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NAMES KAARTHIKA
DOLA SAHA
VIKAS JOSHI
GAURAV RAJ
JAIDEO KUMAR
SUBJECT - BUSINESS PERSPECTIVES
PROJECT TOPIC-FDI IN REATAIL
FACULTY NAME- VENKATESH G.
FACULTY SIGNATURE-
DATE OF SUBMISSION 21/11/12
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TITLE OF PROJECT REPORT

In the partial fulfillment of post graduate
program in business perspectives.

SUBMITTED BY

NAME OF INSTITUTE
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CONTENTS:
. INTRODUCTION
. ANALYSIS
FDI CONCEPT
TYPES OF FDI
FDI-ADVANTAGES Vs DISADVANTAGES
FDI PROCEDURES IN INDIA
CURRENT INDIAN FDI LIMITS
FDI TREND IN INDIA
GLOBAL FDI TREND
FDI CASE STUDIES COKE AND IBM
FDI IN INDIA A REALITY CHECK
FDI IN INDIA FUTURE POTENTAIL
FDI INDIA VS OTHERS COMPARISON
. SUGGESTIONS & RECOMMENDATIONS
. BIBLIOGRAPHY
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INTRODUCTION:
When a firm invests directly in facilities
to produce and market a product in a
foreign country.
FDI is very much concerned with the
operation and ownership of the host
country firm.
As per US Department of Commerce and
IMF, It occurs when investor invests 10
percent or more in foreign business entity.
In this case investor holds majority votes
and have control on management and
equity.
Once a firm under takes FDI, it becomes
(Multinational enterprise) MNC.

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ANALYSIS:
FDI CONCEPT

. Long term investment by a foreign direct investor in
an enterprise resident in an economy other than that in
which the foreign direct investors is based.

. The FDI relationship consists of a parent and enterprise
and a foreign affiliate which together form a
transnational corporation (TNC).

. Parents enterprise investment must afford the parent
enterprise control over its foreign affiliate (owning 10%
or more of the ordinary shares or voting power of an
incorporated firm or its equivalent for an
unincorporated firm (UN definition)

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FDI:
. Direct investment by a controlling Parent enterprise in the assets of an
affiliate enterprise located in an economy other than Parent enterprise is based.
. Investment by any corporation that proposes to carry out business in the
country other than its own.
. Long term & direct investment in plant & machinery aimed to carry out/
expand business in the affiliates country.
. Regulated by RBI and FIPB (Foreign Investment Promotion Board) of the
dept. of Commerce under Ministry Of Finance.
. Sector specific limits prescribed for FDI under automatic/ approval route.

FII:
. Investment in the capital/ debt stock of a company/ govt. securities by an
investor that is from or registered in a country outside of the one in which it is
investing.
. Includes hedge funds, insurance companies, pension funds and mutual funds
. Short term investment (generally) made under portfolio management to earn
profits from value appreciation.
.SEBI registration is required to operate as an FII in India.
. Aggregate investment ceiling for FII investment is 10%(5% for single) of the
paid up capital of a company 24% in case of listed Indian companies under a
General Body Resolution.

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FDI ADVANTAGES Vs disadvantages
ADVANTAGES:
. Inflow of equipment & technology.
. competitive advantage and inn ovation.
. Financial resources for expansion.
.Employment of generation.
. Access to global marketplace for domestic players.
. Access to new market/ distribution channel for products.
. Improved consumer welfare through reduced costs, wider choice and improved
quality.
DISADVANTAGES:
. Crowding of local industry.
. Loss of control in business and its activities.
. Repatriation of profits/ dividend by investor.
. Conflicts of codes/ laws.
. Possible exploitation of resources-materials/ wages.
. Effect on local culture/ sentiments-socio cultural effect.
. Effect on natural environment.
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FDI PROCEDURE IN INDIA:
Foreign Direct Investment (FDI) is permitted as under the following forms of
investments:
. Through financial collaborations.
. Through joint ventures and technical collaborations.
.Through capital markets via Euro issues.
. Through private placements or preferential allotments.
Forbidden Territories: FDI is not permitted in the following industrial sectors.
a. Arms and ammunition.
b. Atomic Energy, Railway Transport, Coal and lignite.
c. Mining of iron, manganese, chrome, gypsum, gold , diamonds, copper, zinc.
. Indian companies are allowed to raise equity capital in the international
market through the issue of Global Depository Receipt(GDRs).
.GDRs are designated in dollars and are not subject to any ceilings on
investment.
. Applicant company seeking approval should have consistent track record for
good performance(financial otherwise)for a minimum period of 3 years(this
condition is relaxed for infrastructure projects such as power generation,
telecommunication, petroleum exploration and refining, ports, airports and
roads)
.GDR proceeds can be used for financing capital goods imports, capital
expenditure including domestic purchase/installation of plant, equipment and
building and investment in software development, prepayment or scheduled
repayment of earlier external borrowings , and equity investment in JV/WOSs.
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CURRENT INDIAN FDI LIMITS:

