PRESENTATION TOPIC

FDI IN INDIA

SUBMITTED TO Dr NAVJOT KAUR ASSOCIATE PROF.

SUBMITTED BY SATVIR SINGH MBA 2nd SEM. ROLL NO. -5678

ACKNOWLEDGEMENT
I owe a many thanks to Dr NAVJOT KAUR for giving me this topic and hope that I am able to fulfill your expectancy level. Again I would like to give thanks ..from -SATVIR SINGH

CONTENTS 1 INTRODUCTION 2 HISTORY 3 RULES &REGULATIONS 4 SPECIFIC GUIDELINES FOR FDI 5 SECTORWISE ANALYSIS OF FDI 6 ADVANTAGES OF FDI 7 DISADVANTAGES OF FDI 8 FDI RESTRICTIONS IN INDIAN SECTORS 9 FDI FLOW UPTO 2007 10 LIST OF DIFFERENT COUNTRIES INVESTING UNDER FDI IN INDIA & THEIR SHARE 11 TOP INVESTING COUNTRIES UNDER FDI IN INDIA 12 COMPARISON BETWEEN CHINA AND INDIA 13 FDI IN DIFFERENT STATES OF INDIA 14 EPZ AND FDI IN INDIA 15 CONCLUSION 16 REFERENCES

1 INTRODUCTION
FDI is where foreign investors invest directly in the economic infrastructure of any foreign country, means they invest their money to establish some institution, concerns, production units or in infrastructural units. This investment contributes directly to the economy of the host country that s why it is a direct investment.

DIRECT FOREIGN INVESTMENT:

A direct foreign investment is a domestically controlled foreign production facility. This does not mean that firms own a majority of the operation. In some cases, less than 50% ownership can constitute effective control because the stock ownership is widely dispersed. On the other hand, the entrepreneur may dictate whom a firm may hire, what pricing structure the firm must use, and how earnings will be distributed. This causes some concerns as to exactly who is in control of the organization. Because of the difficulty of identifying direct investments, governmental agencies have had to establish arbitrary definitions of the term. A direct foreign investment typically involves ownership of 10% to 25% of the voting stock in a foreign enterprise. A firm can make a direct foreign investment by several methods. One is to acquire an interest in an ongoing foreign operation. This initially may be a minority interest in the firm but enough to exert influence on the management of the operation. A second method is to obtain a majority interest in the foreign company. In this case, the company becomes a subsidiary of the acquiring firm. Third, the acquiring firm may simply purchase part of the assets of a foreign concern in order to establish a direct investment. An additional alternative is to build a facility in the foreign country.

2 HISTORIES ECONOMY OF INDIA 1 Pre-liberalization period (1947 1991)

Indian economic policy after independence was influenced by the colonial experience, which was seen by Indian leaders as exploitative, and by those leaders' exposure to democratic socialism as well as the progress achieved by the economy of the Soviet Union. Domestic policy tended towards protectionism, with a strong emphasis on import substitution, industrialization, economic interventionism, a large public sector, business regulation, and central planning, while trade and foreign investment policies were relatively liberal. Five-Year Plans of India resembled central planning in the Soviet Union. Steel, mining, machine tools, water, telecommunications, insurance, and electrical plants, among other industries, were effectively nationalized in the mid-1950s. Jawaharlal Nehru, the first prime minister of India, along with the statistician Prasanta Chandra Mahalanobis, formulated and oversaw economic policy during the initial years of the country's existence. They expected favorable outcomes from their strategy, involving the rapid development of heavy industry by both public and private sectors, and based on direct and indirect state intervention, rather than the more extreme Soviet-style central command system. The policy of concentrating simultaneously on capital- and technology-intensive heavy industry and subsidizing manual, low-skill cottage industries was criticized by economist Milton Friedman, who thought it would waste capital and labour , and retard the development of small manufacturers. The rate of growth of the Indian economy in the first three decades after independence was derisively referred to as the Hindu rate of growth, because of the unfavorable comparison with growth rates in other Asian countries, especially the East Asian Tigers. Since 1965, the use of high-yielding varieties of seeds, increased fertilizers and improved irrigation facilities collectively contributed to the Green Revolution in India, which improved the condition of agriculture in India by increasing productivity of food as well as commercial crops, improving crop patterns and strengthening forward and backward linkages between agriculture and industry. However, it has also been criticized as an unsustainable effort, resulting in the growth of capitalistic farming, ignoring institutional reforms and widening income disparities.

2 Post-liberalization periods (since 1991)

In the late 1970s, the government led by Morarji Desai eased restrictions on capacity expansion for incumbent companies, removed price controls, reduced corporate taxes and promoted the creation of small scale industries in large numbers. However, the subsequent government policy of Fabian socialism hampered the benefits of the economy, leading to high fiscal deficits and a worsening current account. The collapse of the Soviet Union, which was India's major trading partner, and the first Gulf War, which caused a spike in oil prices, caused a major balance-of-payments crisis for India, which found itself facing the prospect of defaulting on its loans. India asked for a $1.8 billion bailout loan from the International Monetary Fund (IMF), which in return demanded reforms. In response, Prime Minister Narasimha Rao, along with his finance minister Manmohan Singh, initiated the economic liberalisation of 1991. The reforms did away with the License Raj (investment, industrial and import licensing), reduced tariffs and interest rates and ended many public monopolies, allowing automatic approval of foreign direct investment in many sectors. Since then, the overall direction of liberalisation has remained the same, irrespective of the ruling party, although no party has tried to take on powerful lobbies such as the trade unions and farmers, or contentious issues such as reforming labour laws and reducing agricultural subsidies. By the turn of the 20th century, India had progressed towards a free-market economy, with a substantial reduction in state control of the economy and increased financial liberalisation. This has been accompanied by increases in life expectancy, literacy rates and food security, although the beneficiaries have largely been urban residents. While the credit rating of India was hit by its nuclear tests in 1998, it has since been raised to investment level in 2003 by S&P and Moody's. In 2003, Goldman Sachs predicted that India's GDP in current prices would overtake France and Italy by 2020, Germany, UK and Russia by 2025 and Japan by 2035. By 2035, it was projected to be the third largest economy of the world, behind the US and China. India is often seen by most economists as a rising economic superpower and is believed to play a major role in the global economy in the 21st century.

HISTORY OF FDI IN INDIA.

At the time of independence, the attitude towards foreign capital was one of fear and suspicion. This was natural on account of the previous exploitative role played by it in draining away resources from this country. The suspicion and hostility found expression in the Industrial Policy of 1948 which, though recognizing the role of private foreign investment in the country, emphasized that its regulation was necessary in the national interest. Because of this attitude expressed in the 1948 resolution, foreign capitalists got dissatisfied and as a result, the flow of imports of capital goods got obstructed. As a result, the prime minister had to give following assurances to the foreign capitalists in 1949: 1. No discrimination between foreign and Indian capital. The government o India will not differentiate between the foreign and Indian capital. The implication was that the government would not place any restrictions or impose any conditions on foreign enterprise which were not applicable to similar Indian enterprises. 2. Full opportunities to earn profits. The foreign interests operating in India would be permitted to earn profits without subjecting them to undue controls. Only such restrictions would be imposed which also apply to the Indian enterprises. 3. Guarantee of compensation. If and when foreign enterprises are compulsorily acquired, compensation will be paid on a fair and equitable basis as already announced in government s statement of policy. Though the Prime Minister stated that the major interest in ownership and effective control of an undertaking should be in Indian hands, he gave assurance that there would be no hard and fast rule in this matter. By a declaration issued on June 2, 1950, the government assured the foreign capitalists that they can remit the he foreign investments made by them in the country after January 1, 1950. In addition, they were also allowed to remit whatever investment of profit and taken place. Despite the above assurances, foreign capital in the requisite quantity did now flow into India during the period of the First plan. The atmosphere of suspicion had not changed substantially. However, the policy statement of the Prime Minister issued in 1949 and continued practically unchanged in the 1956 Industrial Policy Resolution, had opened up immense fields to foreign participation. In addition, the trends towards liberalization grew slowly and gradually more strong and the role of foreign investment grew more and more important. The government relaxed its policy concerning majority ownership in several cases and granted several tax concessions for foreign personnel. Substantial liberalization was announced in the New Industrial Policy declared by the government on 24th July 1991 and doors of several industries have been opened up for foreign investment. Prior to this policy, foreign capital was generally permitted only in the those industries where Indian capital was scarce and was not normally permitted in those industries which had received government

protection or which are of basic and/or strategic importance to the country. The declared policy of the government was to discourage foreign capital in certain inessential consumer goods and service industries. However, this provision was frequently violated as a number of foreign collaborations even in respect of cosmetics, toothpaste, lipstick etc. were allowed by the government. It was also stated that foreign capital should help in promoting experts or substituting imports. The government also laid down that in al those industries where foreign capital investment is allowed, the major interest in ownership and effective control should always be in Indian hands (this condition was also often relaxed). The foreign capital investments and technical collaborations were required to be so regulated as to fit into the overall framework of the plans. In those industries where foreign technicians and managers were allowed to operate as Indians with requisite skills and experience were not available, vital importance was to be accorded to the training and employment of Indians in the quickest possible manner.

