ECONOMICS ASSIGNMENT

[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

ECONOMICS ASSIGNMENT
“FOREIGN DIRECT INVESTMENT (FDI) IN INDIA”

BY: “GROUP 6” NAVNEET CHAUDHARY NIKESH BISWAL SAGAR SINGH MUTHU AYYANAR JAIRAJ VAIDYA

Fazlani Altius Business School [Batch : 2013-2015]

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ECONOMICS ASSIGNMENT
CONTENT:

[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

PARTICULAR A. INTRODUCTION B. FOREIGN DIRECT INVESTMENT (FDI) FLOWS TO INDIA C. WHO CAN INVEST IN INDIA D. ENTITIES FOR FDI E. ENTRY ROUTES FOR FDI F. GUIDELINES FOR CONSIDERATION OF FDI PROPOSALS BY FIPB G. TREND IN FDI FLOWS H. TRENDS IN FDI FLOWS TO INDIA 1. Cumulative FDI flows into India (2000-2013) 2. Financial Year-Wise FDI inflow Data I. STATEMENT ON COUNTRY-WISE FDI EQUITY INFLOWS

PAGE NO. 4 5 6 7 8 9 11 13 14 20 22 25

J. STATEMENT ON SECTOR-WISE FDI EQUITY INFLOWS K. INDIAN ECONOMY 1. Recent Trends in Indian Economy 2. Growth in Gross Domestic Product 3. Economic Survey 2012-13 L. POTENTIAL FOR INVESTMENT IN INDIA M. ADVANTAGE IN INDIA 1. Indian Economy 2. Agriculture Sector 3. Industry Sector 4. Services Sector N. FDI POLICY FRAMEWORK 1. FDI Policy Framework in India 2. FDI Policy: The International Experience 3. Cross-Country Comparison of FDI Policies – Where does India stand? O. FDI FLOWS TO INDIA IN RECENT PERIOD P. APPROVAL FOR FDI IN LIMITED LIABILITY PARTNERSHIP FIRM

27 28 29 30 32 33 33 33 33

34 37 41 44 54

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

Q. SECTOR FOR FDI 1. FDI in Agriculture 2. FDI in Mining 3. FDI in Manufacturing 4. FDI in Power 5. FDI in Defence 6. FDI in Civil Aviation Sector 7. FDI in Banking- Public Sector 8. FDI in Credit Information Companies (CIC) 9. FDI in Broadcasting 10. FDI in Commodity Exchanges 11. FDI in Real Estate & Development of Townships 12. FDI in Industrial Park 13. FDI in Insurance 14. FDI in Infrastructure Company in the Securities Market 15. FDI in Non-Banking Finance Companies (NBFC) 16. FDI in Petroleum & Natural Gas Sector 17. FDI in Print Media 18. FDI in Telecommunication 19. FDI in Trading 20. FDI in Courier services 21. FDI in Retail sector R. ECONOMIC INDICATORS S. TOP 10 FDI EQUITY INFLOW CASES T. CONCLUSION U. LIST OF INVESTMENT PROMOTION AGENCIES IN INDIA STATE-WISE V. REFERENCES

55 57 59 59 60 62 63 64 65 66 67 70 71 71 72 74 75 76 79 81 82 83
85

95 97 106

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ECONOMICS ASSIGNMENT

[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

A. INTRODUCTION India has been ranked at the second place in global foreign direct investments in 2010 and will continue to remain among the top five attractive destinations for international investors during 2010-12 period, according to United Nations Conference on Trade and Development (UNCTAD) in a report on world investment prospects titled, 'World Investment Prospects Survey 2009-2012'. The 2010 survey of the Japan Bank for International Cooperation released in December 2010, conducted among Japanese investors, continues to rank India as the second most promising country for overseas business operations. A report released in February 2010 by Leeds University Business School, commissioned by UK Trade & Investment (UKTI), ranks India among the top three countries where British companies can do better business during 2012-14. According to Ernst and Young's 2010 European Attractiveness Survey, India is ranked as the 4th most attractive foreign direct investment (FDI) destination in 2010. However, it is ranked the 2nd most attractive destination following China in the next three years. Moreover, according to the Asian Investment Intentions survey released by the Asia Pacific Foundation in Canada, more and more Canadian firms are now focusing on India as an investment destination. From 8 per cent in 2005, the percentage of Canadian companies showing interest in India has gone up to 13.4 per cent in 2010. India attracted FDI equity inflows of US$ 2,014 million in December 2010. The cumulative amount of FDI equity inflows from April 2000 to December 2010 stood at US$ 186.79 billion, according to the data released by the Department of Industrial Policy and Promotion (DIPP). The services sector comprising financial and non-financial services attracted 21 per cent of the total FDI equity inflow into India, with FDI worth US$ 2,853 million during April-December 2010, while telecommunications including radio paging, cellular mobile and basic telephone services attracted second largest amount of FDI worth US$ 1,327 million during the same period. Automobile industry was the third highest sector attracting FDI worth US$ 1,066 million followed by power sector which garnered US$ 1,028 million during the financial year April-December 2010. The Housing and Real Estate sector received FDI worth US$ 1,024 million. During April-December 2010, Mauritius has led investors into India with US$ 5,746 million worth of FDI comprising 42 per cent of the total FDI equity inflows into the country. The FDI equity inflows in Mauritius is followed by Singapore at US$ 1,449 million and the US with US$ 1,055 million, according to data released by DIPP.

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

B. FOREIGN DIRECT INVESTMENT (FDI) FLOWS TO INDIA FDI inflows to India remained sluggish, when global FDI flows to EMEs had recovered in 2010-11, despite sound domestic economic performance ahead of global recovery. The paper gathers evidence through a panel exercise that actual FDI to India during the year 2010-11 fell short of its potential level (reflecting underlying macroeconomic parameters) partly on account of amplification of policy uncertainty as measured through Kauffmann‟s Index. FDI inflows to India witnessed significant moderation in 2010-11 while other EMEs in Asia and Latin America received large inflows. This had raised concerns in the wake of widening current account deficit in India beyond the perceived sustainable level of 3.0 per cent of GDP during April-December 2010. This also assumes significance as FDI is generally known to be the most stable component of capital flows needed to finance the current account deficit. Moreover, it adds to investible resources, provides access to advanced technologies, assists in gaining production know-how and promotes exports. A perusal of India‟s FDI policy vis-à-vis other major emerging market economies (EMEs) reveals that though India‟s approach towards foreign investment has been relatively conservative to begin with, it progressively started catching up with the more liberalized policy stance of other EMEs from the early 1990s onwards, inter alia in terms of wider access to different sectors of the economy, ease of starting business, repatriation of dividend and profits and relaxations regarding norms for owning equity. This progressive liberalization, coupled with considerable improvement in terms of macroeconomic fundamentals, reflected in growing size of FDI flows to the country that increased nearly 5 fold during first decade of the present millennium. Though the liberal policy stance and strong economic fundamentals appear to have driven the steep rise in FDI flows in India over past one decade and sustained their momentum even during the period of global economic crisis (2008-09 and 2009-10),the subsequent moderation in investment flows despite faster recovery from the crisis period appears somewhat inexplicable. Survey of empirical literature and analysis presented in the paper seems to suggest that these divergent trends in FDI flows could be the result of certain institutional factors that dampened the investors „sentiments despite continued strength of economic fundamentals. Findings of the panel exercise, examining FDI trends in 10 select EMEs over the last 7 year period, suggest that apart from macro fundamentals, institutional factors such as time taken to meet various procedural requirements make significant impact on FDI inflows. This paper has been organized as follows: Section 1 presents trends in global investment flows with particular focus on EMEs and India. Section 2 traces the evolution of India‟s FDI policy framework, followed by cross country experience reflecting on India‟s FDI policy vis-à-vis that of select EMEs. Section 3 deals with plausible explanations of relative slowdown in FDI flows to India in 2010-11 and arrives at an econometric evidence using panel estimation. The last section presents the conclusions.

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

C. WHO CAN INVEST IN INDIA 1. A non-resident entity (other than a citizen of Pakistan or an entity incorporated in Pakistan) can invest in India, subject to the FDI Policy. A citizen of Bangladesh or an entity incorporated in Bangladesh can invest in India under the FDI Policy, only under the Government route. 2. NRIs resident in Nepal and Bhutan as well as citizens of Nepal and Bhutan are permitted to invest in the capital of Indian companies on repatriation basis, subject to the condition that the amount of consideration for such investment shall be paid only by way of inward remittance in free foreign exchange through normal banking channels. 3. OCBs have been derecognized as a class of Investors in India with effect from September 16, 2003. Erstwhile OCBs which are incorporated outside India and are not under the adverse notice of RBI can make fresh investments under FDI Policy as incorporated non-resident entities, with the prior approval of Government of India if the investment is through Government route; and with the prior approval of RBI if the investment is through Automatic route. 4. (i) An FII may invest in the capital of an Indian Company under the Portfolio Investment Scheme which limits the individual holding of an FII to 10% of the capital of the company and the aggregate limit for FII investment to 24% of the capital of the company. This aggregate limit of 24% can be increased to the sectorial cap/statutory ceiling, as applicable, by the Indian Company concerned by passing a resolution by its Board of Directors followed by passing of a special resolution to that effect by its General Body. The aggregate FII investment, in the FDI and Portfolio Investment Scheme, should be within the above caps. (ii) The Indian company which has issued shares to FIIs under the FDI Policy for which the payment has been received directly into company‟s account should report these figures separately under item no. 5 of Form FC-GPR (Annex-1-A) (Post-issue pattern of shareholding) so that the details could be suitably reconciled for statistical/monitoring purposes. (iii) A daily statement in respect of all transactions (except derivative trade) have to be submitted by the custodian bank in floppy / soft copy in the prescribed format directly toRBI to monitor the overall ceiling/sectorial cap/statutory ceiling. 5. No person other than registered FII/NRI as per Schedules II and III of Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations of FEMA 1999, can invest/trade in capital of Indian Companies in the Indian Stock Exchanges directly i.e. through brokers like a Person Resident in India. 6. A SEBI registered Foreign Venture Capital Investor (FVCI) may contribute up to 100% of the capital of an Indian Venture Capital Undertaking (IVCU) and may also set up a domestic asset management company to manage the fund. All such investments can be made under the automatic route in terms of Schedule 6 to Notification No. FEMA 20. A SEBI registered FVCI can also invest in a domestic venture capital fund registered under the SEBI (Venture Capital Fund) Regulations, 1996. Such investments would also be subject to the extant FEMA regulations and extant FDI policy including sectorial caps, etc. SEBI registered FVCIs are also allowed to invest under the FDI Scheme, as non-resident entities, in other companies, subject to FDI Policy and FEMA regulations.

