Professional Documents
Culture Documents
Index
Introduction Types of FDI Major Bodies Constituted to FDI India as a FDI destination Entry Process Entry Strategy Pros & Cons of FDI in India Sectorial Analysis Special Investment Avenues FDI Equity Inflow FDI Inflow Financial Data Recommendations Conclusion
Introduction
It is defined as an investment involving a longterm relationship and reflecting a lasting interest and control of a resident entity of one
significant
degree
of
influence
on
the
Contd.
Generally speaking FDI refers to capital inflows from abroad that invest in the production capacity of the economy and are: Usually preferred over other forms of external finance because they are:
Non-debt creating, non-volatile and their returns depend on the performance of the projects financed by the investors
FDI also facilitates international trade and transfer of knowledge, skills and technology.
Contd.
The FDI relationship consists of a parent enterprise and a foreign affiliate which together form a multinational corporation (MNC). In order to qualify as FDI the investment must afford the parent enterprise control over its foreign affiliate.
The IMF defines control in this case as owning 10% or more of the ordinary shares or voting power of an incorporated firm or its equivalent for an unincorporated firm.
Foreign Direct Investment (FDI) is permitted as under the following forms of investments: Through financial collaborations Through joint collaborations ventures and technical
Through capital markets via Euro issues Through private placements or preferential allotments
Types of FDI
Greenfield Investment Mergers & Acquisitions Horizontal Foreign Direct Investment Vertical Foreign Direct Investment
Forbidden Territories
FDI is not permitted in the following industrial sectors:
Arms and ammunition Atomic Energy Railway Transport Coal and lignite Mining of iron, manganese, chrome, Gypsum, Sulphur, Gold, Diamonds, Copper, Zinc.
Illustrative List Of Sectors Under Automatic Route For FDI upto 100%
Illustrative List Of Sectors Under Automatic Route For FDI upto 100%
Most manufacturing activities Drugs and pharmaceuticals Food processing Electronic hardware Software development Film industry Advertising Hospitals Pollution control and management Management consultancy Computer related Services Construction and related Engineering Services Health related & Social Services Travel related services
route
And Having a project cost of Rs. 6,000 million or more would require prior approval of Cabinet Committee of Foreign Investment (CCFI)
conducted in India: Wholly owned subsidiary Joint Venture Company Branch Office
Project Office
India Presence: Liaison Office
Contd.
Well-established legal system with independent judiciary.
Developed banking system and vibrant capital market . India among the top three investment hot spots and one of the fastest growing economies in the world. Large English speaking population
Cons:
Constant FDI inflow in the country has lead to increased liquidity & its subsequent strikes of inflation Also there has been immense pressure on our rupees
India allows 100% FDI through the automatic route in: townships housing built-up infrastructure construction-development projects
Contd.
Cons:
FDI regulations currently in force allow an entity to receive FDI in construction development only if the minimum built-up area of the project is 50,000 square meters Many real estate projects have failed to take-off due to the delay in obtaining statutory clearances and conversion of land usage Current FDI regulations provide for a three-year lock-in for each tranche of foreign investment, and early exit needs government approval FDI policy for investment in hotels and hospitals is far less stringent than the one for housing projects
Opened to foreign investment in the year 1991 The production level of this sector has increased from 2 million 1991 to 9.7 million in 2006 and to 11.1 million in 2010 FDI upto 100 % - turnover of USD 12 billion in the Indian auto industry and USD 3 billion in the auto parts industry Manufacturing 100 % FDI and Imports are encouraged
Well developed and competent automotive ancillary industry along with automobile testing and R&D centers Increase in the manufacturing capacity
Export
Long distance Bandwidth capacity in India
Sub Sectors
%age with total FDI inflows in Computer Software & Hardware Sector
105.69
0.10
3.
Others (Software)
648.18
141.60
0.13
42,458.62
9,573.28
9.03
Share Of Top Five RBIs Regions (With State Covered) Attracted FDI Inflows For Computer Software & Hardware
RBIs Regional Rank Office
Rupees in US $ in
States Covered
crores
1. Mumbai Maharashtra, Dadra & Nagar Haveli, Daman & Diu Karnataka 9,334.00
million
2,118.72 22.13
2.
Bangalore
5,076.08
1,129.83
11.80
3.
Chennai
4,416.89
1,004.44
10.49
4.
New Delhi
3,858.26
855.03
8.93
5.
Hyderabad
1,463.37
339.13
3.54
Total of above
24,148.60
5,447.15
56.89
Provider
Cons:
Non-executive Directors of a Corporate Agent are not permitted to be the Director/s of Life Insurance Company
Electronic Hardware and software technology Parks Export oriented units Special Economic zones
FDI Equity Inflows (Month Wise) during Financial Year 2010 2011:
Financial Year 2010 2011 (April March) 1 April 2010 2010 2011 (upto April 2010) 2009 2010 (upto April 2009) %age growth over last year Amount of FDI Inflows (in Rs. Crore) 9,854 9,854 11,708 (-) 16% (in US$ mn) 2,214 2,214 2,339 (-) 05 %
FDI Equity Inflows (Month Wise) during Financial Year 2011 2012:
Financial Year 2011 2012 (April March) 1 April 2011 2011 2012 (upto April 2011) 2010 2011 (upto April 2010) %age growth over last year Amount of FDI Inflows
Recommendations
Attract Quality FDI
Attract Technology And Localize Production
Conclusion
India is continuously gaining its position as a preferred investment destination. The trend line shows a positive growth of inward FDI in India and even in the time of global economic crises it was able to attract investment higher that the previous years. The service sector came up as the front runner in terms of receiving FDI followed by telecommunication and electrical equipments. The main reason behind the success of Service sectors lies in the huge skilled labour pool having good education and knowledge of English. Many MNCs are setting up their BPO and KPO in India to utilize the skilled labours to support their business activities. Mauritius emerged as the highest investing country using FDI route. The main reason is DTAA agreement as per this treaty the capital gain arising in India from the sale of securities can be taxed only in Mauritius. Since in Mauritius such gains are not taxed this becomes tax free income. In case of other countries they levied tax on such gains.
THANK YOU