3 RULES &REGULATIONS POLICY ON FDI

The Policy on FDI in India has been most liberal and transparent among all other developing countries, receiving FDI Inflows for economic development. India receives up to 100 percent Foreign Direct Investments under the automatic route in almost all the activities and industrial sectors except those which require Government approval for the execution of activities. Sectors in India Prohibited For FDISectors which require industrial license for execution of activities Proposals by the foreign players who already possess a financial or technical collaboration firm in the similar field in India Proposals regulated by Securities and Exchange Board of India for acquisition of shares in an already existent Indian company in the financial service sector Proposals which are not included or which do not abide by the recommended sect oral policy or CAPS under sectors in which Foreign Direct Investment is not permitted Sectors which are not under automatic route and in which investments in those sectors require prior approval of Central Government, the approvals for proposals are granted by Foreign Investment Promotion Board (FIPB) Industrial Units in India Deprived from FDI as per FDI PolicyAtomic Energy Gambling and betting Retail Trading Lottery Business Agricultural or plantation activities of Agriculture FDI Policy in India-

After the granting of Foreign Direct Investment by the Foreign Investment Promotion Board (FIPB) under automatic route, the industrial sectors in India can take regulatory approvals from the state government and other authorities in the local places for construction of building, water, environmental clearance, and so on. FDI Policy Under Automatic RouteSectors working under automatic route do not require any prior approval of the Central Government of RBI to attract Foreign Direct Investment. The foreign investors are only required to inform the Regional Office concerned of RBI within thirty days receiving of inward payments and submit the required documents in that office again within thirty days of the issuing of the shares of foreign institutional investors. FDI Policy Under Government ApprovalThe proposals which involve foreign investment or foreign technical collaboration are granted permission by the Foreign Investment Promotion Board (FIPB). All the proposals for FDI are to be submitted to the FIPB Unit and those of Non-Resident Indian (NRI) investments and 100% Export Oriented Units (EOUs) should be submitted to SIA in Department of Industrial Policy and Promotion. Industrial Licensing in FDI PolicyIndustrial Licensing is regulated by Industries (Development and Regulation) Act 1951. Following are the sectors which require Industrial Licensing: Industries which abide by compulsory licensing Manufacturing of items by the larger industrial units for small sector industries Location restrictions on the proposed sites Sectors Which Require Industrial LicensingElectronic aerospace and defense equipment Alcoholics drinks Explosives Cigarettes and tobacco products

DOCUMENTS FOR FDI

The various documents required for FDI. Foreign direct investment (FDI) precisely means a long-term investment made by a foreign direct investor in an organization except the one in which the foreign direct investor is based. FDI usually comprise of a parent enterprise and a foreign affiliated concern in domestic market, which jointly forms a Transnational Corporation (TNC). Documents for FDI in a NutshellTo acquire Foreign Direct Investments, the primary document required is 10 percent or more of the ordinary shares of an incorporated enterprise. This means, the enterprise seeking FDI must have a control of the foreign parent organization over its affiliated firm in India. Ever since the Second World War, United States of America has been a major contributor in FDI. Between 1945 and 1960, United States accounted for around three-quarters of new FDI. FDI has become a booming phenomenon in global economy especially with FDI stocks occupying around 20 percent of global GDP. In the last few years, India and China have been the most flourishing destinations to receive the maximum of Foreign Direct Investments. Documents Required for Foreign Direct InvestmentsApplication Form Detailed information on the foreign investor or collaborators stating their parent enterprises and affiliated firms Copies of the memorandum of collaborations made by the foreign investors Detailed information on the Joint Venture firms or technical collaborators along with information on their parent enterprise, promoters, and affiliated firms Companies aiming at establishing multi sectoral activities must present their details on the already existent activities with four digit NIC code In case of any investments being carried out in a holding company, information about downstream investments are to be presented Copies of the earlier approved proposals by FIPB or SIA or RBI connected with the current one

The board resolution of the investor company and the approval of transferred shareholder while transferring the existent equity Before and after investments, the detailed information on shareholders of the investor concern. In case of indirect foreign investments, the details of the indirect route and the names of the foreign companies along with their shareholders Justification for higher payments in terms of payments for technology or trademark or brand name which require FIPB approval under automatic route . Declaration from the investors stating their details Detailed information on the existing ventures or enterprises Remarks from Indian partners in case of the collaborations or the Joint ventures

FDI APPROVAL IN INDIA

Foreign Direct Investment in India: Major economic reforms were undertaken in India in the early 1990s. This led to the liberalization and deregulation of the Indian economy and also opened the country's markets to Foreign Direct Investment (FDI). In India, foreign direct investments are allowed through collaborations that are of financial nature, joint venture collaborations, through preferential allotments, and also through Euro issues. Various routes of FDI Approval in India: The proposals for foreign direct investment in India get their approval through two routes that are the Reserve Bank of India and the Foreign Investment Promotion Board. Automatic approval is given by the Reserve Bank of India to the proposals for foreign direct investment in India. The Reserve Bank of India gives approval within the time period of two weeks. It gives approval to the proposals for foreign direct investment in India that involve FDI up to 74% in the nine categories that are included in List four, FDI up to 50% in the three categories that are included in List two, and FDI up to 51% in the forty eight industries that are included in List 3. FDI Approval in India is also done by the Foreign Investment Promotion Board (FIPB), which processes cases of non- automatic approval. The time taken by Foreign

Investment Promotion Board for approving the proposals for foreign direct investment in India is between four to six weeks. The approach of FIPB is liberal as a result of which it accepts most of the proposals and rejects very few. FDI Approval in India and Economic Growth FDI approvals in India have grown significantly in recent years. Significant FDI approvals have taken place in telecom, real estate, banking and insurance sectors. Several other sectors have also benefited from FDI approvals in India. FDI approvals have played a major role in the economic growth of India in recent years.

4 SPECIFIC GUIDELINES FOR FDI Sector Specific Guidelines for FDI

Sector Specific Guidelines for FDI in India has been issued for various sectors like tourism, townships, banking, and housing. Sector Specific Guidelines for FDI have been issued by the Indian government in order to increase the flow of foreign direct investment in the country. Foreign direct investment in India: The Indian government has recognized the importance of foreign direct investment as an important factor in the economic growth of the nation. This is the reason that the government of India has been making several efforts in order to increase the flow of foreign direct investment in the country from Overseas Corporate Bodies (OCBs) and also Non Resident Indians.

This will help to supplement as well as complement the domestic investment in India. Foreign direct investment in India is allowed freely in all sectors, except a small number of sectors, where specific guidelines do not allow foreign direct investment beyond a limit. Various Sector Specific Guidelines for FDI: Various Sector Specific Guidelines for FDI have been issued by the government of India. Specific guidelines pertaining to limits on FDI and other financial clauses are laid down by the Reserve Bank of India (RBI). The Indian government has issued Sector Specific Guidelines for FDI in order to encourage more and more FDI to

come into the country. The various Sector Specific Guidelines for FDI in India for the banking sector are that foreign direct investment up to 20% is allowed in the sector and in the case of investment being made by Non Residential Indians (NRI) it is up to 40%. Further the Sector Specific Guidelines for FDI in India for the sectors of townships, built- up infrastructure, housing, and construction development projects is that foreign direct investment up to 100% is allowed in all the sectors. Sector Specific Guidelines for FDI in India for the sector of hotels and tourism is that foreign direct investment up to 100% is allowed through the automatic route in the sector. Sector Specific Guidelines for FDI in India for the sector of trading is that foreign direct investment up to 100% is allowed in the sector. Results of Sector Specific Guidelines for FDI in India: The results of Sector Specific Guidelines for FDI in India has been that it has made it easy for the foreign investors to make investments in the different sectors of the country and this in its turn has led to huge inflows of foreign direct investment in India.