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

D. ENTITIES FOR FDI 1. FDI in an Indian Company (i) Indian companies including those which are micro and small enterprises (MSEs) can issue capital against FDI. 2. FDI in Partnership Firm / Proprietary Concern: (i) A Non-Resident Indian (NRI) or a Person of Indian Origin (PIO) resident outside India can invest by way of contribution to the capital of a firm or a proprietary concern in India on nonrepatriation basis provided: (a) Amount is invested by inward remittance or out of NRE/FCNR(B)/NRO account maintained with Authorized Dealers / Authorized banks. (b) The firm or proprietary concern is not engaged in any agricultural/plantation or real estate business or print media sector. (c) Amount invested shall not be eligible for repatriation outside India. Investments with repatriation benefits: NRIs/PIO may seek prior permission of Reserve Bank for investment in sole proprietorship concerns/partnership firms with repatriation benefits. The application will be decided in consultation with the Government of India.

(ii)

(iii) Investment by non-residents other than NRIs/PIO: A person resident outside India other than NRIs/PIO may make an application and seek prior approval of Reserve Bank for making investment by way of contribution concern or any association of persons in India. The application will be decided in consultation with the Government of India. (iv) Restrictions: An NRI or PIO is not allowed to invest in a firm or proprietorship concern engaged in any and immovable property with a view to earning profit or earning income there from) or engaged in Print Media. 3. FDI in Venture Capital Fund (VCF): FVCIs are allowed to invest in Indian Venture Capital Undertakings (IVCUs) /Venture Capital Funds (VCFs) /other companies, as stated in paragraph 3.1.6 of this Circular. If a domestic VCF is set up as a trust, a person resident outside India (non-resident entity/individual including an NRI) cannot invest in such domestic VCF under the automatic route of the FDI scheme and would be allowed subject to approval of the FIPB. However, if a domestic VCF is set-up as an incorporated company under the Companies Act, 1956, then a person resident outside India (non-resident entity/individual including an NRI) can invest in such domestic VCF under the automatic route of FDI Scheme, subject to the pricing guidelines, reporting requirements, mode of payment, minimum capitalization norms, etc. 4. FDI in Trusts: FDI in Trusts other than VCF is not permitted. 5. FDI in other Entities: FDI in resident entities other than those mentioned above is not permitted.

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

E. ENTRY ROUTES FOR FDI 1. Investments can be made by non-residents in the equity shares/fully, compulsorily and Mandatorily convertible debentures/ fully, compulsorily and mandatorily convertible preference shares of an Indian company, through two routes: (i) The Automatic Route: under the Automatic Route, the non-resident investor or the Indian company does not require any approval from the RBI or Government of India for the investment.

(ii)

The Government Route: under the Government Route, prior approval of the Government of India through Foreign Investment Promotion Board (FIPB) is required. Proposals for foreign investment under Government route as laid down in the FDI policy from time to time, are considered by the Foreign Investment Promotion Board (FIPB) in Department of Economic Affairs (DEA), Ministry of Finance.

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

F. GUIDELINES FOR CONSIDERATION OF FDI PROPOSALS BY FIPB: The following guidelines are laid down to enable the FIPB to consider the proposals for FDI and formulate its recommendations. 1. All applications should be put up before the FIPB by its Secretariat within 15 days and it should be ensured that comments of the administrative ministries are placed before the Board either prior to/or in the meeting of the Board. 2. Proposals should be considered by the Board keeping in view the time frame of thirty (30) days for communicating Government decision. 3. In cases in which either the proposal is not cleared or further information is required in order to obviate delays presentation by applicant in the meeting of the FIPB should be resorted to. 4. While considering cases and making recommendations, FIPB should keep in mind the sectorial requirements and the sectorial policies vis-à-vis the proposal (s). 5. FIPB would consider each proposal in its totality. 6. The Board should examine the following while considering proposals submitted to it for consideration: (i) Whether the items of activity involve industrial licence or not and if so the considerations for grant of industrial licence must be gone into. (ii) Whether the proposal involves any export projection and if so the items of export and the projected destinations. (iii) Whether the proposal has any strategic or defence related considerations. 7. While considering proposals the following may be prioritized: (i) Items falling in infrastructure sector. (ii) Items which have an export potential. (iii) Items which have large scale employment potential and especially for rural people. (iv) Items which have a direct or backward linkage with agro business/farm sector. (v) Items which have greater social relevance such as hospitals, human resource development, life saving drugs and equipment. (vi) Proposals which result in induction of technology or infusion of capital. 8. The following should be especially considered during the scrutiny and consideration of proposals: (i) The extent of foreign equity proposed to be held (keeping in view sectoral caps if any. (ii) Extent of equity from the point of view whether the proposed project would amount to a holding company/wholly owned subsidiary/a company with dominant foreign investment (i.e. 76% or more) joint venture. Whether the proposed foreign equity is for setting up a new project (joint venture or otherwise) or whether it is for enlargement of foreign/NRI equity or whether it is for fresh induction of foreign equity/NRI equity in an existing Indian company. In the case of fresh induction offerings/NRI equity and/or in cases of enlargement of foreign/NRI equity, in existing Indian companies whether there is a resolution of the Board of Directors supporting the said induction/enlargement of foreign/NRI equity and whether there is a shareholders agreement or not.

(iii)

(iv)

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

(v)

In the case of induction of fresh equity in the existing Indian companies and/or enlargement of foreign equity in existing Indian companies, the reason why the proposal has been made and the modality for induction/enhancement (i.e. whether by increase of paid up capital/authorized capital, transfer of shares(hostile or otherwise) whether by rights issue, or by what modality. Issue/transfer/pricing of shares will be as per SEBI/RBI guidelines. Whether the activity is an industrial or a service activity or a combination of both. Whether the items of activity involves any restriction by way of reservation for the Micro & Small Enterprises sector. Whether there are any sectorial restrictions on the activity. Whether the proposal involves import of items which are either hazardous/banned or detrimental to environment (e.g. import of plastic scrap or recycled plastics).

(vi) (vii) (viii)

(ix) (x)

9. No condition specific to the letter of approval issued to a non-resident investor would be changed or additional condition imposed subsequent to the issue of a letter of approval. This would not prohibit changes in general policies and, regulations applicable to the industrial sector.

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ECONOMICS ASSIGNMENT

[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

G. TREND IN FDI FLOWS Widening growth differential across economies and gradual opening up of capital accounts in the emerging world resulted in a steep rise in cross border investment flows during the past two decades. This section briefly presents the recent trends in global capital flows particularly to emerging economies including India. 1. Global Trends in FDI Inflows During the period subsequent to dotcom burst, there has been an unprecedented rise in the cross-border flows and this exuberance was sustained until the occurrence of global financial crisis in the year 2008-09. Between 2003 and 2007, global FDI flows grew nearly four -fold and flows to EMEs during this period, grew by about three-fold. After reaching a peak of US$ 2.1 trillion in 2007, global FDI flows witnessed significant moderation over the next two years to touch US$ 1.1 trillion in 2009, following the global financial crisis. On the other hand, FDI flows to developing countries increased from US$ 565 billion in 2007 to US$ 630 billion in 2008 before moderating to US$ 478 billion in 2009. The decline in global FDI during 2009 was mainly attributed to subdued cross border merger and acquisition (M&A) activities and weaker return prospects for foreign affiliates,which adversely impacted equity investments as well as reinvested earnings. According to UNCTAD, decline in M&A activities occurred as the turmoil in stock markets obscured the price signals upon which M&As rely. There was a decline in the number of green field investment cases as well, particularly those related to business and financial services. From an institutional perspective, FDI by private equity funds declined as their fund raising dropped on the back of investors‟ risk aversion and the collapse of the leveraged buyout market in tune with the deterioration in credit market conditions. On the other hand, FDI from sovereign wealth funds (SWFs) rose by 15 per cent in 2009. This was apparently due to the revised investment strategy of SWFs - who have been moving away from banking and financial sector towards primary and manufacturing sector, which are less vulnerable to financial market developments as well as focusing more on Asia. As the world economic recovery continued to be uncertain and fragile, global FDI flows remained stagnant at US $ 1.1 trillion in 2010. According to UNCTAD‟s Global Investment Trends Monitor (released on January 17, 2011), although global FDI flows at aggregate level remained stagnant, they showed an uneven pattern across regions – while it contracted further in advanced economies by about 7 per cent, FDI flows recovered by almost 10 per cent in case of developing economies as a group driven by strong rebound in FDI flows in many countries of Latin America and Asia. Rebound in FDI flows to developing countries has been on the back of improved corporate profitability and some improvement in M&A activities with improved valuations of assets in the stock markets and increased financial capability of potential buyers. Improved macroeconomic conditions, particularly in the emerging economies, which boosted corporate profits coupled with better stock market valuations and rising business confidence augured well for global FDI prospects. According to UNCTAD, these favourable developments may help translate MNC‟s record level of cash holdings (estimated to be in the range of US$ 4-5 trillion among developed countries‟ firms alone) into new investments during 2011. The share of developing countries, which now constitutes over 50 per cent in total FDI inflows, may increase further on the back of strong growth prospects. However, currency volatility, sovereign debt problems and potential protectionist policies may pose some risks to this positive outlook. Nonetheless, according to the Institute of International Finance (January 2011), net FDI flows to EMEs was projected to increase by over 11 per cent in 2011. FDI flows into select countries are given in Table 1.