Sector Specific Foreign Direct Investment in India

. Hotel and Tourism: FDI in Hotel & tourism sector in India-100% FDI
is permissible in the sector on the automatic route. The term hotel includes
restaurants, beach resorts, and other tourist complexes providing
accommodation and/or catering ad food facilities to tourists.

. Private Sector Banking: Non-Banking Financial Companies
(NBFC)-49% FDI is allowed from all sources on the automatic route subject to
guidelines issued from RBI from time to time in 19 NBFC activities
.MERCHANT BANKING,UNDERWRITING,PORTFOLIO MANAGEMENT
SERVICES,INVESTMENT ADVISORY SERVICES,FINANCIAL
CONSULTANCY,SOCK BROKING,ASSET MANAGEMENT,VENTURE
CAPITAL,CUSTODIAL SERVICES,FACTORING,CREDIT REFERNCE
AGENCIES,CREDIT RATING AGENCIES,LEASING & FINANCE,HOUSING
FINANCE,FOREIGN EXCHANGE BROKERING,CREDIT CARD
BUSINESS,MONEY CHANGING BUSINESS,MIRO CREDIT AND RURAL
CREDIT.
There are separate prescribed minimum capitalization norms for fund/non
fund based NBFCs.
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. Insurance Sector: Up to 26% FDI is allowed on the automatic route
subject to obtaining license from Insurance Regulatory & Development
Authority (IRDA)

. Telecommunication Sector: Limited to 49% in basic, cellular,
value added services and global mobile personal communications by satellite,
subject to licensing and security requirements and adherence by the companies
(by both investor and investee companies) to the license conditions, up to 74%
in ISPs with gateways radio-paging and end-to-end band width, up to 100% is
allowed subject to the condition that such companies would divest 26% of their
equity in favor of Indian public in 5 years, if these companies are listed in other
parts of the world

.Trading Companies: Up to 51% under automatic route provided it is
primarily export activities, and the undertaking is an export house/trading
house/super trading house/star trading house. However, under the FIPB route,
100% FDI is permitted in case of trading companies for activities like exports,
bulk imports with export/ ex-bonded warehouse sales, cash and carry wholesale
trading etc.





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.Power Sector: Up to 100% FDI allowed in respect of projects relating to
electricity generation, transmission and distribution, other than atomic reactor
power plants. There is no limit on the project cost and quantum of foreign direct
investment.

. Drugs and Pharmaceuticals: Up to 100% under automatic route
for manufacture of drugs and pharmaceutical, provided the activity does not
attract compulsory licensing or involve use of recombinant DNA technology,
and specific cell/tissue targeted formulation, otherwise prior Government
approval is required.

. Pollution Control and Management: Up to 100% under
automatic route in both manufacture of pollution control equipment and
consultancy for integration of pollution control systems.

. Call Centre/ BPO in India: Up to 100% is allowed subject to certain
conditions.

. Roads, Highways, Ports and Harbors: Up to 100% under
automatic route in projects for construction and maintenance of roads,
vehicular bridges, toll roads, vehicular tunnels, ports and harbors.

. Retail Sector: The proposal for FDI in Retail sector has loomed into a
controversy with the proposal being put on the backburner.
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SUGGESTIONS & RECOMMENDATIONS:



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. FDI should be leveraged to create back end
structure.

. FDI will be a powerful driver to curb inflation.

. Restrict the number of stores that can be operated
in a city.

. Allow access to the small retailers to the stores
through special windows.



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BIBLIOGRAPHY:

1. http://businesstoday.intoday.in/story/f
di-in-retail/1/20408.html

2. http://economictimes.indiatimes.com/top
ic/FDI-in-retail

3. http://www.livemint.com/Search/Link/
Keyword/FDI%20IN%20RETAIL%20IN%
20INDIA#title=From the Newsroom:
Pavers moves to comply with FDI norms


4. http://www.banknetindia.com/books/fdi
guide.htm

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