• Foreign Direct Investment refers to

cross border investment made by a

resident in one economy with the
objective of establishing a lasting
interest in an enterprise that is
resident in a country other than that
of the direct investor.
• In India, Foreign Direct Investment
Policy allows for investment only in
case of the following form of
investments:
– Through financial alliance
– Through joint schemes and technical
alliance
– Through capital markets, via Euro issues
– Through private placements or
preferential allotments
• Foreign Direct Investment in India
is not allowed under the following
industrial sectors:
– Arms and ammunition
– Atomic Energy
– Coal and lignite
– Rail Transport
– Mining of metals like iron, manganese,
chrome, gypsum, sulfur, gold,
diamonds, copper, zinc
– Tea plantations.
• Up to 100 per cent equity is allowed in
the following sectors
– 34 High Priority Industry Groups
– Export Trading Companies
– Hotels and Tourism-related Projects
– Hospitals, Diagnostic Centers
– Shipping
– Deep Sea Fishing
– Oil Exploration
– Power
– Housing and Real Estate Development
– Highways, Bridges and Ports
– Sick Industrial Units
– Industries Requiring Compulsory Licensing
– Industries Reserved for Small Scale Sector
• Domestic capital is not adequate for the
purpose of economic growth.
• During the period in which the capital
market is in the process of development
, foreign capital is essential as a
temporary measure.
• Foreign capital brings with it other
scarce productive factors ; technical
know how, business experience and
knowledge.
 AUTOMATIC ROUTE APPROVAL BY FIPB
Under delegated powers Under Foreign Investment
exercised by RBI. Promotion Board.
FDI upto 100% for new and Required for the objects which
existing companies, JVs, firms do not qualify the automatic
is permitted under automatic approval route .
route for all items except from
those where approval from
SEBI or FIPB is required.
A proposal to be made to the
FIPB which studies which
studies it’s project and
conveys it’s decisions within
30 days of submitting
application.
Preference is given to projects
in high priority industries.
• Investment through GDRs and
ADRs.
• Mobilization of funds through
preference shares.
• Mobilization of funds through
external commercial borrowings.
• Foreign currency exchangeable
bonds.
• Local area demand – 86%
• Low cost operations – 29%
• Ease of making FDI – 29%
• Labour availability – 29%
• Entry of other players – 24%
• Political stability – 24%
• Time zone advantage – 24%
• Play a complementary in overall capital
formation.
• Employment production and
productivity enhancement.
• Encourages the transfer of management
skills, intellectual property and
technology.
• Improves Forex position of the country.
• Promotion of the competition within the
local area market.
• Increase in exports.
• A company may lose out on its ownership to
an overseas company.
• Government has less control over the
functioning that is working as the wholly
owned subsidiary of an overseas company.
• FDI entering and taking the control of the
already established market, where local
companies are meeting the requirements of
the market.
• Invest in machinery and intellectual property,
not in wages.
• Large giants can set up monopolies in highly
profitable sectors.
• Asianet's proposal worth US$ 91.7 million
to undertake the business of broadcasting
non-news and current affairs television
channels.
• Global media magnate Rupert Murdoch-
controlled Star India holdings' investment
of US$ 70 million to acquire shares of
direct-to-home (DTH) provider Tata Sky.
• AIP Power will set up power plants either
directly or indirectly by promotion of joint
ventures at an investment of US$ 24.4
million.
•
Foreign Direct InvestmentLast Updated: July 2010Sembcorp
Utilities, a company based in Singapore, has picked up 49 per cent
stake in the 1,320 mega watt (MW) coal-fired plant of Thermal
Powertech Corporation India Ltd, a special purpose vehicle and
subsidiary of Gayatri Projects Ltd, for US$ 235.1 million.

• Cinepolis, a Mexico-based multiplex operator, is looking at

expanding its footprint in India. The company which started
operations in India last year plans to invest US$ 350 million in the
next five years to operate 500 screens in 40 cities.

• According to a study released by global consultancy Bain &

Company, private equity (PE) and venture capital (VC) investments
are projected to reach US$ 17 billion in 2010. The report includes a
survey conducted across leading PE investors globally. The survey
revealed number of respondents planning to invest in the range of
US$ 200-500 million in 2011 has risen nearly four-fold to 27 per cent.
Further, as per figures released by Grant Thornton, the food
processing and agri-based companies have attracted US$ 300 million
PE investments during January-June 2010. In 2009, PE investments
in these sectors were about US$ 398 million.

• IL&FS Investment Managers (IIML) plans to invest US$ 300 million, in

real estate and urban infrastructure projects by the end of 2010.
• Investments by French companies in India is
expected to touch US$ 12.72 billion by 2012, and
would focus on automobile, energy and environment
sectors among others, according to Jean Leviol,
Minister Counsellor for Economic, Trade and
Financial Affairs, French Embassy in India.

• Japanese pharmaceutical major, Eisai plans to invest

US$ 21.25 million in India to expand its
manufacturing capacity and research capabilities.
The investment will be used for increasing the
manufacturing capacity of Active Pharmaceutical
Ingredients (APIs) and product research at the Eisai
Knowledge Centre in Visakhapatnam.

• Japan's Kobelco Cranes, a subsidiary of Kobe Steel,

is planning to invest US$ 12.7 million to set up a
plant near Chennai to produce crawler cranes. The
plant will begin production in 2011.