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Table 1 : Countries with Higher Estimated Level of FDI Inflows than India in 2010 Amount (US$ billion) 2007 World Developed Economies United States France Belgium United Kingdom Germany Developing Economies China Hong Kong Russian Federation Singapore Saudi Arabia Brazil 2100.0 1444.1 266.0 96.2 118.4 186.4 76.5 564.9 83.5 54.3 55.1 35.8 22.8 34.6 2008 1770.9 1018.3 324.6 62.3 110.0 91.5 24.4 630.0 108.3 59.6 75.5 10.9 38.2 45.1 2009 1114.2 565.9 129.9 59.6 33.8 45.7 35.6 478.3 95.0 48.4 38.7 16.8 35.5 25.9 2010 (Estimates) 1122.0 526.6 186.1 57.4 50.5 46.2 34.4 524.8 101.0 62.6 39.7 37.4 30.2 Variation (Percent) 2008 15.7 29.5 22.0 35.2 -7.1 50.9 68.1 11.5 29.7 9.8 37.0 69.6 67.5 30.3 2009 37.1 44.4 60.0 -4.3 69.3 50.1 45.9 24.1 12.3 18.8 48.7 54.1 -7.1 2010 (Estimates) 0.7 -6.9 43.3 -3.7 49.4 1.1 -3.4 9.7 6.3 29.3 2.6 122.6 -

16.6 42.6 India 25.0 40.4 34.6 23.7 61.6 -31.5 14.4 Source: World Investment Report, 2010 and Global Investment Trends Monitor, UNCTAD.

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H. TRENDS IN FDI FLOWS TO INDIA With the tripling of the FDI flows to EMEs during the pre-crisis period of the 2000s, India also received large FDI inflows in line with its robust domestic economic performance. The attractiveness of India as a preferred investment destination could be ascertained from the large increase in FDI inflows to India, which rose from around US$ 6 billion in 2001-02 to almost US$ 38 billion in 2008-09. The significant increase in FDI inflows to India reflected the impact of liberalisation of the economy since the early 1990s as well as gradual opening up of the capital account. As part of the capital account liberalisation, FDI was gradually allowed in almost all sectors, except a few on grounds of strategic importance, subject to compliance of sector specific rules and regulations. The large and stable FDI flows also increasingly financed the current account deficit over the period. During the recent global crisis, when there was a significant deceleration in global FDI flows during 2009-10, the decline in FDI flows to India was relatively moderate reflecting robust equity flows on the back of strong rebound in domestic growth ahead of global recovery and steady reinvested earnings (with a share of almost 25 per cent) reflecting better profitability of foreign companies in India. However, when there had been some recovery in global FDI flows, especially driven by flows to Asian EMEs, during 2010-11, gross FDI equity inflows to India witnessed significant moderation. Gross equity FDI flows to India moderated to US$ 20.3 billion during 2010-11 from US$ 27.1 billion in the preceding year. Table 2: Equity FDI Inflows to India (Percent) Sectors 2006- 200707 08 Sectoral shares (Percent) 17.6 56.9 15.5 9.9 100.0 1.6 5.3 1.4 0.9 9.3 19.2 41.2 22.4 17.2 100.0 3.7 8.0 4.3 3.3 19.4 200809 21.0 45.1 18.6 15.2 100.0 4.8 10.2 4.2 3.4 22.7 200910 22.9 32.8 26.6 17.7 100.0 5.1 7.4 6.0 4.0 22.5 201011 32.1 30.1 17.6 20.1 100.0 4.8 4.5 2.6 3.0 14.9

Manufactures Services Construction, Real estate and mining Others Total Manufactures Services Construction, Real estate and mining Others Total Equity FDI

Equity Inflows (US$ billion)

From a sectoral perspective, FDI in India mainly flowed into services sector (with an average share of 41 per cent in the past five years) followed by manufacturing (around 23 per cent) and mainly routed through Mauritius (with an average share of 43 per cent in the past five years) followed by Singapore (around 11 per cent). However, the share of services declined over the years from almost 57 per cent in 2006-07 to about 30 per cent in 2010-11, while the shares of manufacturing, and „others‟ largely comprising „electricity and other power generation‟ increased over the same period (Table 2). Sectoral information on the recent trends in FDI flows to India show that the moderation in gross equity FDI flows during 2010-11 has been mainly driven by sectors such as „construction, real estate and mining‟ and services such as „business and financial services‟. Manufacturing, which has been the largest recipient of FDI in India, has also witnessed some moderation (Table 2).

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I.

CUMULATIVE FDI FLOWS INTO INDIA (2000-2013):

A.

TOTAL FDI INFLOWS (from April, 2000 to March, 2013): US$ 290,078 million -

1. CUMULATIVE AMOUNT OF FDI INFLOWS (Equity inflows + „Re-invested earnings‟ +„Other capital‟) *

2. CUMULATIVE AMOUNT OF FDI EQUITY INFLOWS (excluding, amount remitted through RBI‟s-NRI Schemes)

Rs. 896,38 crore

US$ 193,282 million

B. 1.

FDI INFLOWS DURING FINANCIAL YEAR 2012-13 (from April, 2012 to March, 2013):

TOTAL FDI INFLOWS INTO INDIA (Equity inflows + „Re-invested earnings‟ + „Other capital‟) (as per RBI‟s Monthly bulletin dated: 13.05.2013). FDI EQUITY INFLOWS

-

US$ 36,860 million

2.

Rs. 121,907 crore US$ 22,423 million

C.

FDI EQUITY INFLOWS (MONTH-WISE) DURING THE FINANCIAL YEAR 2012-13: Financial Year 2012-13 ( April-March ) Amount of FDI Equity inflows (In Rs. Crore) (In US$ mn) 9,620 7,229 6,971 8,182 12,578 25,552 10,295 5,798 6,012 11,719 9,654 8,297 121,907 165,146 ( - ) 28 % 1,857 1,327 1,244 1,475 2,264 4,679 1,942 1,058 1,100 2,157 1,795 1,525 22,423 35,121 ( - ) 38 %

1. 2. 3. 4. 5. 6. 7. 8. 9. 10 . 11 . 12 .

April, 2012 May, 2012 June, 2012 July, 2012 August, 2012 September, 2012 October, 2012 November, 2012 December, 2012 January, 2013 February, 2013 March, 2013 2012-13 (up to March, 2013) # 2011-12 (up to March, 2012) # %age growth over last year

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D.

FDI EQUITY INFLOWS (MONTH-WISE) DURING THE CALENDAR YEAR 2013: Amount of FDI Equity inflows (In Rs. Crore) (In US$ mn) 11,719 2,157 9,654 1,795 8,297 1,525 29,670 5,477 29,354 5,844 ( + ) 01 % ( - ) 06 %

1. 2. 3.

Calendar Year 2013 (Jan.-Dec.) January, 2013 February, 2013 March, 2013 Year 2013 (up to March, 2013) # Year 2012 (up to March, 2012) # %age growth over last year

Note:

Country & Sector specific analysis is available from the year 2000 onwards, as Company-wise details are provided by RBI from April, 2000 onwards only. * Data on „Re-invested earnings‟ & „Other capital‟, are the estimates on an average basis, based upon data for the previous two years, published by RBI in monthly bulletin dated: 10.12.2012. # Figures are provisional, subject to reconciliation with RBI, Mumbai. ^ Inflows for the month of March, 2012 are as reported by RBI, consequent to the adjustment made in the figures of March, „11, August, ‟11 and October, „11.

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E.

[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

SHARE OF TOP INVESTING COUNTRIES FDI EQUITY INFLOWS (Financial years): Amount Rupees in crores (US$ in million)

Ranks

Country

2010-11 (April March) 31,855 (6,987) 7,730 (1,705) 12,235 (2,711) 7,063 (1,562) 5,353 (1,170) 5,501 (1,213) 4,171 (913) 908 (200) 3,349 (734) 1,569 (341) 97,320 (21,383)

2011-12 ( April March) 46,710 (9,942) 24,712 (5,257) 36,428 (7,874) 14,089 (2,972) 5,347 (1,115) 6,698 (1,409) 7,722 (1,587) 7,452 (1,622) 3,110 (663) 1,728 (353) 165,146 (35,121)

2012-13 (April – March) 51,654 (9,497) 12,594 (2,308) 5,797 (1,080) 12,243 (2,237) 3,033 (557) 10,054 (1,856) 2,658 (490) 4,684 (860) 3,487 (646) 987 (180) 121,907 (22,423)

Cumulative %age to total Inflows (April Inflows (in ‟00 – March‟13) terms of US $) 341,125 (73,666) 90,182 (19,460) 80,459 (17,549) 70,094 (14,550) 50,923 (11,121) 42,378 (8,965) 32,328 (6,889) 25,512 (5,480) 16,865 (3,573) 11,307 (2,422) 896,913 (193,403) 38 % 10 % 9% 8% 6% 5% 4% 3% 2% 1% -

1. 2. 3. 4. 5. 6. 7. 8. 9 10.

MAURITIUS SINGAPORE U.K. JAPAN U.S.A. NETHERLANDS CYPRUS GERMANY FRANCE U.A.E.

TOTAL FDI INFLOWS FROM ALL COUNTRIES *

*Includes inflows under NRI Schemes of RBI. Note: (i) (ii) Cumulative country-wise FDI equity inflows (from April, 2000 to March, 2013) are at – Annex-„A‟ %age worked out in US$ terms & FDI inflows received through FIPB/SIA+ RBI‟s Automatic Route + acquisition of existing shares only.

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

F.

SECTORS ATTRACTING HIGHEST FDI EQUITY INFLOWS:

Amount in Rs. crores (US$ in million) Cumulative Inflows (April ‟00 – March ‟13) 172,275 (37,235) 101,049 (22,080) % age to total Inflows (In terms of US$) 19 % 11 %

Ranks

Sector

2010-11 (April March) 15,054 (3,296) 7,590 (1,663)

2011-12 ( April March) 24,656 (5,216) 15,236 (3,141)

2012-13 (April – March) 26,306 (4,833) 7,248 (1,332)

1. 2.