SOME SPECIFIC GUIDELINES FOR DIFERENT SECTORS Guidelines for FDI in Banking
In the private banking sector of India, FDI is allowed up to a maximum limit of 74 % of the paid-up capital of the bank.

On the other hand, Foreign Direct Investment and Portfolio Investment in the public or nationalized banks in India are subjected to a limit of 20 % in totality. This ceiling is also applicable to the investments in the State Bank of India and its associate banks. FDI limits in the banking sector of India were increased with the aim to bring in more FDI inflows in the country along with the incorporation of advanced technology and management practices. The objective was to make the Indian banking sector more competitive. The Reserve Bank of India governs the investment matters in the banking sector. According to the guidelines for FDI in the banking sector, Indian operations by foreign banks can be executed by any one of the following three channels Branches in India Wholly owned subsidiaries.

Other subsidiaries. In case of wholly owned subsidiaries (WOS), the guidelines for FDI in the banking sector specified that the WOS must involve a capital of minimum Rs. 300 crores and should ensure proper corporate governance. Problems Faced by the Indian Banking SectorFDI in Indian banking sector resolves the following problems often faced by various banks in the country: Inefficiency in management Instability in financial matters Innovativeness in financial products or schemes Technical developments happening across various foreign markets Non-performing areas or properties Poor marketing strategies Changing financial market conditions Benefits of FDI in Banking Sector in IndiaTransfer of technology from overseas countries to the domestic market Ensure better and improved risk management in the banking sector Assures better capitalization Offers financial stability in the banking sector in India

Guidelines for FDI in Trading

Foreign Direct Investment in Indian EconomyIndia has become one of the most favored destinations in drawing foreign direct investments from various overseas nations. India ranks second after China in terms of FDI and it has been estimated that India is moving at a massive pace in attracting foreign investors in various industrial sectors with every passing year which had led to a remarkable rise in the Indian economy.

FDI equity flow grew from USD 5.5 billion in 2005-06 to USD 15.7 billion in 2006-07, representing a growth rate of 184 percent. Guidelines for FDI in TradingCertain activities in the Trading sector in India are permitted 100 percent Foreign Direct Investment, provided they are absolutely export-oriented under government and FIPB approvals. Under the Foreign Investment Promotion Board (FIPB), 100 percent FDI is permitted in the following sectors: Export related activities Bulk imports with the warehouse sales related to export or ex-bond Wholesale trading activities 75 percent FDI is allotted to the other importing of goods and services for procurement and selling of goods among the companies of the similar group FDI in Trading Under the Provisions of Exim PolicyCompanies which provide after sales service Trading companies who wants to market the manufactured products of their Joint Venture companies in Indian market Trading of hi-tech goods and services especially those which provide after sales service Trading of products in the social sector in Indian market Trading of medical equipments and diagnostic services Trading of items from the small scale industries Companies providing test marketing facilities on the manufactured items before exporting them E-commerce activities are entitled to 100 percent FDI provided if these companies divest 26 percent of their assets to the Indian population in five years The e-commerce activities are only carried out in the business-to-business units and not in the retail trading sector

Guidelines for FDI in Hotels and Tourism

Sectors Receiving the Maximum FDI Inflows in Hotel & Tourism Industry in IndiaHotel and Tourism is one of the most booming sectors in Indian economy. It has contributed heavily in the Gross Domestic Product of India. 100 percent FDI is permitted in the Hotel and Tourism in India under various approvals. Under Automatic route, FDI is allowed only up to 51 percent in this industry. As per FDI guidelines for hotel and tourism industry in India, following are the sectors, in hotels, which have been receiving the maximum amount of FDI Inflows for the past few years: Restaurants Beach resorts Tourist complexes which facilitates accommodation and catering to the tourists As per FDI guidelines for hotel and tourism industry in India, following are the sectors in tourism which have been receiving the maximum amount of FDI Inflows for the past few years: Travel agencies Tour operating agencies and Tourist transport operating agencies Units which facilitates cultural, adventure and wild life experience to tourists Units providing surface, air and water transport facilities to tourists Sectors which offers leisure, entertainment, amusement, sports, and health related facilities to the tourists Convention/Seminar units and organizations FDI in Hotels and Tourism Industries in India100 percent FDI is permitted in the hotel and tourism industry in India under various approvals Hotels offer restaurants, beach resorts, and other tourist complexes which provide accommodation or catering and food facilities to tourists Tourism Sector includes tour operating agencies and tourist transport operating agencies, units which offer cultural, adventurous and wild life experiences to tourists, and various other entertainment programs which include, water sport

activities, leisure games, amusement parks as well as the health care units. Automatic approval for foreign technology in the hotel and tourism sector will be availed if 3 percent of the total expense of the project occupies infrastructural developments. Up to 3 percent of the net turn over is payable as marketing fee under automatic route. 10 percent of the gross operating profit is payable as management fee under automatic route

5 SECTORWISE ANALYSIS OF FDI

Sector wise Analysis of FDI Inflow in IndiaThe IT industry is one of the booming sectors in India. At present India is the leading country pertaining to the IT industry in the Asia -Pacific region. With more international companies entering the industry, the Foreign Direct Investments (FDI) has been phenomenon over the year. The rapid development of the telecommunication sector was due to the FDI inflows in form of international players entering the market and transfer of advanced technologies. The telecom industry is one of the fastest growing industries in India. With a growth rate of 45%, Indian telecom industry has the highest growth rate in the world. The FDI in Automobile Industry has experienced huge growth in the past few years. The increase in the demand for cars and other vehicles is powered by the increase in the levels of disposable income in India. The options have increased with quality products from foreign car manufacturers. The introduction of tailor made finance schemes, easy repayment schemes has also helped the growth of the automobile sector. For the past few years the Indian Pharmaceutical Industry is performing very well. The varied functions such as contract research and manufacturing, clinical research, research and development pertaining to vaccines are the strengths of the Parma Industry in India. Multinational pharmaceutical corporations outsource these activities and help the growth of the sector. The Indian Pharmaceutical Industry has been experiencing a vast inflow of FDI. The FDI inflow in the Cement Industry in India has increased with some of the Indian cement giants merging with major cement manufacturers in the world such Holcim, Heidelberg, Italcementi, Lafarge, etc. The FDI in Semiconductor sector in India were crucial for the development of the IT and the ITES sector in India. Electronic hardware is the major component of several industries such as information technology, telecommunication, automobiles, electronic appliances and special medical equipments.

SOME SECTORWISE INFLOWS OF FDI IN INDIA FDI Inflows to Telecommunications

FDI Inflows to Telecommunications have been quite high since the past few years. The telecom sector in India is growing at an alarming pace. India has more than 125 million telephone networks, which is one of the largest communication networks across the globe. An Overview of the Telecom Sector in India-

The government of India has taken measures to ensure pro-active and positive policies to boost the Foreign Direct Investment (FDI) to telecommunications sector in India. Tremendous growth has taken place in this sector in recent years. Number of telecom service providers is working in both the private and public sector. The two most crucial causes behind the huge success of the telecom sector are the growing demand for mobile phone services and private sector participation in the telecommunication industry. The private sector participation in the telecommunication sector in India is increasing at a rapid pace. Opportunities of FDI in the Telecommunication Sector in India FDI opportunities in the telecommunication sector in India exist in the following areas E-commerce Manufacturing of equipments and components Tele-education Tele-banking Exports of telecom equipment and services Tele-medicine Setting up a national long distance bandwidth capacity in the country FDI Inflows to TelecommunicationsThe limit to FDI in telecommunications was increased from 49% to 74% in 2005 by the Department of Industrial Policy and Promotion that functions under the Ministry of Commerce and Industry, Government of India. Important aspects of FDI in telecommunications are Telecom sectors which will be entrusted with the FDI ceiling include National/ International Long Distance, Basic, Cellular, V-Sat, Unified Access Services, Public Mobile Radio Trunked Services (PMRTS), Global Mobile Personal Communications Services (GMPCS) and other value added Services. The license companies which will be regulated by the public sector banks in India and the public sector financial institutions in India will be recognized as 'Indian holding' and Indian shareholding cannot be less than 26 percent by any means. FDI up to 49 percent will be allotted to certain telecom sectors in India under automatic route

In case of the license companies, FDI will require the FIPB approval provided it has a total ceiling of 74 percent.

