FOREIGN INVESTMENT IN INDIA

Foreign Direct Investment (FDI)

What is FDI Why we need FDI Process of the inflow of FDI

Benefits
Types Advantages & Disadvantages FII

Modes Of FDI
1)
o o

By Direction
Inward Outward

1)
o o o

By Target
Mergers & Acquisitions Horizontal FDI Vertical FDI

1)
o o o

By Motive
Resource seeking Market seeking Efficiency seeking

Factors affecting FDI

Financial Incentives (Funds from local govt.) Fiscal Incentives (Exemption from import duties) Indirect Incentives (Provides land & political stability)

Market potential & accessibility

Large economy Market size

Why India??
Liberal & Largest Democracy Second largest emerging market Skilled & competitive labor force

Higher rate of return

Second largest stock exchange after NYSE

(6500 aprrox) Destination for business process outsourcing, knowledge process outsourcing, etc. Low costs and tax exemptions

Government Policies

Automatic Route

Prior Permission

Entry Routes

Investing in India

Automatic Route

Prior Permission (FIPB)

General Rule No prior permission required, only information to the RBI

By Acceptance Prior Government approval needed Decision generally within 4-6 weeks

FDI Investment sectors

Prohibited activities Atomic Energy Arms & Ammunition Lottery Business Betting & Gambling Aircraft & Warships Coal lignite

Fully permitted activities Cigar & Cigarettes of tobacco Roads & Highways Hotels & Hospitals Minerals Coal, Diamond, Gold, Silver Real estate Mining Mobile sector Automobile & telecommunication

Foreign Institutional Investment (FII)

An institution established outside India, which

invests in securities traded in the markets Investment vehicles are:

Mutual funds
Investment trusts Insurance companies University funds Foundations or charitable trusts Asset management companies Bank Equity & debt

FINANCIAL YEAR-WISE FDI EQUITY INFLOWS:

S no. Financial year (april-march) Amount of FDI inflows

Financial years 2000-2011 1 2 3 4 5 6 7 8 9 10 11 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 * 2008-2009 * 2009-2010 ** 2010-2011 (up to February 2011) + In crores 10,733 18,654 12,871 10,064 14,653 24,584 56,390 98,642 123,025 123,120 83,687 In US$ millions 2,463 4,065 2,705 2,188 3,219 5,540 12,492 24,575 27,330 25,834 18,355

% growth over previous year

( + ) 65 % ( - ) 50 % ( - ) 19 % ( + ) 47 % ( + ) 72 % (+ )125 % ( + ) 97 % ( + ) 11 % ( - ) 05 % -

Cumulative total from april 2000 to February 2011

576,423

128,766

ROBIN R. MASIH MBA(MS) 5 YRS, IX sem IM-2K7-77