Foreign Direct Investment

Presenter : Pankaj
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Contents
ü Introduction ü Government policy of FDI ü Benefits of FDI ü Disadvantages of FDI ü FDI inflow in India ü FDI v/s FII ü References

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Introduction
Ø Foreign Direct Investment is any form of investment that earns interest in enterprises which function outside of the domestic territory of the investor. Ø FDIs require a business relationship between a parent company and its foreign subsidiary Ø FDI stocks now constituting 28% of the global GDP

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Types of FDI
Ø Inward FDI and Outward FDI Ø Vertical FDI and Horizontal FDI Ø Market seeking FDI and Resource seeking FDI Ø Greenfield investments and mergers and acquisitions

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Ø Increased by 5.1% and stood at US $ 947 bn in 2007 Ø Number of projects 11,574 (2007) Ø Top 10 destinations for FDI : § China, US, India, UK, France, Germany, Russia, Spain , Poland and Romania
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FDI movement in the World

Ranking based on FDI

Based on no. of projects
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Government policy for Investment Promotion Board FDI Ø Approval given by Foreign
Ø Under automatic route Ø Under government approval Ø Prohibited sectors Ø FDI policy notified by RBI under Foreign Exchange Management Act (FEMA)
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Benefits of FDI
Ø Economic development of the host Ø Transfer of technology Ø Development of human capital resources Ø Creation of jobs Ø Opening export window
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Ø Company may lose ownership

Disadvantages of FDI

Ø Difference in language and culture Ø Country secrets may be disclosed Ø Policies adapted may not be appreciated

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FDI inflow in India

FDI Inflow in US million dollars

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Sector wise FDI

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Country wise share in FDI

SOURCE: DIPP, Federal Ministry of Commerce and Industry, Government of India

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FDI v/s FII
Ø Till 2006 more FII investment than FDI in India. Ø Reverse in China Ø FDI was more than ten times of ours earlier Ø More FDI helpful than FII

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References
Ø www.indianembassy.org Ø www.economywatch.com Ø www.indiaonestop.com Ø Pratiyogita Darpan

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