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Foreign Direct Investment in India (FDI)
- 1. GROUP MEMBERS- Ameya Gandhi (13) Pratik Jain(16) Priy Chheda(46) Pranali Bavkar(2) Rohit Maingi(19) Rushil Gupta(65) Sunmeet Matta(22) Gurpreet kaur(15) Vikramjeet Singh Solar(48) Hardik Gala(12) Harshal Panchal(29) Arshad Ck(54) Jagjit Kaur Wasan(44) 1 22/9/2013
- 2. What is FDI..? Foreign direct investment (FDI)- It is a direct investment into production or business in a country by an individual or company in another country. It can be either by buying a company in the target country or by expanding operations of an existing buisness in that country. 2 22/9/2013
- 4. 31% 13% 12% 11% 10% 6% 6% 4% 4% 3% Services Sector Computer Software & hardware Telecommunications Housing & real Estate Construction Activities Power Automobile Industry Metallurgical Industries Petroleum & Natural Gas Chemicals 4 22/9/2013
- 5. 53% 11% 9% 7% 5% 4% 4% 3% 2% 2% Mauritius Singapore USA UK Netherlands Japan Cyprus Germany UAE France 5 22/9/2013
- 6. Economic Growth Trade Employment and skill levels Technology diffusion and knowledge transfer Linkages and spillover to domestic firms 6 22/9/2013
- 7. 7 22/9/2013
- 9. Ranked 2nd most favored destination for foreign investments after China India ranks among the top 12 producers of manufacturing value added (MVA). In textiles, the country is ranked 4th after China, USA and Italy. In electrical machinery and apparatus, it is ranked 5th. 9 22/9/2013
- 10. 6th position in the basic metals category 7th in chemicals and chemical products 10th in leather, leather products, refined petroleum products and nuclear fuel 12th in machinery and equipment and motor vehicles. 10 22/9/2013
- 11. Foreign Direct Investment (FDI) up to 100% is permitted in all manufacturing activities except:- Defense Industry Cigars & Cigarette manufacturi ng Where the foreign investor has an existing joint venture in India in the same field. Where more than 24% foreign equity is proposed to be inducted for manufactur e of items reserv ed for Small Scale sector 11 22/9/2013
- 12. 12 22/9/2013
- 13. 13 22/9/2013
- 14. 14 22/9/2013
- 15. Attracted only $3.4 billion of FDI in manufacturing on an average every year from 2000 to 2008 67% of China’s total FDI comes in the manufacturing sector compared to 37% in case of India. Acc to FICCI Action plan, India can attract $12billion of FDI in the manufacturing sector per annum. 15 22/9/2013
- 16. India’s share in outward FDI stock is negligible (Chemicals, Automobiles, Food Processing, Electrical & Electronic Equipment, Metals and Machinery Equipment) Sectors like Industrial Machinery, Agricultural Machinery, Ship Building, Medical & Surgical Devices and Computer Hardware Rather India imports these items. 16 22/9/2013
- 17. FDI Inflows for SelectedSectorsin India(Jan 2000 to September 2008) Sector FDI Inflows ($ million) Ship Building 59.15 Industrial Machinery 283.77 Agricultural Machinery 148.37 Earth Moving Machinery 134.51 Medical and Surgical Appliances 140.77 Computer hardware 99.7 Defence 0.15 17 22/9/2013
- 18. A concrete and comprehensive Action plan FDI Policy should aim at incentivizing maximum value addition . Encourage technology transfer by adopting ‘Swap Technology for Market’ policy Cut ting down the complex regulatory procedures and reducing delays in the project approvals. 18 22/9/2013
- 19. FDI IN SERVICE SECTOR 19 22/9/2013
- 20. India's large service industry accounts for more than 50% of the country's GDP. It makes up more than 25% Employment Service sectors like telecommunication, IT enabled services, insurance, air transport are becoming prominent 20 22/9/2013
- 21. Introduction of ‘Manmohanomics’ in 1991 Growing presence of transnational corporations and the technological progress. Liberalization of many service sectors activities (telecom, transport, finance etc.) 21 22/9/2013
- 22. Attracted $3.12 billion FDI in the first seven months of 2009-10 22 per cent of the total FDI inflows of $17.64 billion in the April-October for service sector In 2008-09, attracted the maximum FDI worth USD 6.11 billion. 22 22/9/2013
- 23. FDI Policy in Services Sector 100% FDI is permitted for many service sectors like- (Real estate, Construction, Hotels, tourism, films, IT - enabled services, Consultancy, Medical, Education, Advertising, etc) 23 22/9/2013
