CONTENTS

Introduction
Classification of FDI Govt. Policies on FDI. Investment scenario in India. Entry Routes for FDI. FDI v/s FII. FDI Inflows.

FDI outflows.
Impact of FDI on Indian economy.

INTRODUCTION
Foreign direct investment (FDI) is defined as a

company from one country making a physical investment into building a factory in another country. In order to qualify as FDI the investment must afford the parent enterprise control over its foreign affiliate. The UN defines control in this case as owning 10% or more of the ordinary shares or voting power of an incorporated firm.

Classification of FDI
Greenfield investment: It is the direct investment in

new facilities or the expansion of existing facilities. It is the principal mode of investing in developing countries like India. Mergers and Acquisition: It occurs when a transfer of existing assets from local firms takes place.

FDI policies in INDIA

FDI permitted in almost all activities
Policy supported by a legal framework National treatment to investment Indian FDI policy regime assessed independently to be liberal

and progressive. Ceilings and routes for investment being constantly reviewed and liberalized.

Liberalization of FDI Policy

FDI Policy . Prohibited activities

Retail except single brand retailing allowed upto 51% with FIPB approval Atomic energy Lottery business Betting and Gambling

FDI Policy for Industry SectorFully permitted

Manufacturing 100% FDI permitted in all activities under automatic route except: Cigar and cigarettes of tobacco - FIPB

Products reserved for Small Scale Sector FDI less than 24% under automatic route FDI beyond 24% - FIPB subject to export obligation
Defence products FDI upto 26% - FIPB subject to licensing of Arms and Ammunitions

FDI Policy for Industry Sector. Fully permitted

Mining Coal FDI upto 100% as per Coal Mines (Nationalization) Act 1977 Diamond, Gold, Silver , Minerals upto 100% under automatic route as MMRD Act Atomic minerals upto 74% in JV with PSUs FIPB

Electricity FDI upto 100% under automatic route in Generation, Transmission, Distribution and Power Trading as per Electricity Act 2003

FDI Policy for Service Sector. Largely permitted

Upto 26%

FM Broadcasting (20%) Uplinking News and CATV Channel Print Media News Papers & Periodicals Insurance

- FIPB - FIPB - FIPB - Automatic

Upto 49%

Broadcasting - Cable Network, DTH, Setting up hardware Stock Exchanges Air Transport Services

- FIPB - FIPB - Automatic

FDI Policy for Service Sector. Largely permitted

Telecommunication Private sector bank

Upto 74%

- FIPB (Beyond 49%) - Automatic

Upto 100%

Development of existing airports Publishing scientific magazines Courier services

-FIPB (Beyond 74%) - FIPB - FIPB

FDI Policy for Agriculture Sector. Largely Restricted

Floriculture, Horticulture, Development of seeds, Animal husbandry, Pisciculture, Cultivation of vegetables, Mushrooms under controlled condition allowed 100% under automatic route
Tea plantation 100% with FIPB and divestment of 26% in 5 years Other activities not allowed.

Entry Route for FDI

Investing in India

Automatic Route
General rule No prior permission required
Only information to the Reserve Bank of India within 30 days of inflow/ Issue of shares

Prior Permission (FIPB)

By exception Prior Government Approval needed Decision generally Within 4-6 weeks

What is FII
An institution established outside India, which invests in securities traded on the markets in India e.g.

Pension Funds Mutual Funds Investment Trust Insurance companies Endowment Funds University Funds Foundations or Charitable Trusts Asset Management Companies Power of Attorney Holders Bank

FDI v/s FII

FII is Foreign Institutional Investment: It is

investment made by foreign Mutual Funds in the Indian Market. FDI is Foreign Direct Investment: It is the investment made by Foreign Multinational companies in India.

FDI Inflows.Robust Growth

FDI Country Wise

Investment Promotion and Facilitation

Promotion Holding Destination India and Invest India events

abroad. Events were held at France, Japan, UK, Finland, Taiwan, Italy, USA, and Davos this year. Publications, Chat room and Website

Facilitation Country Focus Desks Foreign Investment Implementation Authority Policy review comprising of review of route, Equity caps and procedures.

FDI Outflow
Globalization has led Indian firms going on buying spree

abroad.
Buyers spread across wide spectrum of industries - pharma,

telecom, auto and IT.

Geographic spread - spanning US, Europe, Africa, China .
FDI outflows from India now exceed inflows. 2005 saw 136 deals at a value of $4.7 billion. In outward FDI performance index rankings covering

132 economies, India improved rank from 80 in 1990 to 54 in 2004.

FDI Outflow Drivers

Outward FDI attributed to increasing competitiveness of Indian

firms and interest to expand globally. Access to markets, natural resources, distribution networks, foreign technologies and strategic assets like brand names- main motivations. Liberalization of govt policies and relaxation of regulations on FDI abroad. Globalization led domestic companies to transcend geographical barriers and find foothold in developed markets. Changes in international regulatory environment, particularly in the IPR regime have been critical drivers.

Indian Investments Overseas ( US$ Million)

Overseas Investors

Impacts of FDI
Access to International market Increased capital flow

Transfer of Technology
Transfer of managerial skills

SUCCESS!!
Automotive Sectors Hyundai Motors, FORD Motors, Suzuki, Honda,Daimler Crysler and Automotive Components Sector in general- has brought rigorous quality standards and technology innovation in Auto industry
Electronics Sector Samsung, LG, Sony etc.-has set up big R&D centre in Noida

IT All the major IT players in the world have made India a very important link in India

SUCCESS!!
Pepsico-India- has set up 8 greenfield sites in backward regions of different states
Petrolium & Gas British Gas, Cheveron, Cairn Energy etc. Telecom Singapore Telecom , Hutchinson Whampoa, Motorola etc.-established a good source of software and chip design for telecomsupplying worldwide

FAILURES!!
Automobile Daewoo Motors. Energy Sector Despite much efforts, not much progress.

Example Failure of Enron ( DPC). Infrastructure Sector Except Telecom, not much success yet. Manufacturing Sector is yet to see good amount of FDI.

HOW TO IMPROVE!!
Created a hospitable environment for investment non resident or otherwise.
Continue to offer a low wage rate market. Maintain stable foreign exchange market. Promote quality education. Reforms in the labor market. Some tax incentives

for foreign enterprises. Some tax incentives for foreign enterprises.

FDI & ECONOMIC GROWTH

The growth rate of the service sector was 11.18% in 2007 and now

contributes 53% of GDP.

The industrial sector grew 10.63% in the same period and is now

29% of GDP.
Agriculture is 17% of the Indian economy.
Growth in the manufacturing sector has also complemented the

countrys excellent growth momentum.

The growth rate of the manufacturing sector rose steadily from

8.98% in 2005, to 12% in 2006.

The storage and communication sector also registered a

significant growth rate of 16.64% in the same year.

FUTURE !!!
Future is always uncertain. BUT exceptions are always there, this exception is about India's certain higher rate of growth in the coming future.
huge human resources absence of rigid controls and licenses

interest of foreign entrepreneurs in India

even today, India is producing largest number of billionaires in a year take over by Indian multinationals is amazing packages are becoming lucrative and competitive

and annual rate of growth of India is highest after China

 rapidly upcoming service sector availability of large number of competent professionals the craze of Indians to go abroad is rapidly diminishing the Rupee is becoming stronger and stronger in relation to Dollar India's say in the international diplomacy and political affairs has now become

meaningful

WE CAN SAY THAT FUTURE OF INDIA IS QUITE BRIGHT AND MAY BE IT WILL BECOME THE WORLDS NEXT SUPERPOWER!!!!

THANKS