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FOREIGN DIRECT INVESTMENT

Foreign direct investment (FDI) is a type of investment that involves the injection of foreign funds into an enterprise that operates in a different country of origin from the investor.
TYPES OF FDI BY DIRECTION

BY TARGET GREENFEILD INVESTMENT
HORIZONTAL FDI VERTICAL FDI

BY MOTIVE RESOURCE SEEKING MARKET SEEKING EFFICIENCY SEEKING
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INWARD
OUTWARD

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 India is the 2nd most important FDI destination (after China) for transnational corporations during 2010–2012 according to a survey conducted by UNCTAD  FDI in India in 2010 was $44.8 billion, and in 2011 there was an increase of 25% to $50.8 billion.  The sectors which attracted higher inflows telecommunication, construction activities information technology. were and

 Mauritius, Singapore, US and UK were among the leading sources of FDI for India.
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• India: Fourth largest economy in terms of Purchasing Power Parity. • Tenth most industrialized economy.

• FII inflows for the period 2003 –2008 was more than US $35 billion, a good sign for the economy.
• India is still quite behind China with China majorly accepting more of Green Field Investments.

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Atomic Energy Lottery Business

Housing and Real Estate business Trading in Transferable Development Rights

Gambling & Betting

Agricultural
Business of Chit Fund Manufacture of cigars , cheroots, cigarillos and cigarettes , of tobacco or of tobacco substitutes.
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Nidhi Company
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Economic Growth Linkages and spillover to domestic firms

Trade

Technology diffusion and knowledge transfer
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Employment and skill levels
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1. Economic growth- A remarkable inflow of FDI in various industrial units boosts the economic life of country and has a remarkable effect on the economic growth. 2. Trade- FDI opens a wide spectrum of opportunities in the trading of goods and services both in terms of import and export production with the manufacture of superior quality products. 3. Employment and skill levels- FDI brings in a number of employment opportunities by aiding the setting up of industrial units. 4. Technology diffusion and knowledge transfer- FDI helps in the outsourcing of knowledge especially in the Information Technology sector in India. The foreign countries bring in technological advancements in the foreign country. 5. Linkages and spillover to domestic firms- Firms enter into joint ventures with various domestic firms with both the companies getting the benefits.
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Inflation increases Positive pressure on prices FDI has an adverse effect on competition. FDI will be make the host country lose control over domestic policy. Certain foreign policies are adopted that are not appreciated by the workers of the recipient country.

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INVESTING IN INDIA

AUTOMATIC ROUTE
•Inform RBI within 30 days of inflow/issue of shares • Pricing: FEMA Regulations •Unlisted – CCI •Listed – SEBI • Cap of Rs.600Crore
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PRIOR PERMISSION
By exception •Approval of Foreign Investment Promotion Board needed. •Decision generally within 4-6 weeks
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50,000 46,553 41,873 45,000 37,745 40,000 34,843 34,847 35,000 30,000 22,826 25,000 20,000 15,000 10,257 8,961 10,000 6,130 6,051 5,035 4,322 4,029 5,000 0

Figures in $millions
Amount of FDI Inflows %age growth over 2 per. Mov. Avg. (Amount of FDI Inflows %age growth over)

Source: dipp.nic.in/English/Publications/
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3.5 3 2.5 2 1.5 1 0.8 0.5 0 2004 2005 2006 2007 2008 2009 2010 2011 0.91 2.14 2.06 1.43 2.62 2.5 3.55

FDI as % of GDP

Source: dipp.nic.in/English/Publications/

• It was highest in year 2008 i.e. 3.55 % . • It decreased to 1.43 % in year 2010. • In year 2011, it increased to 2.5 % .
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100%=176760.71$mn
SERVICES SECTOR
19% 37% 12%

CONSTRUCTION DEVELOPMENT TELECOMMUNICATIONS COMPUTER SOFTWARE & HARDWARE DRUGS & PHARMACEUTICALS CHEMICALS (OTHER THAN FERTILIZERS) POWER AUTOMOBILE INDUSTRY

7% 4% 4% 5% 5% 6%

http://dipp.nic.in/English/Publications/SIA_Newsletter/2012/feb2012/monthSector.ht

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EXISTING POLICY
For Single Brand Retail Trading (SBRT) sector – only 51% FDI permitted and no FDI in Multi Brand – subject to approvals and conditions such as:  FDI in (MBRT) is prohibited.  Products to be under the same brand in one or more countries if are sold outside India.  ”Single Brand‟ products should be branded during manufacturing.

