Foreign Direct Investment

Abhishek Tripathi
Abhishek_23july@yahoo.com
Contact : 7827398207
FDI
FDI refers to capital inflows from abroad that
invest in the production capacity of the
economy
Understanding FDI
Foreign
Direct
Investment

Foreign
Derived from another country or nation; not native
Direct Investment
In order to qualify as FDI the investment must afford the
parent enterprise control over its foreign affiliate.

Modes
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.



WHY FDI ?
1. Gain a foothold in a new geographic market.
2. Increase a firms global competitiveness and
positioning.
3. Fill gaps in a companys product lines in a global
industry.
4. Reduce costs in areas such as R&D, production, and
distribution.
5. Competition :
-Catalysts to spur competition & innovation in retail
industry
-Ensure highly efficient-low margin business model
WHY FDI ?...
6. Consumers:
-Improved product availability, quality & reduce
wastages
-Consumers to get best products and services at
reasonable price
7. Back End & Supply Chain Improvement :
- Inadequate storage facilities cause heavy losses to
farmers
- 25%-30% of F&V and 5%-7% of food grain in
India are wasted
- Food inflation and fluctuation in food prices can be
controlled
WHY FDI ?...
Back End & Supply Chain Improvement :
Inadequate storage facilities cause heavy
losses to farmers
25%-30% of F&V and 5%-7% of food grain in
India are wasted
Food inflation and fluctuation in food prices
can be controlled
FACTORS REQUIRED TO
ATTRACT FDI

Low cost BUT Qualified, Educated/Skilled Labor Pool.
Long-term Market Potential OR Yields greater than can be achieved
Domestically.
Access to Natural Resources.
Geography
Stability of the economic and Political Environment.
Size of the Market
Legal and Regulatory Framework
Access to Basic Inputs
Cont
Cost factors
Labor costs
Transpiration/ logistic cost
Low cost of raw materials
Return on investment
Market factor
Large size of host markets
Demand in host country
Level of competition in host market
Economic stability
Infrastructure and technological factors
Level of infrastructure
High industrial concentration (Clustering)
Availability of well qualify of work force
Access to reliable and corporative suppliers
Political and legal factors
Political stability
International trade agreements
Tax reduction in host country
Benign environmental legislation towards FDI
Social & Cultural factors
Cultural distance
Attitude of the local community toward the firm
Current Indian FDI limit
Private Sector Banking - 49 %
Non-Banking Financial Companies (NBFC) .100%
Insurance 26%
Telecommunications . 74%
Petroleum Refining (Private Sector) ..100%
Housing and Real Estate .100%
Power 100%
Drugs & Pharmaceuticals .100%
Hotel & Tourism - 100%
Advertising - ..100%
Electricity ..100%
Trading 51%
Single Brand Retail ........100%
Trends Indian FDI 2012-13
Advantages
Raising the Level of Investment
Up gradation of Technology
Improvement in Export Competitiveness
Employment Generation
Benefits to Consumers
Revenue to Government
Resilience Factor
Low cost Products
Employment Opportunities
Economic growth
Better realization to farmers

Disadvantages
Fall in domestic savings
Contribution of foreign firms to public revenue
through corporatetaxes is comparatively less
because of liberal tax concessions
income inequalities
The technology is generally capital-intensive
which does not suit the needs of a labor-surplus
economy
Foreign firms may influence political decisions
Conclusion
After considering all the aspects related to
FDI, we can conclude that, though there
are slight disadvantages of it, but it is very
important or we can say life blood for a
developing country for there economic
growth and stability and for developed
country, to continue their stability.
Questions?
Thank you
Abhishek Tripathi
Abhishek_23july@yahoo.com
Contact : 9022855659