SERVICES SECTOR ** CONSTRUCTION DEVELOPMENT: TOWNSHIPS, HOUSING, BUILT-UP INFRASTRUCTURE TELECOMMUNICATIONS (radio paging, cellular mobile, basic telephone services) COMPUTER SOFTWARE & HARDWARE DRUGS & PHARMACEUTICALS CHEMICALS (OTHER THAN FERTILIZERS) AUTOMOBILE INDUSTRY POWER METALLURGICAL INDUSTRIES HOTEL & TOURISM

3.

7,542 (1,665) 3,551 (780) 961 (209) 10,612 (2,354) 5,864 (1,299) 5,796 (1,272) 5,023 (1,098) 1,405 (308)

9,012 (1,997) 3,804 (796) 14,605 (3,232) 18,422 (4,041) 4,347 (923) 7,678 (1,652) 8,348 (1,786) 4,754 (993)

1,654 (304) 2,656 (486) 6,011 (1,123) 1,596 (292) 8,384 (1,537) 2,923 (536) 7,878 (1,466) 17,777 (3,259)

58,732 (12,856) 52,774 (11,691) 48,880 (10,318) 40,496 (8,881) 39,170 (8,295) 36,137 (7,834) 34,814 (7,507) 33,260 (6,631)

7%

4. 5. 6. 7. 8. 9. 10

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

3%

Note:

(i) (ii) (iii)

** Services sector includes Financial, Banking, Insurance, Non-Financial / Business, Outsourcing, R&D, Courier, Tech.Testing and Analysis Cumulative Sector- wise FDI equity inflows (from April, 2000 to March, 2013) are at - Annex-„B‟ . FDI Sectoral data has been revalidated / reconciled in line with the RBI, which reflects minor changes in the FDI figures (increase/decrease) as compared to the earlier published sectoral data.

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ECONOMICS ASSIGNMENT
G.

[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

STATEMENT ON RBI‟S REGIONAL OFFICES (WITH STATE COVERED) RECEIVED FDI EQUITY INFLOWS (from April, 2000 to March, 2013): Amount Rupees in crores (US$ in million)

S. RBI‟s - Regional No. Office

State covered

2010-11 (April March) 27,669 (6,097)

2011-12 ( April March) 44,664 (9,553)

2012-13 (April – March) 47,359 (8,716)

Cumulative %age to Inflows (April ‟00 total Inflows – March‟13) (in terms of US$) 293,494 (63,337) 33

1

MUMBAI

MAHARASHTRA, DADRA & NAGAR HAVELI, DAMAN & DIU

2

3 4 5 6 7

DELHI, PART OF UP AND HARYANA CHENNAI TAMIL NADU, PONDICHERRY BANGALORE KARNATAKA AHMEDABAD HYDERABAD KOLKATA GUJARAT ANDHRA PRADESH WEST BENGAL, SIKKIM, ANDAMAN & NICOBAR ISLANDS

NEW DELHI

12,184 (2,677) 6,115 (1,352) 6,133 (1,332) 3,294 (724) 5,753 (1,262) 426 (95)

37,403 (7,983) 6,711 (1,422) 7,235 (1,533) 4,730 (1,001) 4,039 (848) 1,817 (394)

17,490 (3,222) 15,252 (2,807) 5,553 (1,023) 2,676 (493) 6,290 (1,159) 2,319 (424)

168,581 (36,294) 52,810 (11,081) 49,445 (10,784) 39,100 (8,650) 36,891 (7,968) 10,504 (2,306)

19

6 6 4 4 1

8

9

CHANDIGARH CHANDIGARH, PUNJAB, HARYANA, HIMACHAL PRADESH BHOPAL MADHYA PRADESH, CHATTISGARH KOCHI PANAJI JAIPUR KANPUR KERALA, LAKSHADWEEP GOA RAJASTHAN

1,892 (416)

624 (130)

255 (47)

5,564 (1,201)

1

2,093 (451) 167 (37) 1,376 (302) 230 (51) 514 (112) 68 (15)

569 (123) 2,274 (471) 181 (38) 161 (33) 635 (140) 125 (28)

1,208 (220) 390 (72) 47 (9) 714 (132) 167 (31) 285 (52)

4,787 (997) 4,321 (911) 3,554 (771) 3,325 (685) 1,614 (347) 1,617 (341)

0.5

10. 11 12 13

0.5 0.4 0.4 0.2

UTTAR PRADESH, UTTRANCHAL 14 BHUBANESHW ORISSA AR

0.2

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ECONOMICS ASSIGNMENT
15 GUWAHATI

[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]
37 (8) 5 (1) 27 (5) 348 (78) 0

ASSAM, ARUNACHAL PRADESH, MANIPUR, MEGHALAYA, MIZORAM, NAGALAND, TRIPURA

16 17

BIHAR, JHARKHAND REGION NOT INDICATED SUB. TOTAL

PATNA

18

RBI‟S-NRI SCHEMES (from 2000 to 2002) GRAND TOTAL

25 (5) 29,344 (6,447) 97,320 (21,383) 0 97,320 (21,383)

123 (24) 53,851 (11,399) 165,146 (35,121) 0 165,146 (35,121)

41 (8) 21,833 (4,004) 121,907 (22,424) 0 121,907 (22,423)

190 (37) 220,233 (47,494) 896,380 (193,282) 533 (121) 896,913 (193,403)

0 24.6 100.00 -

Note:

1. 2. 3

Includes „equity capital components‟ only. The Region-wise FDI inflows are classified as per RBI‟s – Regional Office received FDI inflows, furnished by RBI, Mumbai. Represents, FDI inflows through acquisition of existing shares by transfer from residents to non residents. For this, RBI Regional wise information is not provided by Reserve Bank of India.

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ECONOMICS ASSIGNMENT

[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

II. FINANCIAL YEAR-WISE FDI INFLOWS DATA: A. AS PER INTERNATIONAL BEST PRACTICES: (Data on FDI have been revised since 2000-01 with expended coverage to approach International Best Practices) (Amount US$ million)

Sr. No.

Financial Year (April-March)

FOREIGN DIRECT INVESTMENT (FDI) Investment Equity ReOther FDI FLOWS INTO by F II s Foreign invested capital INDIA FIPB Route/ Equity Institutiona + RBI s capital of earnings %age l Investors + Automatic unicorpora growth Fund Route/ ted bodies Total FDI over (net) Acquisition # Flows previous Route year (in US$ terms) 2,339 3,904 2,574 2,197 3,250 5,540 15,585 24,573 31,364 25,606 21,376 34,833 21,825 194,966 61 191 190 32 528 435 896 2,291 702 1,540 874 1,022 1,059 9,821 1,350 1,645 1,833 1,460 1,904 2,760 5,828 7,679 9,030 8,668 11,939 8,206 11,025 73,327 279 390 438 633 369 226 517 300 777 1,931 658 2,495 2,951 11,964 4,029 6,130 5,035 4,322 6,051 8,961 22,826 34,843 41,873 37,745 34,847 46,556 36,860 290,078 (+) 52 % (-) 18 % (-) 14 % (+) 40 % (+) 48 % (+) 146 % (+) 53 % (+) 20 % (-) 10 % (-) 08 % (+) 34 % 1,847 1,505 377 10,918 8,686 9,926 3,225 20,328 (-) 15,017 29,048 29,422 16,812 27,583 144,654

FINANCIAL YEARS 2000-01 to 2012-13 (up to March, 2013)

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 (P) (+) 2010-11 (P) (+) 2011-12 (P) 2012-13 (P) (up to March, 2013) CUMULATIVE TOTAL (from April, 2000 to March‟ 2013)
Source: (i)

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13.

RBI‟s Bulletin May, 2013 dt. 13.05.2013 (Table No. 34 – FOREIGN INVESTMENT INFLOWS). (ii) Inflows under the acquisition of shares in March, 2011, August, 2011 & October, 2011, include net FDI on account of transfer of participating interest from Reliance Industries Ltd. to BP Exploration (Alpha). (iii) RBI had included Swap of Shares of US$ 3.1 billion under equity components during December 2006. (iv) Monthly data on components of FDI as per expended coverage are not available. These data, therefore, are not comparable with FDI data for previous years. (v) Figures updated by RBI up to March, 2013. „#‟ Figures for equity capital of unincorporated bodies for 2010-11 are estimates. (P) All figures are provisional “+” Data in respect of „Re-invested earnings‟ & „Other capital‟ for the years 2009- 10, 2010-11 & 2012-13 are estimated as average of previous two years.

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ECONOMICS ASSIGNMENT

[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

B. DIPP‟S – FINANCIAL YEAR-WISE FDI EQUITY INFLOWS: (As per DIPP‟s FDI data base – equity capital components only): Sr. Financial Year Amount of FDI Inflows Nos (April – March)

%age growth over previous year (in terms of US $)

FINANCIAL YEARS 2000-01 to 2012-13 (up to March, 2013) 1. 2000-01 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 „*‟ 2009-10 # 2010-11 # 2011-12 # ^ 2012-13 # (from April, 2012 to March, 2013) CUMULATIVE TOTAL (from April, 2000 to March, 2013) (i) (ii)

In Rs crores 10,733 18,654 12,871 10,064 14,653 24,584 56,390 98,642 142,829 123,120 97,320 165,146 121,907 896,913

In US$ million 2,463 4,065 2,705 2,188 3,219 5,540 12,492 24,575 31,396 25,834 21,383 35,121 22,423 193,404 ( + ) 65 % ( - ) 33 % ( - ) 19 % ( + ) 47 % ( + ) 72 % (+ )125 % ( + ) 97 % ( + ) 28 % ( - ) 18 % ( - ) 17 % (+) 64 % -

Note:

Including amount remitted through RBI‟s-NRI Schemes (2000-2002). FEDAI (Foreign Exchange Dealers Association of India) conversion rate from rupees to US dollar applied, on the basis of monthly average rate provided by RBI (DEPR), Mumbai.