FDI Inflows to Automobile Industry

FDI Inflows to Automobile Industry have been at an increasing rate as India has witnessed a major economic liberalization over the years in terms of various industries. The automobile sector in India is growing by 18 percent per year. The Automobile Sector in IndiaThe automobile sector in the Indian industry is one of the high performing sectors of the Indian economy. This has contributed largely in making India a prime destination for many international players in the automobile industry who wish to set up their businesses in India.

The automobile industry in India is growing by 18 percent per year. The automobile sector in India was opened up to foreign investments in the year 1991. 100% Foreign Direct Investment (FDI) is allowed in the automobile industry in India. The production level of the automobile sector has increased from 2 million in 1991 to 9.7 million in 2006 after the participation of global players in the sector. Advantages of FDI in the Automobile Sector in India The basic advantages provided by India in the automobile sector include, advanced technology, cost-effectiveness, and efficient manpower. Besides, India has a well-developed and competent Auto Ancillary Industry along with automobile testing and R&D centers. The automobile sector in India ranks third in manufacturing three wheelers and second in manufacturing of two wheelers. Opportunities of FDI in the Automobile Sector in India Opportunities of FDI in the Automobile Sector in India exist in Establishing Engineering Centers Two Wheeler Segment Exports Establishing Research and Development Centers Heavy truck Segment

Passenger Car Segment Important Aspects of FDI in Automobile Industry FDI up to 100 percent, has been permitted under automatic route to this sector, which has led to a turn over of USD 12 billion in the Indian auto industry and USD 3 billion in the auto parts industry The manufacturing of automobiles and components are permitted 100 percent FDI under automatic route The automobile industry in India does not belong to the licensed agreement Import of components is allowed without any restrictions and also encouraged.

FDI Inflows to Power

The huge size of the market in the power sector in India and high returns on investment are important factors in boosting FDI inflows to power. 100% FDI is permitted to this sector under automatic route in almost all the power sectors in India except the Atomic energy. There are huge opportunities of FDI in power sector in India. The Power Sector in IndiaThe power sector in India has grown significantly and is an important part of infrastructure. Investment potential in the power sector of India is huge due to the market size and returns on investment capital. Past few years have witnessed an outstanding growth in the power sector especially the sectors based on renewable sources of energy. The total installed capacity of the electric power generation stations in India according to estimates of January 2007 is 128182.47 MW which comprise of the following: Thermal - 84149.84 MW Hydro - 33941.77 MW Nuclear - 3900 MW Renewable Energy Sources (RES) - 6190.86 MW The government of India aims at reaching 2, 00,000 MW by the year 2012. The regional transmission network along with inter-regional capacity to transmit power will be expanded to ensure this growth. The total power generation in India has increased from 264.3 Billion Units (BUs) during 1990-91 to 551.7 Billion Units during 2006-07(up to Jan.'07). The investments

required in the execution of this task will be generated from public-private partnerships in the sector. Opportunities of FDI in the Power Sector in India Opportunities of Foreign Direct Investment (FDI) in the Power Sector in India exist in Hydro Projects Captive Power Ultra Mega Power Projects Nuclear Power National Grid Program Rural Electrification Trading Renewable FDI Inflows to Power 100% FDI is allowed in the power sector under the automatic route in India with the exception of Atomic Energy. Important aspects of FDI in the power sector of India are 100 percent Foreign Direct Investment is allowed under automatic route in almost all the power sectors in India except the Atomic Energy Power projects involving generation and distribution tasks are allowed in all types and sizes As per the Electricity Act 2003, trading in power is activated A duration of 30 years will given as a renewable license period Thermal power plants will get a return of 16 percent on equity The import of equipments will be entitled to 20 percent of import duty Power generating projects will have a five year tax holiday with five more years which will have a deduction of 30 percent taxable profits.

FDI Inflows to Real Estate

FDI Inflows to Real Estate sector in India has registered significant growth in the last few years due to the several incentives that have been provided by the government of India. The increased FDI Inflows to Real Estate sector in India have given a major boost to the country's economy. Real estate sector in India: The real estate sector in India is highly fragmented. According to the estimates of 2004- 2005, the real estate sector in India was worth US$ 12 billion. The majority of the developers in the real estate sector in India have only a regional presence. The involvement of large corporations is limited in the real estate sector in the country. The profit margins are higher in the sector of real estate in India in comparison to the foreign markets that are developed. FDI policy in the real estate sector in India: The government of India allows foreign direct investment up to 100% for the development of the real estate sector in the country. The guidelines for Foreign Direct Investments (FDI) in the real estate sector in India state that the minimum built up area should be 50,000 sq. meters for projects of construction development and the minimum area should be 25 acres for integrated townships. Amount of FDI inflows to real estate sector in India: FDI Inflows to Real Estate sector in India has increased over the last few years due to the fact that many international companies are investing in the sector. The Emaar Group has made an investment of around US$ 850 million in 2006 in the real estate sector in India. The Siachen Capital has invested in Nitesh Estates with total investments worth US$ 100 million in 2006. Further the FDI Inflows to Real Estate sector in India has come from Morgan Stanley Real Estate, which has made an investment of Rs. 300 crores in the Alhpa G Corp. FDI inflows to real estate sector in India have developed the sector: The increased flow of foreign direct investment in the real estate sector in India has helped in the growth, development, and expansion of the sector.

FDI Inflows to Textiles

FDI Inflows to Textiles industry in India enhanced the growth of the sector. India has been known for its textiles all over the world. The textile industry is concentrated in the western belt of the country, mainly in the state of Gujarat and Maharashtra. Ahmadabad, in Gujarat is called the 'Manchester of India', after a place which was famous for its textile mills. Indian textiles industry-At a glance The Indian textiles industry is a highly established sector. The advantages of the Indian Textile industry are fully equipped manufacturing units, vast multi-fiber raw material base, advanced designing capabilities, highly skilled and effective human resources.

In the future, India has good scope of becoming the global textile and apparel sourcing center. The Indian textiles sourcing market is expected to grow at the rate of 12% per year. The market value is US$ 22-25 billion which is expected to grow to US$ 35-37 billion by the year 2011. FDI Inflows to Textiles-Facts The textiles industry in India is experiencing an increase in the collaboration between national and international companies International apparel companies like Hugo Boss, Liz Claiborne, Diesel, Ahlstorm, Kanz, Baird McNutt, etc have already started their operations in India and these companies are trying to increase it to a considerable level National and the international companies that are involved in collaborations include Rajasthan Spinning & Weaving Mills, Armani, Raymond, Levi Strauss, De Witte Lietaer, Barbara, Jockey, Vardhman Group, Gokaldas, Vincenzo Zucchi, Arvind brands, Benetton, Esprit, Marzotto, Welspun, etc FDI Inflows to Textiles-Government Initiatives Foreign Direct Investments (FDI) up to 100% is allowed in this sector through the automatic route by the Reserve Bank of India In order to provide quality cotton raw materials at reasonable price to the manufacturers, the Technology Mission on Cotton was launched In order to facilitate the technological advancement in the textile industry, the Technology Up gradation Fund Scheme (TUFS) was set up. The Scheme for Integrated Textile Park (SITP) is set up to provide world standard infrastructure facilities The reservations for the small scaled units in textiles were abolished.

FDI Inflows to Air Transports

The FDI Inflows to Air Transport industry of India is allowed up to 74% foreign equity participation through the automatic route. 100% FDI is allowed in the airport infrastructure segment. The Indian cities of Bangalore and Hyderabad to be facilitated with two new greenfield airports. With the opening up of the air transport industry of India to FDI, this industry is witnessing substantial participation from private airlines in India. The FDI in the transport industry of India is thus witnessing an overall participation of 60% of the domestic aviation market in India.

Further, the opening of the transport industry of India to FDI has seen a substantial increase in air traffic flow in India. A number of budget airlines in India has made inroads in to the Indian air transport industry. As a result of which the domestic air traffic in India has increased from 10 million in 2003 to 25 million in 2004.Furthermore, it is estimated that the domestic air traffic of India will add five million passengers every year till the end of 2009. The ministry of civil aviation, government of India envisages an average annual growth 16% per annum till 2010. Moreover, the FDI in the air transport industry of India is expected to generate employment to the tune of 10 million jobs in the next ten years. Highlights of the FDI policy in air transport industry of India: The ministry of civil aviation, government of India allows foreign direct investment up to 74% foreign equity participation through the automatic route For 100% FDI in the airport infrastructure, which comes under the air transport industry of India, special permission should be sought for the government of India International airport authorities can also make such investments 100% FDI is allowed in modernization of Indian airports, but FDI above 74% needs government of India approval For domestic airlines, up to 49% of FDI is allowed NRIs can also make such investments up to 100% through the automatic route .