- 24. Restricted sectors in Services Atomic Energy, Lottery Business, Gambling and Betting, Business of Chit Fund, and any activity/sector that is not opened to private sector investment. Besides the above, FDI is not allowed in plantations. 24 22/9/2013
- 25. CurrentissueswithFDI in ServicesSector Very weak linkages of service sector with the Indian economy (only few cities) Requires highly skilled workers Employee Welfare in time of crisis 25 22/9/2013
- 26. Allowed up to 100% Contributes 19% to the GDP Pilot programme for delivering subsidy directly to farmer 26 22/9/2013
- 27. To connect 66,800 habitations To construct 1,46,000Km of new rural roads To Upgrade and modernize 1,94,000Km of existing rural roads To provide corpus of Rs. 8000 crore RIDF(rural infrastructure development fund) 27 22/9/2013
- 28. FDIinRetail….WHYINDIA? Low share of organized retailing Increase in disposable income and customer aspiration or demand. Increase in expenditure for luxury items. 28 22/9/2013
- 29. FDIinRetail….Benefits Generate huge employment Increased investment in technology The huge tax revenue generated. The consumer gains from the wide variety of choices and a more diversified basket. The indirect benefits like better roads, online marketing, expansion of telecom sector etc. Will give a ‘big push’ to other sectors like agriculture, small and medium size enterprises.29 22/9/2013
- 30. FDIinRealEstate Second-most favoured destination for FDI in the world Norms to allow 100% FDI in Mar 2005 . 100 acre criterion to 25 acre criterion. 30 22/9/2013
- 31. FDIinRealEstate….WhyInvest?? India produces an estimated 2 million new graduates Presence in the list of top 500 sectors complied by US taking into consideration of the growth rate. Real estate investments in India yield huge dividends. 31 22/9/2013
- 32. Tourism Raised to $120 million. Major source of employment. Third largest earner of foreign exchange. Private investments through public private partnership. 100% FDI permitted. 32 22/9/2013
- 33. NeedforFDIinTourism Foreign tourist arrivals are expected to grow to 10 million by 2010-12 Estimated that tourism in India could contribute Rs.8,50,000 crores to the GDP by 2020 33 22/9/2013
- 34. ReasonsforlowFDI High Taxes Highest import duty on imported liquor used in hotels Service Tax on Tour Operators Inland Air Travel Tax 34 22/9/2013
- 35. FDI Policies in India(overview) FDI Policy permits FDI up to 100 % from foreign/NRI investor without prior approval in most of the sectors. Known as the automatic route. The FDI policies in INDIA are formulated on 4 parameters: -Increased capital flow. -Improved technology. -Management expertise. -Access to international markets. Hence 100% inflow was allowed in sectors like Power, Renewable energy , Agriculture, mining etc. Also sectors like insurance and defence have a cap of 26% and the banking sector has cap of 49%. 35 22/9/2013
- 36. Someof the MajorInvesting Countries 36 22/9/2013
- 37. Attract ‘Quality’ FDI Attract technology and localize production Focus on Export- oriented FDI Target specific sectors Increase ease of doing business 37 22/9/2013
- 38. FDI may provide better access to latest technologies for the local economy. FDI provides compitition to the local industries which intern make them compitant. Hence product quality improvement. The increased flow of FDI in a country has given a major boost to the country's economy . Hence measures must be taken in order to ensure that the flow of FDI in the country to continue to progess in all perspectives. 38 22/9/2013
- 39. THANK YOU 39 22/9/2013
Notas del editor
- Foreign direct investment (FDI) capital flows into India have increased dramatically since 1991, when India opened its economy to FDI, and inflows have accelerated since 2000. New equity capital flows take one of two forms: M&A and greenfield investment. In a merger or acquisition, one firm acquires an equity stake in an existing foreign firm. Greenfield FDI takes place as the establishment of a new overseas affiliate by a parent company. India does not provide FDI statistics that break out M&A vs. greenfield FDI. For most developing countries, however, the greenfield route is more prominent, as there are fewer existing companies available to acquire, as compared with developed countries.
