use facts or information already available, and
analyze these to make a critical evaluation of the facts, figures, data or material.

RESEARCH DESIGN:

The research design is a pattern or an outline of a research project. It is a statement only the
essential of a study those provide the basic guidelines for the detail of the project. The
present study being conducted follows a descriptive research design has the data would be
responses from a simple containing g a large numbers of sources. It is a cross section of the
situation design of the descriptive studies including the nature and the analytical method. The
research design will be used in this study is both ‘Descriptive’ and ‘exploratory’.

RESEARCH PROBLEM

Financial statement is a collection of data organized according to logical and consistent

accounting procedure to convey an under-standing of some financial aspects of a business
firm. It may show position at a moment in time, as in the case of balance sheet or may
reveal a series of activities over a given period of time, as in the case of an income
statement. Thus, the term ‘financial statements’ generally refers to the two statements.
(1) The position statement or Balance sheet.
(2) The income statement or the profit and loss Account

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SOURCE OF RESEARCH DATA:
There are mainly two through which the data required for the research is collected.

1. PRIMARY DATA: The primary data is that data which will be collected fresh or
first hand, and for first time which is original in nature. In this study the Primary data
will be collected from Questionnaire and Personal Interaction with Finance manager
and other staff members.

2. SECONDARY DATA: The secondary data are those which have already collected
and stored. Secondary data easily get those secondary data from records, annual
reports of the company etc. It will save the time, money and efforts to collect the data.
The major source of data for this project will be collected through annual reports,
profit and loss accounts, some more information collected from internet, journals and
text books.

SAMPLING DESIGN
Sampling is an effective step in collection of primary and secondary data and has a great
influence on the quality of the results. The sampling plan includes population, sample size
and sample design.

TOOLS USED FOR ANALYSIS OF DATA

The data will be analyzed using the following financial tools. They are
 Ratio analysis.
 Statement of changes in working capital.

DATA ANALYSIS & INTERPRETATION

Classification & tabulation transforms the raw data collected through questionnaire in to
useful information by organizing and compiling the bits of data contained in each
questionnaire i.e., observation and responses are converted in to understandable and orderly
statistics will be used to organize and analyze the data.

LIMITATIONS

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Every project reports have certain limitations and the present study is no more exception.
These are:
 The lack of information sources for the analysis part.
 The time constraint may be one of the major problems.
 Getting accurate responses from the respondents due to their inherent Problems,
personality traits, and mood fluctuations may be very difficult task.
 Some respondents may be re-contacted as per their convenience of time.
 Some data may be given by the staffs might be not proper. Like their contact number
& address, etc.
 As the time available will be limited and the subject is very vast.
 It is mainly based on the data available in various websites & other secondary sources
 The inferences made is purely from the past year’s performance;
 There is no particular format for the study;
 Sufficient time is not available to conduct an in-depth study; the study is conducted in
a short period, which may be not detailed in all aspects.
 Non-availability of accurate data to FDI
 Data in one secondary source do not match with that of another source.

NEED FOR THE STUDY

The objective of this study is the impact of FDI on developing economies such as India and
current situation of FDI in India, study the current trend of FDI on the global platform,
country that have most important economic value and how companies analyse economies and
accordingly investing those countries and in which sector.
 To know the flow of investment in India and to know how can India Grow by
Investment.
 To Examine the trends and patterns in the FDI across different sectors and from
different countries in India and to know in which sector we can get more foreign
currency in terms of investment in India
 To know how much to invest in a developed country or in a developing and to know
which sector is good for investment.
 To know which country in investing in which country and to know the reason for
investment in India
1. Influence of FII on movement of Indian stock exchange
2. To understand the FII & FDI policy in India.

REFERENCES

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BOOKS:-
 Foreign Investment in India: 1947-48 to 2007-08, Dr. Kamlesh Gakhar
 Foreign Direct Investment in India: 1947 to 2007, Dr. Nitin Bhasin
 PRATIYOGITA DARPAN ECONOMY EDITION
 Business environment (Suresh Bedi)
 The Journal of Amity Management Analyst (Jan. June 2007)
 The Journal of Business ,vol.59,no.3, 383-403.
 The Journal of Finance India
 Apeejay journal of management and technology.(Jan 2009)
 JIMS 8M April June 2007

INTERNET:-
 www.dipp.nic.in
 www.commerce.nic.in
 www.finmin.nic.in
 www.india.gov.in
 www.rbi.org.in
 www.wikipedia.org
 www.docs.google.com
 www.nse.india.com
 www.sebi.co.in
 www.onlinestockholding

MAGAZINES

 Business world
 India Today
 Business today, etc.

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