FDI Inflows to Computer Software and Hardware

Foreign Direct Investment (FDI) Inflows to Computer Software and Hardware Industry in the first half of the fiscal year 2007-08 has been USD 0.3 billion. Software Technology Parks, regulatory reforms by the Indian government, the growing Indian market and availability of skilled workforce have been important factors in boosting FDI inflows to computer software and hardware in India. An Overview of Computer Software and Hardware Industry in India Over the past few years the computer software industry has been one of the fastest growing sectors in Indian economy. FDI Inflows to Computer Software and Hardware Industry in India have been significant in the year 2007-08 with current figures being USD 0.3 billion for the first half of the fiscal year. The computer software industry has witnessed a growth of 28 percent CAGR in the past five years. The total contribution of Information Technology and ITES is estimated to grow by 7 percent by the year 2007-08 as against 4.8 percent in the year 2005-06 to the Gross Domestic Product of India. The computer hardware industry has occupied about USD 1.4 billion in the entire electronics hardware industry as has been accounted in the Financial Year 2005. This includes PC, Servers, and Laptops. 100 percent Foreign Direct Investment is permitted under automatic route in the computer hardware industry. FDI Inflows to Computer Software Industry 100 percent FDI is permitted under automatic route to the E-Commerce activities in India. However, a pertinent condition is that, 26 percent of their equity will be spent on welfare activities for the Indian population in five years. Software Technology Parks (STP) have been a major initiative in India to drive in Foreign Direct Investment in the computer software industry. These Software Technology Parks provide highly developed infrastructure and facilities that attract foreign investors. Regulatory measures by the Indian government have also played a positive role in this regard. Measures like increased freedom of recruiting and laying-off employees, tax benefits and easing of export producers have contributed to the growth of FDI in this sector. FDI Inflows to Computer Hardware Industry India constitutes 0.6 percent of the entire international market in terms of manufacturing electronics hardware. Electronics hardware in India is an USD 11 billion industry. The computer hardware industry in India has occupied about USD 1.4 billion in the entire electronics hardware industry as has been accounted in the Financial Year 2005. This

includes PC, Servers, and Laptops. 100 percent FDI is permitted under automatic route in the computer hardware industry in India. The huge market for computer hardware in India, coupled with the availability of skilled workforce in this sector has boosted the inflow of FDI. High growth prospects, in terms of increased consumption in the India as well as increasing demand for exports are expected to lead to more Foreign Direct Investments in this sector.

FDI Inflows to Industrial Machinery

The FDI inflows in the Industrial Machinery of India offer tremendous growth opportunities in India. A brief history of Foreign direct investment in the Indian industrial machinery industry: The FDI inflows to the industrial machinery industry of India offer tremendous scope. With the stupendous rise of the Indian manufacturing industry, the scope of growth of the Indian industrial machinery industry is witnessing an upswing.

The opening up of the Indian economy during the early 1990s, facilitated access to world class industrial machinery in India. Further, with rise of manufacturing industry, especially the rise of engineering based industry propelled the need for the development, vies-a-vies the FDI in the industrial machinery industry of India. Details of the Foreign direct investment in the Indian industrial machinery industry: The quantum of foreign direct investment in the Indian industrial machinery industry amounted to US $ 204.84 million during the period from August 1991 to December 2005. The cumulative percentage of the foreign direct investment during the same period was 0.65 against the total inflow of foreign direct investment during the same period. The period from the year 2002 to 2006 recorded setting up of around 95 industrial machinery projects in India. The industrial machinery industry of India is facilitated with 100% foreign direct investment through automatic route. The main states that attracted foreign direct investment in the industrial machinery industry of India are Maharashtra, Gujarat, Karnataka, Haryana (Gurgaon), Andhra Pradesh, Tamil Nadu and Uttar Pradesh. Foreign companies that have contributed in Foreign direct investment in the Indian industrial machinery industry Siemens ,Alstom ,ABB ,Bosch ,Alcatel ,Cisco ,Mitsubishi

6 ADVANTAGES OF FDI
Foreign Direct Investment plays a pivotal role in the development of India's economy. It is an integral part of the global economic system. Advantages of FDI can be enjoyed to full extent through various national policies and international investment architecture. Both the factors contribute enormously to the maximum FDI inflows in India, which stimulates the economic development of the country. Foreign Direct Investment in India is allowed through four basic routes namely, financial collaborations, technical collaborations and joint ventures, capital markets via Euro issues, and private placements or preferential allotments.

FDI inflow helps the developing countries to develop a transparent, broad, and effective policy environment for investment issues as well as, builds human and institutional capacities to execute the same. Benefits of Foreign Direct InvestmentAttracting foreign direct investment has become an integral part of the economic development strategies for India. FDI ensures a huge amount of domestic capital, production level, and employment opportunities in the developing countries, which is a major step towards the economic growth of the country. FDI has been a booming factor that has bolstered the economic life of India, but on the other hand it is also being blamed for ousting domestic inflows. FDI is also claimed to have lowered few regulatory standards in terms of investment patterns. The effects of FDI are by and large transformative. The incorporation of a range of well-composed and relevant policies will boost up the profit ratio from Foreign Direct Investment higher. Some of the biggest advantages of FDI enjoyed by India have been listed as under: Economic growth- This is one of the major sectors, which is enormously benefited from foreign direct investment. A remarkable inflow of FDI in various industrial units in India has boosted the economic life of country. Trade- Foreign Direct Investments have opened a wide spectrum of opportunities in the trading of goods and services in India both in terms of import and export production. Products of superior quality are manufactured by various industries in India due to greater amount of FDI inflows in the country. Employment and skill levels- FDI have also ensured a number of employment opportunities by

aiding the setting up of industrial units in various corners of India. Technology diffusion and knowledge transfer- FDI apparently helps in the outsourcing of knowledge from India especially in the Information Technology sector. It helps in developing the know-how process in India in terms of enhancing the technological advancement in India. Linkages and spillover to domestic firms- Various foreign firms are now occupying a position in the Indian market through Joint Ventures and collaboration concerns. The maximum amount of the profits gained by the foreign firms through these joint ventures is spent on the Indian market.

7 DISADVANTAGES OF FDI
The disadvantages of foreign direct investment occur mostly in case of matters related to operation, distribution of the profits made on the investment and the personnel. One of the most indirect disadvantages of foreign direct investment is that the economically backward section of the host country is always inconvenienced when the stream of foreign direct investment is negatively affected. The situations in countries like Ireland, Singapore, Chile and China corroborate such an opinion. It is normally the responsibility of the host country to limit the extent of impact that may be made by the foreign direct investment. They should be making sure that the entities that are making the foreign direct investment in their country adhere to the environmental, governance and social regulations that have been laid down in the country. The various disadvantages of foreign direct investment are understood where the host country has some sort of national secret something that is not meant to be disclosed to the rest of the world. It has been observed that the defense of a country has faced risks as a result of the foreign direct investment in the country.

At times it has been observed that certain foreign policies are adopted that are not appreciated by the workers of the recipient country. Foreign direct investment, at times, is also disadvantageous for the ones who are making the investment themselves. Foreign direct investment may entail high travel and communications expenses. The differences of language and culture that exist between the country of the investor and the host country could also pose problems in case of foreign direct investment.

Yet another major disadvantage of foreign direct investment is that there is a chance that a company may lose out on its ownership to an overseas company. This has often caused many companies to approach foreign direct investment with a certain amount of caution. At times it has been observed that there is considerable instability in a particular geographical region. This causes a lot of inconvenience to the investor. The size of the market, as well as, the condition of the host country could be important factors in the case of the foreign direct investment. In case the host country is not well connected with their more advanced neighbors, it poses a lot of challenge for the investors. At times it has been observed that the governments of the host country are facing problems with foreign direct investment. It has less control over the functioning of the company that is functioning as the wholly owned subsidiary of an overseas company. This leads to serious issues. The investor does not have to be completely obedient to the economic policies of the country where they have invested the money. At times there have been adverse effects of foreign direct investment on the balance of payments of a country. Even in view of the various disadvantages of foreign direct investment it may be said that foreign direct investment has played an important role in shaping the economic fortunes of a number of countries around the world.