- (cumulative inflows Apr’00 to Nov’09)
- (cumulative inflows Apr’00 to Nov’09)
- The manufacturing sector is estimated to have a US$ 180-billion investment opportunity over the next five years, according to the Investment Commission of India.
- FICCI study further observed that India’s share remains negligible in the outward FDI stock of developed countries in the top manufacturing sectors like Chemicals, Automobiles, Food Processing, Electrical & Electronic Equipment, Metals and Machinery Equipment. India has not attracted FDI in a large manner in any of these sectors so far from the developed countries. India on the other hand India continues to import large amount of these machinery and equipments in the absence of sufficient domestic capacity to meet the demand. India has so far attracted only $283 billion of FDI in industrial machinery sector and $99.7 billion in the Computer Hardware sector.
- Besides this, FICCI study pointed-out that the technology transfer and absorption which is one of the major benefits of FDI has not taken place adequately in various manufacturing sectors in India. While there are few Indian manufacturing firms whose technological capabilities are world class, but for many manufacturers especially in SMEs, technological capabilities are limited. A concrete and comprehensive Action plan to attract FDI in important and strategic areas like Computer Hardware, Capital Goods, Ship Building, Aerospace, Electronics, Medical Devices and Food Processing. FDI Policy should aim at incentivizing maximum value addition in the country. Incentivize technology transfer by adopting ‘Swap Technology for Market’ policy as is the case in China. Rationalizing complex regulatory procedures and reducing delays in the project approvals.
- The emergence of India as one of the fastest growing economies in the 1990’s is due to rapid growth of service sector. India has also become an exporter of services.
- The liberalization measures post-1990 has changed with foreign investments radically, now portfolio as well as Foreign Direct Investment are not only allowed but also actively encouraged.
- In both banking and insurance, foreign investment is permitted subject to specific caps or entry conditions. FDI in media is permitted with varying sector caps. Retail trade is currently restricted to 51% FDI permitted in single brand retail stores and 100% FDI permitted in wholesale cash and carry. Legal services are currently not open to foreign investment.
- Subject to these foreign equity conditions, a foreign company can set up a registered company in India and operate under the same laws, rules and regulations as any India-owned company. India extends National Treatment to foreign investors with absolutely no discrimination against foreign-invested companies registered in India or in favor of domestic ones
- The nature of work in the service sector fuelled by FDI is restricted to a few metropolitan centers like Delhi, Mumbai, Bangalore etc performing back office jobs – IT and otherwise. Moreover, the kind of work necessary requires an extremely skilled workforce and does not form much of a value add for the common Indian man. These firms behave like isolated export points that have a very weak interrelationship with the economy of the host country, negating the advantage of the FDI. Some of them also claim that the impact of FDI on the service sector can swing its output both in the positive and the negative direction. This ambiguity in the impact on this sector makes it all the more difficult to frame appropriate precautionary regulations. This we have seen in recent recession, when people were fired from MNC’s without any notice.
- FDI in sectors/activities under automatic route does not require any prior approval either by the Government or the RBI.
- Foreign direct investment in India is allowed through joint ventures, preferential allotments, capital markets, and financial collaborations. 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. 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.
- For instance, multinational firms may increase the degree of competition in host-country markets which will force existing inefficient firms to invest more in physical or human capital.