# Figures for the years 2009-10, 2010-11, 2011-12 & 2012-13 (from April, 2012 to August, 2012) are provisional subject to reconciliation with RBI. ^ Inflows for the month of March, 2012 are as reported by RBI, consequent to the adjustment made in the figures of March, „11, August, ‟11 and October, „11. *‟ An additional amount of US$ 4,035 million pertaining to the year 2008-09, since reported by RBI, has been included in FDI data base from February, 2012.

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ECONOMICS ASSIGNMENT

[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

I.

STATEMENT ON COUNTRY-WISE FDI EQUITY INFLOWS APRIL, 2000 TO MARCH, 2013

Sr. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44

Country Mauritius Singapore United Kingdom Japan U.S.A Netherlands Cyprus Germany France UAE Switzerland Spain South Korea Italy Hong Kong Sweden Caymen Islands British Virginia Indonesia Poland Malaysia Australia The Bermudas Belgium Luxembourg Russia Canada Oman Denmark China Finland Austria Ireland Chile Morocco Norway South Africa Thailand British Isles West Indies Taiwan Mexico Turkey Israel

Amount of Foreign Direct Investment Inflows (In Rs crore) (In US$ million) 341,124.86 73,666.11 90,182.32 19,460.35 80,458.61 17,548.55 70,094.45 14,550.29 50,922.68 11,121.11 42,378.39 8,965.08 32,328.14 6,889.33 25,512.17 5,480.30 16,864.63 3,572.99 11,307.02 2,422.47 11,064.28 2,367.02 6,960.69 1,463.19 5,821.17 1,231.55 5,258.45 1,169.48 4,769.75 1,028.74 4,604.83 982.37 3,755.52 877.74 3,604.01 795.76 2,825.48 610.30 2,987.28 568.79 2,730.13 549.45 2,478.02 535.06 2,252.20 502.07 2,277.18 491.86 2,197.27 473.03 2,236.55 468.17 1,954.65 425.67 1,622.44 352.02 1,645.73 342.61 1,428.48 278.31 1,301.95 273.89 895.05 187.64 687.66 154.23 654.72 141.07 649.65 136.99 607.06 126.18 564.27 120.71 513.66 111.10 451.33 98.37 348.17 78.28 306.60 65.70 345.83 64.97 279.53 59.66 247.93 55.69

%age with total FDI Inflows (+) 38.11 10.07 9.08 7.53 5.75 4.64 3.56 2.84 1.85 1.25 1.22 0.76 0.64 0.61 0.53 0.51 0.45 0.41 0.32 0.29 0.28 0.28 0.26 0.25 0.24 0.24 0.22 0.18 0.18 0.14 0.14 0.10 0.08 0.07 0.07 0.07 0.06 0.06 0.05 0.04 0.03 0.03 0.03 0.03

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]
254.02 193.91 185.36 187.15 147.88 145.92 168.58 141.68 138.45 155.03 119.72 93.72 98.45 100.43 101.10 83.67 86.99 84.96 81.11 74.81 130.53 64.54 58.39 57.20 49.93 49.48 47.86 46.23 35.75 38.09 39.07 29.90 25.14 24.72 22.62 22.30 23.16 21.13 19.84 23.27 18.78 16.06 13.51 14.23 12.31 9.12 7.74 7.49 7.30 6.31 49.67 40.93 40.61 36.94 33.53 32.62 31.24 30.74 29.45 28.57 25.00 21.14 21.07 20.97 20.83 19.51 18.24 17.95 17.42 17.36 29.23 14.56 12.78 12.71 12.17 10.44 10.30 10.15 8.96 8.49 8.24 6.43 5.52 5.49 5.22 5.07 4.60 4.46 4.31 4.20 3.72 3.63 2.99 2.84 2.47 1.93 1.87 1.52 1.43 1.41 0.03 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94

St. Vincent Saudi Arabia Panama Korea(North) Saint Kitts & Nevis New Zealand Philippines Bahamas Sri Lanka Jordan Portugal Iceland Kenya Brazil Virgin Islands(US) Gibraltar Seychelles Kuwait Kazakhstan Czech Republic Bahrain Liberia Malta Channel Islands Belarus Nigeria Hungary Argentina Myanmar Isle of Man Slovenia Liechtenstein Belize Maldives Slovakia Rep. of Fiji Islands Romania Ghana Tunisia Guersney Greece Uruguay Scotland Qatar West Africa Nepal Yemen Monaco Egypt Tanzania

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]
5.36 5.06 5.06 4.73 4.60 4.41 3.45 3.08 2.41 2.29 1.96 1.87 1.69 1.31 1.46 1.13 1.14 1.00 0.85 0.67 0.47 0.28 0.27 0.27 0.24 0.20 0.16 0.12 0.13 0.06 0.02 0.02 0.01 0.01 0.01 0.01 0.01 0.00 0.00 0.00 0.00 0.25 20,383.66 30,854.20 896,379.66 533.06 896,912.72 1.17 1.12 1.10 1.04 1.00 0.94 0.64 0.60 0.54 0.52 0.43 0.39 0.36 0.30 0.29 0.24 0.24 0.22 0.19 0.15 0.10 0.07 0.06 0.06 0.05 0.04 0.03 0.03 0.02 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.06 4,684.25 6,960.47 193,281.91 121.33 193,403.24 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2.42 3.65 100.00 -

95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 119 120 121 122 123 124 125 126 127 128 129 130 131 132 133 134 135 136 137 138 139

Colombia Ukraine Uganda Cuba Guyana Vanuatu Bermuda Togolese Republic Congo (DR) Croatia Aruba Lebanon Bulgaria Estonia Anguilla Yugoslavia Vietnam Jamaica Iraq Zambia Iran Libya Latvia Mongolia Sudan Peru Bangladesh Afghanistan Botswana St. Lucia Georgia East Africa Bolivia Costa Rica Kyrgyzstan Trinidad & Tobago Cameroon Djibouti Venezuela Barbados Muscat FII's NRI „*‟ Country Details Awaited SUB.-TOTAL RBI‟S- NRI SCHEMES (2000GRAND 2002) TOTAL

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ECONOMICS ASSIGNMENT
J.

[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

STATEMENT ON SECTOR-WISE FDI EQUITY INFLOWS APRIL, 2000 TO MARCH, 2013 Sector SERVICES SECTOR (Fin., Banking, Insurance, Non Fin/Business, Outsourcing, R&D, Courier, Tech. Testing and Analysis, Other) CONSTRUCTION DEVELOPMENT Townships, housing, built-up infrastructure and construction-development projects TELECOMMUNICATIONS COMPUTER SOFTWARE & HARDWARE DRUGS & PHARMACEUTICALS CHEMICALS (OTHER THAN FERTILIZERS) AUTOMOBILE INDUSTRY POWER METALLURGICAL INDUSTRIES HOTEL & TOURISM PETROLEUM & NATURAL GAS TRADING INFORMATION & BROADCASTING (INCLUDING PRINT MEDIA) ELECTRICAL EQUIPMENTS CEMENT AND GYPSUM PRODUCTS NON-CONVENTIONAL ENERGY MISCELLANEOUS MECHANICAL & ENGINEERING INDUSTRIES INDUSTRIAL MACHINERY CONSULTANCY SERVICES CONSTRUCTION (INFRASTRUCTURE) ACTIVITIES FOOD PROCESSING INDUSTRIES PORTS AGRICULTURE SERVICES HOSPITAL & DIAGNOSTIC CENTRES TEXTILES (INCLUDING DYED,PRINTED) ELECTRONICS SEA TRANSPORT FERMENTATION INDUSTRIES RUBBER GOODS MINING PAPER AND PULP (INCLUDING PAPER PRODUCTS) PRIME MOVER (OTHER THAN ELECTRICAL GENERATORS) Amount of FDI Inflows (In Rs crore) (In US$ million) 172,275.31 37,234.60 %age with total FDI Inflows (+) 19.26

Sr. No 1

2

101,049.13

22,080.20

11.42

3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32

58,732.23 52,774.07 48,879.53 40,495.55 39,169.94 36,136.88 34,814.13 33,260.03 24,808.41 18,646.51 15,495.69 14,668.58 11,779.04 12,901.12 10,522.52 11,017.51 9,692.72 9,741.06 8,681.38 6,717.38 7,797.73 7,437.93 5,689.76 5,466.74 5,492.51 5,095.29 5,824.46 4,368.18 4,056.14 4,131.80

12,856.06 11,691.10 10,318.17 8,880.83 8,294.85 7,834.22 7,507.07 6,631.25 5,381.48 3,955.80 3,284.21 3,182.70 2,626.43 2,591.22 2,318.71 2,302.14 2,095.13 2,090.41 1,811.06 1,635.08 1,608.69 1,597.33 1,226.02 1,198.22 1,194.50 1,134.63 1,134.44 998.30 865.54 848.68

6.65 6.05 5.34 4.59 4.29 4.05 3.88 3.43 2.78 2.05 1.70 1.65 1.36 1.34 1.20 1.19 1.08 1.08 0.94 0.85 0.83 0.83 0.63 0.62 0.62 0.59 0.59 0.52 0.45 0.44

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]
3,332.97 3,115.54 2,967.09 2,913.92 2,195.59 2,022.00 1,810.74 1,942.21 1,893.72 1,425.53 1,423.25 1,257.51 1,246.35 1,181.76 769.05 527.88 456.01 684.35 632.39 622.99 604.47 508.13 449.26 390.76 389.07 384.94 297.90 296.42 272.32 270.33 254.83 174.95 107.43 101.21 0.35 0.33 0.32 0.31 0.26 0.23 0.20 0.20 0.20 0.15 0.15 0.14 0.14 0.13 0.09 0.06 0.05

33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49

50 51 52 53 54 55 56 57 58 59 60 61 62 63 64.