8 FDI RESTRICTIONS IN INDIAN SECTORS

FDI Restrictions in Indian Sectors have been imposed in a number of sectors such as, atomic energy, chit fund business and lottery business. FDI Restrictions in Indian Sectors have been imposed by the government of India in order to protect the interests of the nation. Foreign direct investment in India: The several policy initiatives taken by the government of India in the 1990s helped to transform the country from a restrictive regime with regard to foreign direct investment to a liberal one. As in 2007, foreign direct investment in India is encouraged in almost all the sectors of the country's economy under the automatic route. At the same time there are a few Indian sectors in which foreign direct investment has been restricted by the government. Forms through which foreign direct investment in India are allowed include, Euro issues, preferential allotments, technical collaborations, and financial collaborations. The amount of foreign direct investment in India came to around US$ 4.7 billion in 2006 - 2007, and the next year this figure increased more than three times to about US$ 15.7 billion. Various Indian sectors having FDI restrictions: FDI Restrictions in Indian Sectors have been imposed on a few sectors by the Indian government. FDI Restrictions in Indian Sectors have been imposed in order to protect the interests of the country, as these sectors either relate to national security or sensitive enough to keep apart the foreign companies. Foreign direct investment restrictions in Indian sectors have also been imposed in order to allow the domestic companies to make more profits with less competition, than that of in the presence of rivalry international firms. The various Indian Sectors having restrictions of foreign direct investment are: Atomic energy Betting and gambling Chit fund business Plantation or agricultural activities Real estate business Business in Transferable Development Rights Lottery business Retail trading

Railway transport Mining of chrome, zinc, gold, diamonds, copper, iron, gypsum, manganese, and sulfur Ammunition and arms

9 FDI FLOW UPTO 2007 INFLOW IN 2005-06

FDI Inflows in India During 2005- 2006 has registered significant growth in comparison to the previous year. FDI Inflows in India During 2005- 2006 has increased to such an extent that the country has ranked 4th among all the recipients of foreign direct investment in 2006. India has also helped in increasing the total inflow of foreign direct investment in the region of South Asia by around 126% in 2006. Advantages of foreign direct investment in India: The advantage of increased flow of Foreign direct investment in India is that, it has helped in the economic development of the country.

Further the various advantages of FDI in India are that it has helped in the transfer of technology, raising the level of production, developing the infrastructure, and generating opportunities for employment in the country. Amount of FDI inflows in India during 2005- 2006: The amount of FDI Inflows in India During 2005- 2006, that included, equity capital, came to US$ 5.5 billion, which is an increase of around 72% in comparison with the previous year. The amount of FDI Inflows in India During 2005- 2006 which included, reinvested capital, equity capital, and all other capital, came to over US$ 7.7 billion, which is an increase of more than 37% over 2004- 2005. India ranked 4th among all the recipients of foreign direct investment during 2005- 2006 and it was also instrumental in increasing the flow of foreign direct investment to South Asia by around 126% which amounted to about US$ 22 billion in 2006. Various sectors in India that attracted FDI during 2005- 2006 are: Telecommunications Food processing industries Transportation industry

Pharmaceuticals and drugs Metallurgical industries Services sector Electrical equipments Fuels Chemicals Gypsum and cement products Countries contributing to FDI inflows in India during 2005- 2006 are: USA UK Mauritius Singapore Switzerland Germany France Japan Netherland

INFLOW IN2006-07
FDI Flow in India 2007 touched USD 15.7 billion, which represents a growth rate of 184 percent. India is considered to be the most appropriate country for business and therefore Foreign Direct Investment is enormously high in the country. An Overview of FDI Flow in India 2007FDI Inflows to India have been growing at a high rate for the last few years. UNCTAD's World Investment Report states that India ranked fourth in terms of receiving FDI during the year 2006-07, which amounted to USD 22 billion with a growth rate of 126 percent.

The Foreign Direct Investment Inflows during the year 2007-08 was USD 5,614 million as against USD 2,848 million in the previous year during the same period with a growth rate of 97 percent. The total FDI Inflows in India during the epoch August 1991 to July 2007 was USD 60,242 million. Between 2001-02 and 2006-07, FDI inflows in India increased by about two and a half times. Foreign Direct Investment in India for the year 2007Foreign Direct Investment (FDI) inflows into India reached USD 4.9 billion in the first quarter of the year 2007. The major contributor in this alarming FDI Inflow had been the British Telecom major called Vodafone. It led to FDI Inflow of USD 801 million in India's growing telecom industry. FDI Flow in India during April-June 2007 had been USD 1.7 billion, which is apparently a rise of 185 percent as against in the same period of 2006. During January-June 2007, FDI Inflows in India increased by 216 percent as against USD 3.6 billion in the previous year. Foreign Direct Investment in India has generated maximum employment in the year 2007. Delhi received FDI Inflow of around USD 1.3 billion till May 2007 which accounted for a growth of 36 percent of the total FDI Inflows in India. Mumbai, Bangalore and Chennai have contributed to two-thirds of the total FDI inflows into the country. Matsushita Electric Works of Japan brought in USD 342 million in India in 2007. Mauritius had been the biggest source of Foreign Direct Investment in India in the year 2007. Services, telecom, electrical equipment, real estate and transportation were the five major sectors that received maximum foreign direct investment inflows in India in the year 2007. Major Sectors in India Attracting FDI Inflows till June 2007 (from August 1991) Services (USD 9,443 million) Electrical equipment (USD 8,964 million) Telecommunication (USD 4,880 million) Transportation (USD 3,856 million) Fuels (USD 2,892 million) Chemicals (USD 2,465 million) Construction (USD 1,912 million)

10 LISTS OF DIFFERENT COUNTRIES INVESTING UNDER FDI IN INDIA & THEIR SHARE
Top Investing Countries FDI Inflows in India has registered significant growth over the last few years due to the several incentives that have been provided by the Indian government. The increase in the Top Investing Countries FDI Inflows in India has helped in the growth of the country's economy. Foreign direct investment in India: Regulatory reforms were undertaken in India in the early 1990s to encourage FDI inflows to the country.

Foreign direct investment in India is allowed through joint ventures, preferential allotments, capital markets, and financial collaborations. The total amount of foreign direct investment in India came to around US$ 4,222 million in 2001- 2002 and the next year, this figure stood at US$ 3,134 million. The advantages of foreign direct investment in India are that it has led to transfer of technology, generation of new opportunities for employment, and infrastructure development. Countries sending FDI to India are: Mauritius U.K U.S.A Sweden France Switzerland Malaysia Singapore Japan Germany Netherlands

Sectors in India attracting FDI from foreign countries are: Telecommunications that includes services of cellular mobile, radio paging, and basic telephone Chemicals Metallurgical industries Food processing industries Transportation industry Pharmaceuticals and drugs Fuels Electrical equipments that includes electronics and computer software Services sector that includes non- financial and financial Gypsum and cement products Amount of FDI inflows from top investing countries in India are: FDI from Mauritius came to US$ 6,811.1 million between 1991 to 2002 FDI from Japan came to US$ 1,254.8 million between 1991 to 2002 FDI from U.S.A came to US$ 3,194.6 million between 1991 to 2002 FDI from Germany came to US$ 3,603.94 million between 1991 to 2002 FDI from Netherlands came to US$ 3,251.65 million between 1991 to 2002 FDI from Singapore came to US$ 1,648.22 million between 1991 to 2002 FDI from France came to US$ 1,995.79 million between 1991 to 2002 FDI from U.K came to US$ 3,768.77 million between 1991 to 2002

11 TOP INVESTING COUNTRIES UNDER FDI IN INDIA FDI from Mauritius

FDI from Mauritius to India is the highest in comparison with all the other countries that invest in India. FDI from Mauritius to India is the highest due to the special treatment of tax that is given in India to the investments that come through Mauritius.

Foreign direct investment in India: The Indian government realized the fact that foreign direct investment plays a very crucial role in boosting the country's economy by developing the infrastructure, generating new jobs, transfer of technology, and increasing productivity. Thus the government of India liberalized its economic policies in order to use foreign direct investment as a developmental tool. India offers several positive incentives to the foreign investors such as an abundant supply of educated workforce, low wages, and very strong economic growth in the country which has increased the middle class's power of buying. Flow of foreign direct investment from Mauritius to India: The first rank goes to Mauritius in terms of highest inflow of foreign direct investment to India in comparison with all the other countries that make investments in India. This is due to the fact that special tax treatment is given to all those investments that come through Mauritius to India. The total amount of FDI from Mauritius to India came to Rs. 27,891.15 core between 1991 to 2002. The total percentage of FDI from Mauritius to India stood at 38.7% out of the total foreign direct investment in the country from 1991 to 2002. Industries attracting FDI from Mauritius to India are: Electrical equipment Gypsum and cement products Telecommunications Services sector that includes both non- financial and financial Fuels Effects of FDI from Mauritius to India: The effects of increased flow of foreign direct investment from Mauritius to India has been that it has led to the generation of a lot of new employment opportunities, development of the sectors that have received investments, and also growth of the country's economy.