PRESENT POLICY
FDI in SBRT is permitted to 100% and up to 51% in MBRT with Government approval.  Fresh agricultural produce, including fruits, vegetables, flowers, grains, pulses, fresh poultry, fishery and meat products, may be unbranded.  FDI in MBRT may be permitted up to51% and 100% in SBRT.  Minimum amount to be brought in, as FDI, by the foreign investor, would be$100 million.  At least 50% of total FDI brought in shall be invested in “back-end infrastructure”.  In respect of proposals involving FDI beyond 51%, 30% sourcing would mandatorily have to be done from SMEs.  In case of “Single Brand” The foreign investor should be the owner of the brand

 The foreign investor should be the owner of the brand.

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 Job opportunities in areas like marketing, agro-processing, packaging, transportation, etc. will be created.  Farmers will get a good price for their crops and their exploitation will stop.  Infrastructure facilities, refrigeration transportation, etc. will be renovated. technology,

 Foreign companies will create an improved and efficient supply-chain in the Indian market.

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• Contract farming-imposed on farmers with strict adherence to quality & schedule. • Will affect 50 million merchants in India • Market places are situated too far which increases traveling expenses. • FDI may lead to rise of inflation. • Multiple Indian companies are well entrenched into the Indian market with their organized multi brand retail offerings who may face tough challenges. • FDI in retail nowhere claims that the consumer will spend less from his/her pocket. The prices will largely remain the same.
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28%

32%

4%

5%
1% 1% 5% 6% 19%

Mumbai New Delhi Bangalore Chennai Ahmedabad Hyderabad Kolkata Chandigarh others

Source.isca.in/IJMS/Archive/v1i2/5.ISCA-RJMgtS-2012-020.pdf
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100%=176760.69
25.2% 37.4%

MAURITIUS SINGAPORE UNITED KINGDOM JAPAN

4.4% 6.1% 7.2% 9.6% 10.2%

U.S.A NETHERLANDS OTHERS

Source.isca.in/IJMS/Archive/v1i2/5.ISCA-RJMgtS-2012-020.pdf
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• The government should provide additional incentives to foreign investors to invest in states where the level of FDI inflows is quite low. • Ensure equitable distribution of inflows among states and give freedom to states to attract inflows at their own level. • Attract specific types of FDI that will be able to generate spillovers effects in the overall economy like investing in human capital, R&D activities, environmental issues, productive capacity, sectors with high income elasticity of demand. • The policy makers should focus more on attracting diverse types of FDI and should design policies where foreign investment can be utilized as means of enhancing domestic production, savings, and exports and also as medium of technological learning and diffusion and also in providing access to the external market.

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• The increased flow of FDI in a country has given a major boost to the country's economy. • FDI has provided better access to technologies for the local economy. • FDI has lead to indirect productivity gains through spillovers.

• MNC’s have increased the degree of competition in host-country markets which will force existing inefficient firms to invest more in physical or human capital.
• Service sector has been the most sought after sector in India for FDI. • India, with its skilled labor and manpower has the potential to overtake China as the most preferred destination for Foreign Investments.

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• http://rbidocs.rbi.org.in/rdocs/Content/PDFs/FDIST_110412.pdf Accessed on 24 Oct • http://www.indiainbusiness.nic.in/investment/for_dir_investment.htm Accessed on 26 Oct • http://planningcommission.gov.in/ Accessed on 6 Nov • http://finmin.nic.in/capital_market/capital_market.asp Accessed on 6 Nov • http://www.randstad.com/the-world-of-work/employment-rises-in-indiasservice-sector?c=4374 Accessed on 11 Nov • http://business.mapsofindia.com/india-gdp/sectorwise/services-sector growth-rate.html Accessed on 8 Nov

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PRESENTED BY:• • • • • UTKARSH GARG (121) SANGAM LALSIVARAJU (138) SUGANDHA ARORA (140) DHRUV MAHAJAN (141) MANASVI BANSAL (143)

PRESENTED TO:-

PROF. K. M. KUMAR

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