EDUCATION SOAPS, COSMETICS & TOILET PREPARATIONS MACHINE TOOLS MEDICAL AND SURGICAL APPLIANCES CERAMICS AIR TRANSPORT (INCLUDING AIR FREIGHT) DIAMOND,GOLD ORNAMENTS GLASS VEGETABLE OILS AND VANASPATI FERTILIZERS AGRICULTURAL MACHINERY PRINTING OF BOOKS (INCLUDING LITHO PRINTING INDUSTRY) RAILWAY RELATED COMPONENTS COMMERCIAL, OFFICE & HOUSEHOLD EQUIPMENTS EARTH-MOVING MACHINERY LEATHER,LEATHER GOODS AND PICKERS TEA AND COFFEE (PROCESSING & WAREHOUSING COFFEE & RUBBER) RETAIL TRADING (SINGLE BRAND) SCIENTIFIC INSTRUMENTS TIMBER PRODUCTS PHOTOGRAPHIC RAW FILM AND PAPER INDUSTRIAL INSTRUMENTS BOILERS AND STEAM GENERATING PLANTS SUGAR COAL PRODUCTION DYE-STUFFS GLUE AND GELATIN MATHEMATICAL,SURVEYING AND DRAWING INSTRUMENTS DEFENCE INDUSTRIES COIR MISCELLANEOUS INDUSTRIES SUB -TOTAL RBI‟S- NRI SCHEMES (2000-2002) GRAND TOTAL

459.55 496.11 398.52 269.26 307.45 305.75 242.32 103.11 87.32 70.56 39.80 19.89 10.37 35,469.28 896,379.67 533.06 896,912.73

95.36 94.48 79.15 66.54 66.53 61.83 51.82 24.78 19.50 14.55 7.98 4.12 2.17 7,843.68 193,283.31 121.33 193,404.64

0.05 0.05 0.04 0.03 0.03 0.03 0.03 0.01 0.01 0.01 0.00 0.00 0.00 4.10 100 -

FDI inflows data re-classified, as per segregation of data from April 2000 onwards. +‟ Percentage of inflows worked out in terms of US$ & the above amount of inflows received through FIPB/SIA route RBI‟s automatic route & acquisition of existing shares only. FDI Sectoral data has been revalidated / reconciled in line with the RBI, which reflects minor changes in the FDI figures (increase/decrease) as compared to the earlier published sectoral data.

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ECONOMICS ASSIGNMENT
K. I.

[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

INDIAN ECONOMY Recent Trends in Indian Economy

1. The Indian economy has emerged with remarkable rapidity from the slowdown caused by the global economic crisis and emerged stronger in 2011.The Indian economy is estimated to grow at 8.6 per cent in 2010-11 as compared to the growth rate of 8.0 per cent in 2009-10. The growth rate of 8.6 per cent in GDP during 2010-11 has been due to the robust growth rates of over 8 per cent in the sectors of manufacturing, construction, trade, hotels, transport and communication, financing, insurance, and, real estate and business services. 2. The agriculture, forestry and fishing sector is likely to show a growth of 5.4 per cent during 2010-11, as against the previous year's growth rate of 0.4 per cent. According to the Department of Agriculture and Cooperation (DAC) of Government of India, production of food grains and oilseeds is expected to grow by 6.5 per cent and 11.9 per cent, respectively, as compared to the previous agriculture year. The production of cotton and sugarcane is also expected to rise by 41.2 per cent and 15.2 per cent, respectively, in 201011. Among the horticultural crops, production of fruits and vegetables is expected to increase by 4.1 per cent and 3.8 per cent, respectively, during the year 2010-11. 3. The growth in mining and quarrying and manufacturing sectors during 2010-11 is expected to be 6.2 and 8.8 per cent respectively over previous year. According to the latest estimates available of the Index of Industrial Production (IIP), mining and manufacturing registered growth rates of 8.0 per cent and 10.0 per cent respectively during April-November, 2010. The estimated growth rate for construction sector is 8.0 per cent in 2010-11. The key indicators of construction sector, namely, cement production and steel consumption have registered growth rates of 4.4 per cent and 8.8 per cent, respectively during AprilDecember, 2010. 4. The estimated growth in the trade, hotels, transport and communication sectors during 2010-11 is placed at 11.0 per cent, mainly on account of growth of 14.9 per cent in passengers handled in civil aviation, 21.3 per cent in air cargo handled and 40.9 per cent in stock of telephone connections. The sales of commercial vehicles witnessed an increase of 34.1 per cent per cent in April-December, 2010. The financing, insurance, real estate and business services sectors are expected to show a growth rate of 10.6 per cent during 2010-11, on account of 14.0 per cent growth in aggregate deposits and 22.6 per cent growth in bank credit during April- November 2010 (against the respective growth rates of 18.6 per cent and 10.1 per cent in the corresponding period of previous year). The growth rate of community, social and personal services during 2010-11 is estimated to be 5.7 per cent. 5. India's per capita income, often used to measure a country's standard of living, increased by 14.5 per cent during 2009-10 to US$ 1038.2 as compared to US$ 906.9 in 2008-09.

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II.

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Growth in Gross Domestic Product Annual growth by economic activity in Gross Domestic Product (GDP) for the year 2010-11, released by the Central Statistics office (CSO) of Government of India

S.No.

Industry

1 2 3 4 5 6 7 8

Agriculture, forestry & fishing Mining & quarrying Manufacturing Electricity, gas & water supply Construction Trade, hotels, transport & communication Financing, insurance, real estate & business services Community, social & personal services Total GDP

GDP at Factor Cost (2010-11) at 2004-05 prices(US$ billion) 152.42 24.32 170.87 20.49 84.57 291.36 187.89 141.87 1073.79

Percentage change over previous year at current prices (US$ billion) 295.25 40.13 228.09 22.15 129.21 379.65 285.97 216.87 1597.49 at 2004-05 prices 5.4 6.2 8.8 5.1 8.0 11.0 10.6 5.7 8.6 at current prices 23.2 18.2 14.5 8.6 17.0 16.7 26.5 11.3 18.3

Source: Central Statistics Office (CSO), Ministry of Statistics & Programme Implementation, Government of India

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

III.

Economic Survey 2012-13 According to the Economic Survey 2010-11, tabled in Parliament on February 25, 2011 by the Union Finance Minister, Mr. Pranab Mukherjee, the economy is expected to grow at 8.6 per cent in 2010-11 and is expected to be around 9 per cent in the next fiscal year. The growth has been broad based with a rebound in the Agriculture sector which is expected to grow around 5.4 per cent. Manufacturing and Services sector have registered impressive gains. The Survey reports that the industrial output growth rate was 8.6 per cent while the manufacturing sector registered a growth rate of 9.1 per cent in 2010-11. The main highlights of the survey are: 1. Economy expected to grow at 8.6 per cent in 2010-11 and 9 per cent in next fiscal. 2. Growth broad based with rebound in Agriculture, continued momentum in manufacturing and private services. 3. Fundamentals strong with savings and investments up, exports rising rapidly and inflation falling. 4. Agriculture likely to grow at 5.4 per cent in 2010-11. 5. Industrial output grows by 8.6 per cent. 6. Manufacturing sector registers 9.1 per cent growth. 7. Exports in April–December 2010 up by 29.5 per cent. 8. Imports in April–December 2010 up by 19 per cent. 9. Trade gap narrowed to US$ 82.01 billion in April-December 2010. 10. 59 per cent rise in Net Bank Credit. 11. Social programme spending stepped up by 5 percentage points of GDP over past 5 years. 12. 9.7 per cent growth of GDP at market prices. 13. Production of food grains estimated at 232.1 million tonnes. 14. Forex Reserves estimated at US$ 297.3 billion. 15. Gross Fiscal Deficit stands at 4.8 per cent of GDP

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L.

POTENTIAL FOR INVESTMENT IN INDIA

1. India presents a vast potential for overseas investment and is actively encouraging the entrance of foreign players into the market. India is also one of the few markets in the world, which offers high prospects for growth and earning potential in practically all areas of business. 2. India‟s biotechnology sector is set to become a $10 billion industry by 2015, CMD of Biocon Ltd, Kiran Mazumdar-Shaw said . She expects the industry to grow to $5 billion by next year. In 2008-09 it was $2.51 billion. “India‟s biotechnology industry is at an inflexion point, and has attained a critical mass, Mazumdar-Shaw said. It now has a platform from where it can leapfrog and deliver exponential growth, she said. India is also becoming the vaccine capital.Clinical trials, agri-biotech and bio-fuels are becoming opportunities. There are a lot of growth drivers and trigger points which, she said, will deliver in the next five years. 3. With the launch of video telephony, by BSNL and Sai Info Systems (SIS), will boost demand for broadband connection, Sam Pitroda, advisor to Prime Minister on public information, infrastructure and innovations, expects the number to hit 100 million in next five years. "The service is expected to revolutionize the telecom sector and take it to the next level. Globally with video phones have become an integral part of life. The service will be provided and marketed by SIS while the connectivity for the service will be provided by BSNL. BSNL will also market it as another value added service to its large broadband customer base," said Vijay Mandora, director, SIS. 4. Tumbling voice tariffs contributing to the declining average revenue per user (ARPU) rates, will result in SMS volumes to reach 191.6 billion in India by 2013, predicts Gartner. By 2013, the country would have more than 750 million mobile connections; therefore the SMS usage per user would essentially drop. However, overall large base of mobile connections would support this SMS volume. Strong organic growth continues in Asia‟s developing markets, with marginal subscribers turning to low-cost messaging as an entry-level service. In the mature markets of the Asia-Pacific region, SMS has seen sustained healthy growth as a result of steady price declines and increasingly generous SMS and data bundles," said Madhusudan Gupta, senior research analyst at Gartner. SMS contributes around 8% to value added services (VAS), which in turn contributes 10-12% of an operator‟s revenue. 5. The Indian auto sector is likely to witness an overall growth of 10% - 12% in sales during 2010 and a faster recovery in expected in passenger vehicle (PV) volumes of 12% - 14% compared with 5% - 6% for the commercial vehicle (CV) segment. The positive outlook for demand could result in a sharp increase in capex plans, which could offset the positive impact on credit profiles of higher volumes and lower inventories, said Fitch Ratings. The PV rebound has been supported by an improving liquidity scenario and restoration of consumer confidence; modest growth in industrial production, together with the government stimulus, has brought about stability in CV sales, though at lower levels than for PVs. Domestic CV sales grew by 22.3% during April-December 2009 compared with same period in 2008, building on the recovery in demand beginning Q4 09. However, growth trends have distinctly varied within the CV segment depending on the tonnage capacity and end-use, as light commercial vehicles (LCVs) have been able to maintain their ground while medium and heavy commercial vehicles (M&HCVs) continued to face pressure due to the decline in industrial output. The M&HCV segment is now stabilizing with the higher industrial production, while the LCV segment is showing a more rapid recovery. Fitch expects the full-year 2010 numbers to reveal moderate growth in the range of 5% - 6% for domestic sales, with the first few months being driven by regulatory guidelines.