FDI from U.S.A

Foreign direct investment in India: The government of India earlier restricted the entry of foreign direct investment into the country but then it liberalized the country's investment regulations in the beginning of 1991. The two factors that help to make India one of the best destination for foreign direct investment are that the rate of wages in the country are much lower in comparison to the developed countries and it is the second biggest country in the whole world for it has a population of more than one billion people. The total amount of foreign direct investment in India stood at around US$ 48.2 billion from August, 1991 to December, 2006.

Flow of foreign direct investment from U.S.A to India: The flow of FDI from U.S.A to India has increased at a very fast rate in the last few years and this has helped to make U.S.A one of the major countries investing in India. The total amount of FDI from U.S.A to India stood at Rs. 12,333.84 crores between 1991 and 2002. The total percentage of FDI from U.S.A to India came to 17.1% out of the total foreign direct investment in the country between 1991 and 2002. Industries attracting FDI from U.S.A to India are: Telecommunications which includes services of basic telephone, radio paging, and cellular mobile Food processing industries Fuels Service sector which includes non- financial and financial services Electrical equipment which includes electronics and computer software Results of FDI from U.S.A to India: The results of FDI from U.S.A to India has proved to be beneficial for the country for it has led to the transfer of technology, creation of new opportunities for employment, and also economic growth of the country.

FDI from U.K

FDI from U.K to India has registered significant growth in the last few years due to the many incentives that have been given by the government of India. The increased flow of FDI from U.K to India has helped in giving a major boost to the country's economy. Foreign direct investment in India: India has the fifth biggest economy in the world and the country also has such a market that offers very high prospects for earning and growth. These factors have helped to attract huge amounts of foreign direct investment in India. The total amount of foreign direct investment in India stood at US$ 4881 million in 1995- 1996 and the next year, this figure increased to US$ 6008 million. The industries that have attracted foreign direct investment in India are electrical equipments, information technology, service sector, tourism, metallurgical industries.

Various industries attracting FDI from U.K to India are: Information technology Telecommunications which includes services of radio paging, basic telephone, and cellular mobile Service sector which includes non- financial and financial services Power Oil and gas Amount of FDI from U.K to India: FDI from U.K to India has increased over the years to make U.K rank fourth among all the countries that make investments in India. The flow of FDI from U.K to India has increased over the years due to the several incentives that have been provided by the government of India. The total percentage of FDI from U.K to India came to 5.2% out of the total foreign direct investment in the country between 1991 and 2002. The total amount of FDI from U.K to India stood at Rs. 3,768.77 crore between 1991 and 2002. Beneficial results of FDI from U.K to India: The beneficial results of FDI from U.K to India are that it has helped in creating new opportunities for employment in the country, improved the technology of the industries, and also developed the infrastructure of the country.

FDI from Japan

FDI from Japan to India has increased over the years which in its turn have helped in the growth of the country's economy. The flow of FDI from Japan to India has increased due to the several incentives that have been provided by the Indian government. Foreign direct investment in India: The government of India started the process of encouraging the flow of foreign direct investment in the country in 1991. The Indian government further made liberalization and simplification of the procedures for foreign direct investment in 1995. All these measures helped to attract huge amounts of foreign direct investment in India. The various sectors that have been attracting foreign direct investment in India are cement and gypsum products, fuels, transportation industry and drugs and pharmaceuticals. The amount of

foreign direct investment in India stood at US$ 2,634 million in 2003- 2004 and the next year, this figure increased to US$ 3,755 million. Various industries attracting FDI from Japan to India are: Electrical equipments which includes electronics and computer software Transportation industry Services sector which includes non- financial and financial services Earth moving industry Telecommunications which includes cellular mobile, radio paging, and basic telephone services Flow of FDI from Japan to India: FDI from Japan to India has increased over the years as a result of which Japan ranks third among all the countries that make investments in India. FDI from Japan to India came to US$ 94 million in 2003, in 2004 this figure stood at US$ 116 million, and in 2005 this figure increased to US$ 168 million. The total amount of FDI from Japan to India came to US$ 1,254.8 million between 1991 and 2002. The total percentage of FDI from Japan to India stood at 6.8% out of the total foreign direct investment in the country from 1991 to 2002.

12 COMPARISONS BETWEEN CHINA AND INDIA

Comparative Analysis of India's and China's FDI Flow at a GlanceChina stands on a higher plane than India in terms of economy. India's per capita income is USD 440 and China's per capita income is USD 990.

The population residing below the poverty line in China is 3 percent whereas in India, the population below poverty line is 30 to 40 percent. China offered investment opportunities to the foreign players much before India did and thereby attracted a raging FDI Inflows in the country. China received USD 52.7 billion of FDI inflows in the year 2002 while, India received USD 4.67 billion of FDI inflows in the same year. India Lagging Behind China in FDI InflowsAccording to a new World Bank report, India lags behind China in terms of attracting FDI Inflows in the country, in spite of having high-tech industries and adept workforce. The main cause behind this drawback is that India is not skilled enough to adopt the technological advancements at a fast pace. FDI Inflows only contributes to 0.8 percent of India's GDP as compared to 3.5 percent of the same in China. India's high-tech industries claim for 2.3 percent of Gross Domestic Product whereas the high-tech industries in China contribute to around 7.9 percent in the GDP of the country. India did not open much of economic activities to the foreign players as compared to other developing nations except liberalizing trade and foreign investments. Advantages of India and China in terms of FDI InflowsThe majority of the foreign investors prefer China over India for investment opportunities as China has a bigger market size than India, offers easy accessibility to export market, government incentives, developed infrastructure, cost-effectiveness, and macro-economic climate. India on the other hand has skilled and efficient manpower, talented management system, rule of law, transparent system of work, cultural affinity and regulatory environment.

13 FDI IN DIFFERENT STATES OF INDIA

FDI in different states in India have increased steadily since the early 1990s when the Indian economy was opened up to foreign investments. Delhi, Maharashtra, Karnataka and Tamil Nadu are among the leading states that have attracted maximum FDI. The status of FDI in different states of India, during the period beginning from the year January 2000 to October 2006 corroborates the growth of Indian states in sync with the Indian economy. Some of the states in India which have witnessed a massive upsurge in FDI Inflows include Delhi (USD 6,780 million), Maharashtra (USD 5,650.1 million), Karnataka (USD 1,876.1 million), and Tamil Nadu (USD 1,876.1 million). Other states which are in the receipt of FDI Inflows in India include West Bengal, Gujarat, Haryana, Andhra Pradesh, Kerala, and Uttar Pradesh. FDI in Maharashtra -

Foreign Direct Investment on Maharashtra covers Mumbai, Dadra and Nagar Haveli, and Daman & Diu. The total FDI Inflows in Maharashtra economy from January 2000 to October 2006 was estimated to be around Rs. 25,685.45 crores which is approximately USD 5,650.1 million. FDI in West Bengal -

Foreign Direct Investment in various states in and around West Bengal covers West Bengal, Sikkim, and Andaman & Nicobar Islands. The FDI Inflows in these states from January 2000 to October 2006 was around Rs. 1,523.83 crores which comes to around USD 334.8 million. FDI in Karnataka -

Foreign Direct Investment on Karnataka from January 2000 to October 2006 has accounted for Rs. 8,485.38 crores which approximately comes to around USD 1,876.1 million.

FDI in Gujarat -

Foreign Direct Investment on Gujarat from January 2000 to October 2006 was estimated to be around Rs. 4,112.73 crores which comes to around USD 898.8 million. Gujarat ranks six in terms of FDI Inflows in India. FDI in Haryana The total Foreign Direct Investment Inflows in Haryana, Delhi, and parts of Uttar Pradesh has been estimated to be around Rs. 30,673.73 crores which is approximately USD 6,780.0 million from January 2000 to October 2006. Haryana ranks first in terms of receiving FDI Inflows in India. FDI in Delhi Foreign Direct Investment Inflows on Delhi economy has been estimated to be around Rs. 30,673.73 crores which roughly comes to USD 6,780.0 million from January 2000 to October 2006. FDI in Tamil Nadu Foreign Direct Investment Inflows on Tamil Nadu and Pondicherry has been accounted for Rs. 8,485.38 crores which comes to around USD 1,876.1 million from January 2000 to October 2006. Tamil Nadu ranks third in terms of FDI Inflows in India. FDI in Andhra Pradesh Foreign Direct Investment Inflows on Andhra Pradesh has been estimated to be around Rs. 4,825.36 crores which is approximately USD 1,061.4 million as has been calculated between January 2000 and October 2006. Andhra Pradesh ranks fifth as a recipient of FDI Inflows in India. FDI in Kerala Foreign Direct Investment Inflows in Kerala has also covered regions in Lakshadweep and has been estimated to be around Rs. 339.77 crores which is approximately USD 75.1 million from January 2000 to October 2006.