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6. The Union food processing ministry has set a target of attracting investments to the tune of Rs 1 lakh crore in the sector by 2015.Subodh Kant Sahai, Union food processing minister, said: “We are expecting investments of Rs 1 lakh crore in the next five years. We are planning to increase food processing to 20% of the total fruits and vegetable produced in the country. “According to him, food processing has grown by 10% in India while value-added products have grown by 10-15% in the last five years. We are looking at a growth of 35% in value-added production by 2015,” Sahai said. 7. The 234 million tonne per annum (mtpa) Indian cement industry, which witnessed a double digit dispatch growth in December 2009 and an overall growth thanks to infrastructure and real estate projects, is set to add 43.2 mtpa capacity during the next 15 months (January 2010 to March 2011).South India, which has already started feeling the heat of oversupply, will add the maximum capacity of 17.6 million tonne during that period. The next in line is the northern region, which will add 9.6 mt. The western, central and eastern regions will add 9 mt, 3 mt and 4 mt, respectively. “The southern market with 18 players having capacity of 1mtpa or more is the most fragmented one in India. Capacities of three new players (Raghuram Cement, Jayajyothi and JSW Cement with more than 2 mtpa each) will stabilize in the next 6-9 months. With sharp price cuts, new producers may find it difficult to break even, and this would likely to prompt some consolidation. All the three new producers are unlikely to participate in consolidation,” J Radhakrishnan, analyst with IIFL, said in his report. 8. The healthcare industry in the country, which comprises hospital and allied sectors, is projected to grow 23% per annum to touch $77-billion mark by 2012 from the current estimated size of $35 billion, according to a Yes Bank and Assocham report. The sector has registered a growth of 9.3% between 20002009, comparable to the sectorial growth rate of other emerging economies such as China, Brazil and Mexico. The growth in the sector would be driven by healthcare facilities, both private and public sector, medical diagnostic and pathlabs and the medical insurance sector. Of the sum, diagnostic and pathology services would account for $2.5 billion in 2012, more than double its estimated current size of $1billion. The growth in the segment is expected to be driven by consolidation in the industry and increasing insurance penetration among the country‟s population. Healthcare facilities, inclusive of public and private hospitals, the core sector, around which the healthcare sector is centered, would continue to contribute over 70% of the total sector and touch a figure of $54.7 billion by 2012.The medical insurance sector would account for another $ 3 billion in the next three years, up from the estimated current size of $1 billion. 9. Steve King, CEO of Zenith Optimedia Worldwide feels that new and emerging advertising markets like India and China will power the global industry‟s recovery, on the back of positive signals from developed markets like US, Europe. “India, with an approximate 10% growth, will certainly be in the top ten advertising markets in absolute dollar terms by 2015,” he told. Zenith Optimedia, the world‟s third largest media-buying agency and an enterprise under the Paris-based Publics Group is upbeat about India. It has brought fresh business worth $100 million in the country this year. India figures amongst Zenith Optimedia‟s 20 largest markets globally, but over the past five years, it has been among the top three fastest growing ones. “Most of our markets are between 15 to 20 years old, so despite being here for only five years, this market has responded very well. Our focus here will be on winning local clients, apart from the international ones. By the next five years, we will have considerably closed the gap on the top two market leaders here,” King said.

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M. ADVANTAGE IN INDIA 1. World's largest democracy with 1.2 billion people. 2. Stable political environment and responsive administrative set up. 3. Well established judiciary to enforce rule of law. 4. Land of abundant natural resources and diverse climatic conditions. 5. Rapid economic growth: GDP to grow by 8.5% in 2010-11* and 9.0% in 2011-12. 6. India's growth will start to outpace China

s within three to five years and hence will become the fastest large economy with 9-10% growth over the next 20-25 years (Morgan Stanley). 7. Investor friendly policies and incentive based schemes. 8. Second most attractive Foreign Direct Investment (FDI) location in the world: India received a total of US$ 25.9 billion of FDI in 2009-10. 9. Healthy macro-economic fundamentals: Investment rate is expected to be 37% in 2010-11 and 38.4% in 2011-12 while Domestic Savings rate is expected to be 34% in 2010-11 and 36% in 2011-12. 10. India's economy will grow fivefold in the next 20 years (McKinsey). 11. Cost competitiveness: low labour costs. 12. Total labour force of nearly 530 million. 13. Large pool of skilled manpower; strong knowledge base with significant English speaking population. 14. Young country with a median age of 30 years by 2025: India

Related Interests

s economy will benefit from this "demographic dividend". 15. The proportion of population in the working age group (15-59 years) is likely to increase from approximately 58% in 2001 to more than 64% by 2021. 16. Huge untapped market potential. 17. The urban population of India will double from the 2001 census figure of 290m to approximately 590m by 2030 (McKinsey). 18. Progressive simplification and rationalization of direct and indirect tax structures. 19. Reduction in import tariffs. 20. Full current account convertibility. 21. Compliance with WTO norms. 22. Robust banking and financial institutions. "* India's financial year is from April to March. 2010-11 above means April 2010-March 2011."

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I. Indian Economy

[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

India has undergone a paradigm shift owing to its competitive stand in the world. The Indian economy is on a robust growth trajectory and boasts of a stable annual growth rate, rising foreign exchange reserves and booming capital markets among others. Indian economy is estimated to grow at 8.6 percent in 2010-11 as compared to the growth rate of 8.0 percent in 2009-10. These GDP figures are based at factor cost at constant (2004-05) prices in the year 2010-11.The growth rate of 8.6 per cent in GDP during 2010-11 has been due to the robust growth rates of over 8 per cent in the sectors of manufacturing, construction, trade, hotels, transport and communication, financing, insurance, and, real estate and business services. Agriculture sector registered a growth rate of 5.4 percent in 2009-10. A growth rate of 18.3 percent is estimated for GDP at current prices in the year 2010-11.

II.

Agriculture Sector The agriculture, forestry and fishing sector is likely to show a growth of 5.4 per cent in its GDP during 201011, as against the previous year‟s growth rate of 0.4 per cent. The estimate of GDP from agriculture in 201011, according to the Department of Agriculture and Cooperation (DAC),production of food grains and oilseeds is expected to grow by 6.5 per cent and 11.9 per cent, respectively, as compared to the previous agriculture year. The production of cotton and sugarcane is also expected to rise by 41.2 per cent and 15.2 per cent, respectively, in 2010-11. Among the horticultural crops, production of fruits and vegetables is expected to increase by 4.1 per cent and 3.8 per cent, respectively, during the year 2010-11.

III. Industry Sector The growth in GDP for mining and quarrying and manufacturing sectors during 2010-11 is expected to be 6.2 and 8.8 percent respectively over previous year. According to the latest estimates available on the Index of Industrial Production (IIP), the index of mining and manufacturing registered growth rates of 8.0 per cent and 10.0 per cent during April-November, 2010. The estimated growth rate for construction sector is 8.0 percent in 2010-11. The key indicators of construction sector, namely, cement production and steel consumption have registered growth rates of 4.4 per cent and 8.8 per cent, respectively during AprilDecember, 2010.

IV. Services Sector The estimated growth in GDP for the trade, hotels, transport and communication sectors during 2010-11 is placed at 11.0 per cent, mainly on account of growth during April- November, 2010-11 of 14.9 per cent in passengers handled in civil aviation, 21.3 per cent in air cargo handled and 40.9 per cent in stock of telephone connections. The sales of commercial vehicles witnessed an increase of 34.1 per cent per cent in April-December, 2010. The financing, insurance, real estate and business services sector is expected to show a growth rate of 10.6 per cent during 2010-11, on account of 14.0 per cent growth in aggregate deposits and 22.6 per cent growth in bank credit during April- November 2010 (against the respective growth rates of 18.6 per cent and 10.1 per cent in the corresponding period of previous year). The growth rate of community, social and personal services during 2010-11 is estimated to be 5.7 per cent.

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N. FDI POLICY FRAMEWORK Policy regime is one of the key factors driving investment flows to a country. Apart from underlying macro fundamentals, ability of a nation to attract foreign investment essentially depends upon its policy regime whether it promotes or restrains the foreign investment flows. This section undertakes a review of India‟s FDI policy framework and makes a comparison of India‟s policy vis-à-vis that of select EMEs. 1. FDI Policy Framework in India There has been a sea change in India‟s approach to foreign investment from the early 1990s when it began structural economic reforms encompassing almost all the sectors of the economy. Pre-Liberalization Period Historically, India had followed an extremely cautious and selective approach while formulating FDI policy in view of the dominance of „import-substitution strategy‟ of industrialization. With the objective of becoming „self-reliant‟, there was a dual nature of policy intention – FDI through foreign collaboration was welcomed in the areas of high technology and high priorities to build national capability and discouraged in low technology areas to protect and nurture domestic industries. The regulatory framework was consolidated through the enactment of Foreign Exchange Regulation Act (FERA), 1973 wherein foreign equity holding in a joint venture was allowed only up to 40 per cent. Subsequently, various exemptions were extended to foreign companies engaged in export oriented businesses and high technology and high priority areas including allowing equity holdings of over 40 per cent. Moreover, drawing from successes of other country experiences in Asia, Government not only established special economic zones (SEZs) but also designed liberal policy and provided incentives for promoting FDI in these zones with a view to promote exports. As India continued to be highly protective, these measures did not add substantially to export competitiveness. Recognising these limitations, partial liberalisation in the trade and investment policy was introduced in the 1980s with the objective of enhancing export competitiveness, modernisation and marketing of exports through Transnational Corporations (TNCs). The announcements of Industrial Policy (1980 and 1982) and Technology Policy (1983) provided for a liberal attitude towards foreign investments in terms of changes in policy directions. The policy was characterized by de-licensing of some of the industrial rules and promotion of Indian manufacturing exports as well as emphasizing on modernization of industries through liberalized imports of capital goods and technology. This was supported by trade liberalization measures in the form of tariff reduction and shifting of large number of items from import licensing to Open General Licensing (OGL). Post-Liberalization Period A major shift occurred when India embarked upon economic liberalization and reforms program in 1991 aiming to raise its growth potential and integrating with the world economy. Industrial policy reforms gradually removed restrictions on investment projects and business expansion on the one hand and allowed increased access to foreign technology and funding on the other. A series of measures that were directed towards liberalizing foreign investment included: (i) (ii) (iii) (iv) Introduction of dual route of approval of FDI – RBI‟s automatic route and Government‟s approval (SIA/FIPB) route, Automatic permission for technology agreements in high priority industries and removal of restriction of FDI in low technology areas as well as liberalization of technology imports, Permission to Non-resident Indians (NRIs) and Overseas Corporate Bodies (OCBs) to invest up to 100 per cent in high priorities sectors, Hike in the foreign equity participation limits to 51 per cent for existing companies and liberalization of the use of foreign „brands name‟ and