FDI in Uttar Pradesh Foreign Direct Investment Inflows on Uttar Pradesh and Uttaranchal was Rs. 15.27 crores which comes to around USD 3.3 million from January 2000 to October 2006.

Detailed information related to some states Impact of FDI on Maharashtra Economy - Impact of FDI on Maharashtra Economy has
been very strong as foreign direct investments have introduced innovative technologies in various industrial units in the state. Advantages of Maharashtra EconomyMaharashtra offers a business-friendly environment, excellence in infrastructure, highly-skilled and trained workforce, and effective policies in the industrial units. The Jawaharlal Nehru Port Trust (JNPT) provides effective communication network with markets of Southern, Northern & Western India. During 2002-2006, Mumbai was estimated to touch 8.4 percent GSDP growth. Increase in the growth rate of agriculture can make the state achieve 10 percent growth rate. The industrial and service sectors have contributed largely in the robust growth of the state's economy. Mumbai executes around 70 percent of India's stock transactions and is claimed to be the commercial capital of India. Sectors which have been heavily benefited from foreign investments in Maharashtra include Engineering, Electronics Hardware, Automobiles and Auto Components, Consumer Durables, Chemicals, Petrochemicals, Pharmaceuticals, Information Technology and Biotechnology. FDI Inflows in MaharashtraThe Konkan railway project has attracted huge foreign direct investments. Maharashtra has ranked first in terms of attracting maximum foreign direct investments in executing various projects FDI Inflows in Maharashtra has brought in innovative technologies in the industrial units in the state Foreign Direct Investment in the state has raised the competitiveness of the business units in Maharashtra.

Foreign Direct Investment Inflows has increased investment from the domestic market to a great extent. The export-market has got a real boost up from the FDI Inflows in the state and has also got a bonus of accessibility in the global markets. FDI Inflows have also bridged the gap in the foreign exchange system which was a major issue of concern.

Impact of FDI on Gujarat Economy- Impact of FDI on Gujarat Economy has been positive
for it has led to the all round development of the state. Impact of FDI on Gujarat Economy has proved to be beneficial for the various industries in the state have grown, developed and also expanded. Factors attracting foreign direct investment in Gujarat: The state provides extensive network of railways. Gujarat has the highest number of airports in the country. The state provides excellent network of roads. Professional services to the investors are provided in Gujarat. The state is highly industrialized. Location wise, Gujarat has a strategic location providing easy access to the African, western, and Middle East markets. Skilled manpower is abundantly available in Gujarat. Industries attracting foreign direct investment in Gujarat are: Oil and gas Infrastructure Food processing industries Information technology Gems and jewelry Biotechnology Chemicals

Textiles Amount of foreign direct investment in Gujarat: The regional office of Reserve Bank of India in Ahmadabad received US$ 970.3 million as foreign direct investment for the state during January 2000 to December 2006. The total percentage of foreign direct investment that the regional office of Reserve Bank of India in Ahmadabad received came to 3.7% out of the total foreign direct investment in India during this period.

Impact of FDI on Haryana Economy

Impact of FDI on Haryana Economy has proved to be beneficial for the state's economy has grown at a very impressive rate. Employment in Haryana has increased significantly due to Foreign Direct Investments in the state. Factors attracting foreign direct investment in Haryana are: The state provides excellent infrastructure facilities such as well developed roads, railways, and industrial estates, technical Institutes, commercial markets, and communication network. The state provides a well developed system of banking with more than 4500 branches of banks The state has adopted policies that are investor friendly The state has a very efficient administrative system which tries to make it easy for the investors to make investments in the state The state provides abundant supply of skilled manpower The state provides residential and corporate estates that are of world class standards Amount of foreign direct investment in Haryana: The total amount of foreign direct investment in the state of Haryana came to around Rs. 3,000 crore during 2000 to 2004. Industries in Haryana attracting foreign direct investment are: Information technology Electrical goods

Food processing industries Automobiles Ready made garments Light engineering International companies having presence in Haryana are: Siemens Alcatel Duracell GE Capital Silicon graphics Motorola Daewoo Telecom Ltd Polaroid Hughes Software systems Growth in Haryana economy due to foreign direct investment: Haryana has emerged as one of the most important states in the country for foreign direct investment and this has given a major boost to the economy of the state. Haryana has become the largest manufacturer of the number of tractors, passenger cars, scientific instruments, and motorcycles in the country. The tax collections in the state increased at the rate of 15% in 20032004. The state of Haryana has also generated more than 2 lakh jobs due to foreign direct investments between 2000 and 2004. The total amount of exports from Haryana has registered growth from Rs. 10,000 crores in 2002- 2003 to more than Rs. 12,000 crores in the next year.

14 EPZ ANDFDI IN INDIA

EPZ and Foreign Direct Investment in India work hand in hand to ensure a rapid economic growth in the units set up in the export processing zones in India. The foreign direct investment is allowed up to 100 percent in these units of the EPZs in India. FDI is one of the most significant factors for the success of the export processing zones in India. It has been playing a key role in fueling the economic growth of these sectors. These units of EPZ in India are generally 100 percent export-oriented. The foreign direct investment made in such export processing zones in the country comes from the non-residential Indians as well as the Overseas Corporate Bodies. These corporate bodies are ruled by the owners itself or the NRIs who have set them up in order to aid the domestic investments.

The FDI policy has made investments in India more flexible and attractive for the investors. However, there are some exceptional cases, which are bonded by certain confinements such as lock-in period on original investment, dividend cap, and foreign exchange neutrality, as per the notified sect oral policy. Initially there was a clause regarding the dividends from consumer good industries, which has been withdrawn from 14th July 2000. EPZ and Foreign Direct Investment in India have been concomitant in every activity of the units in export processing zones. FDI is allowed in almost all the sectors including the service sectors up to 100 percent but there are few segments, which have to abide certain restrictions that hinder such a huge amount of FDI flows in those particular sectors. Reserve Bank of India (RBI) and Foreign Investment Promotion Board (FIPB) approve the FDI flows made in the industrial units in EPZ in India. The export processing zones in India are highly labor intensive, comprising of competent manpower, and a steadfast macroeconomic ambiance. In 1989, the foreign direct investment in the export processing zones in India was 12 percent. It witnessed a minuscule increase of 18 percent in the year 2000. Nonetheless, ever since 2000, the FDI flows in the EPZ in India started increasing at a massive pace and by the year 2003, the FDI inflows grew by 25 percent. Share of foreign direct investments in the export processing zones in India during 1997-2003 (in %): Kandla 1.3 4.9

Santacruz 8.4 9.2

Noida Chennai Cochin Falta Vizag

12.3 12.7 28.4 30.7 9.6 13.7 3.1 4.0 38.8

The Government of India decided upon aiding the EPZ in India with financial incentives in the beginning to attract remarkable FDI inflows. EPZ and Foreign Direct Investment in India seem to be inconsistent at some areas. For example, the Santacruz export processing zone which is supposed to be one of the largest zones in India experiences very less of FDI whereas surprisingly, Vizag being the lowest growing EPZ in India has higher proportion of FDI inflows.

15 CONCLUSIONS
In the end we can say that FDI will give boost to Indian economy if proper uses are made by introducing fdi in those sectors where has not expanded and lack in technology.FDI will also increase the competition in the market and the customers will get good quality products at reasonable prices . Fdi also helps to introduce the new technology, superior quality designs in so many sectors. FDI also helps in the up gradation of the backward area it means the development on the country is going on. It will also help to increases the GDP of the county and also provides employment opportunities to the peoples. It also helps in the best possible utilization of resources in the country. Infrastructural growth will also increases due to FDI. So we can say that the FDI is very helpful for our country if the government has total control on in it otherwise it will start to exploit the resources of the country.

16 REFERENCES
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