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(v)

[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

Signing the Convention of Multilateral Investment Guarantee Agency (MIGA) for protection of foreign investments. These efforts were boosted by the enactment of Foreign Exchange Management Act (FEMA), 1999 [that replaced the Foreign Exchange Regulation Act (FERA), 1973] which was less stringent. This along with the sequential financial sector reforms paved way for greater capital account liberalization in India.

Investment proposals falling under the automatic route and matters related to FEMA are dealt with by RBI, while the Government handles investment through approval route and issues that relate to FDI policy per se through its three institutions, viz., the Foreign Investment Promotion Board (FIPB), the Secretariat for Industrial Assistance (SIA) and the Foreign Investment Implementation Authority (FIIA). FDI under the automatic route does not require any prior approval either by the Government or the Reserve Bank. The investors are only required to notify the concerned regional office of the RBI within 30 days of receipt of inward remittances and file the required documents with that office within 30 days of issuance of shares to foreign investors. Under the approval route, the proposals are considered in a time-bound and transparent manner by the FIPB. Approvals of composite proposals involving foreign investment/ foreign technical collaboration are also granted on the recommendations of the FIPB. Current FDI policy in terms of sector specific limits has been summarized in Table 3 below: Table 3: Sector Specific Limits of Foreign Investment in India Sector A. Agriculture 1. Floriculture, Horticulture, Development of Seeds, Animal Husbandry, Pisciculture, Aquaculture, Cultivation of vegetables & mushrooms and services related to agro and allied sectors. 2. Tea sector, including plantation B. Industry 1. Mining covering exploration and mining of diamonds & precious stones; gold, silver and minerals. 2. Coal and lignite mining for captive consumption by power projects, and iron & steel, cement production. 3. Mining and mineral separation of titanium bearing minerals C. Manufacturing 1. Alcohol- Distillation & Brewing 2. Coffee & Rubber processing & Warehousing. 3. Defence production 4. Hazardous chemicals and isocyanates 5. Industrial explosives -Manufacture 6. Drugs and Pharmaceuticals 7. Power including generation (except Atomic energy); transmission, distribution and power trading. FDI Cap/Equity 100% Entry Route Automatic Other Conditions

100%

FIPB

(FDI is not allowed in any other agricultural sector /activity) 100% Automatic

100%

Automatic

100%

FIPB

Automatic 100% 100% 26% 100% 100% 100% 100% Automatic FIPB Automatic Automatic Automatic Automatic

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(FDI is not permitted for generation, transmission & distribution of electricity produced in atomic power plant/atomic energy since private investment in this activity is prohibited and reserved for public sector.) D.Services 1. Civil aviation (Greenfield projects and 100% Automatic Existing projects) 2. Asset Reconstruction companies 49% FIPB 3. Banking (private) sector 4. NBFCs : underwriting, portfolio management services, investment advisory services, financial consultancy, stock broking, asset management, venture capital, custodian, factoring, leasing and finance, housing finance, forex broking, etc. 5. Broadcasting a. FM Radio b. Cable network; c. Direct to home; d. Hardware facilities such as up-linking, HUB. e. Up-linking a news and current affairs TV Channel 6. Commodity Exchanges 7. Insurance 8. Petroleum and natural gas : a. Refining 74% (FDI+FII). FII not to exceed 49% 100% Automatic s.t.minimum capitalization norms

Automatic

20% 49% (FDI+FII) 100% 49% (FDI+FII) (FDI 26 % FII 23%) 26% 49% (PSUs). 100% (Pvt. Companies)

FIPB

FIPB Automatic FIPB (for PSUs). Automatic (Pvt.) FIPB Clearance from IRDA

9. Print Media 26% a. Publishing of newspaper and periodicals dealing with news and current affairs b. Publishing of scientific magazines / speciality 100% journals/periodicals 10. Telecommunications 74% (including FDI, a. Basic and cellular, unified access services, FII, NRI, FCCBs, national / international long-distance, V-SAT, ADRs/GDRs, public mobile radio trunked services (PMRTS), convertible preference global mobile personal communication services shares, etc. (GMPCS) and others. Sectors where FDI is Banned

FIPB Automatic up to 49% and FIPB beyond 49%.

S.t.guidelines by Ministry of Information & broadcasting

1. Retail Trading (except single brand product retailing); 2. Atomic Energy; 3. Lottery Business including Government / private lottery, online lotteries etc; 4. Gambling and Betting including casinos etc.; 5. Business of chit fund; 6. Nidhi Company; 7. Trading in Transferable Development Rights (TDRs); 8. Activities/sector not opened to private sector investment; 9. Agriculture (excluding Floriculture, Horticulture, Development of seeds, Animal Husbandry, Pisciculture and cultivation of vegetables, mushrooms etc. under controlled conditions and services related to agro and allied sectors) and Plantations (Other than Tea Plantations); 10. Real estate business, or construction of farm houses; 11. Manufacturing of Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco or of tobacco substitutes.

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FDI Policy: The International Experience Foreign direct investment is treated as an important mechanism for channelizing transfer of capital and technology and thus perceived to be a potent factor in promoting economic growth in the host countries. Moreover, multinational corporations consider FDI as an important means to reorganise their production activities across borders in accordance with their corporate strategies and the competitive advantage of host countries. These considerations have been the key motivating elements in the evolution and attitude of EMEs towards investment flows from abroad in the past few decades particularly since the eighties. This section reviews the FDI policies of select countries to gather some perspective as to „where does India stand‟ at the current juncture to draw policy imperatives for FDI policy in India. China
 

 

Encouragement to FDI has been an integral part of the China‟s economic reform process. It has gradually opened up its economy for foreign businesses and has attracted large amount of direct foreign investment. Government policies were characterised by setting new regulations to permit joint ventures using foreign capital and setting up Special Economic Zones (SEZs) and Open Cities.The concept of SEZs was extended to fourteen more coastal cities in 1984.Favorable regulations and provisions were used to encourage FDI inflow, especially export-oriented joint ventures and joint ventures using advanced technologies in 1986. Foreign joint ventures were provided with preferential tax treatment, the freedom to import inputs such as materials and equipment, the right to retain and swap foreign exchange with each other, and simpler licensing procedures in 1986. Additional tax benefits were offered to export-oriented joint ventures and those employing advanced technology. Priority was given to FDI in the agriculture, energy, transportation, telecommunications, basic raw materials, and high-technology industries, and FDI projects which could take advantage of the rich natural resources and relatively low labour costs in the central and northwest regions. China‟s policies toward FDI have experienced roughly three stages: gradual and limited opening, active promoting through preferential treatment, and promoting FDI in accordance with domestic industrial objectives. These changes in policy priorities inevitably affected the pattern of FDI inflows in China.

Chile

   

In Chile, policy framework for foreign investment, embodied in the constitution and in the Foreign Investment Statute, is quite stable and transparent and has been the most important factor in facilitating foreign direct investment. Under this framework, an investor signs a legal contract with the state for the implementation of an individual project and in return receives a number of specific guarantees and rights. Foreign investors in Chile can own up to 100 per cent of a Chilean based company, and there is no time limit on property rights. They also have access to all productive activities and sectors of the economy, except for a few restrictions in areas that include coastal trade, air transport and the mass media. Chile attracted investment in mining, services, electricity, gas and water industries and manufacturing. Investors are guaranteed the right to repatriate capital one year after its entry and to remit profits at any time. Although Chile‟s constitution is based on the principle of non-discrimination, some tax advantages are extended to foreign investors such as invariability of income tax regime, invariability of indirect taxes, and special policy regime for large projects.

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Malaysia
   

[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

The Malaysian FDI regime is tightly regulated in that all foreign manufacturing activity must be licensed regardless of the nature of their business. Until 1998, foreign equity share limits were made conditional on performance and conditions set forth by the industrial policy of the time. In the past, the size of foreign equity share allowed for investment in the manufacturing sector hinged on the share of the products exported in order to support the country's export-oriented industrial policy. FDI projects that export at least 80 per cent of production or production involving advanced technology are promoted by the state and no equity conditions are imposed. Following the crisis in 1997-98, the restriction was abolished as the country was in need of FDI.

Korea

 

The Korean government maintained distinctive foreign investment policies giving preference to loans over direct investment to supplement its low level of domestic savings during the early stage of industrialisation. Korea‟s heavy reliance on foreign borrowing to finance its investment requirements is in sharp contrast to other countries. The Korean Government had emphasised the need to enhance absorptive capacity as well as the indigenisation of foreign technology through reverse engineering at the outset of industrialisation while restricting both FDI and foreign licensing. This facilitated Korean firms to assimilate imported technology, which eventually led to emergence of global brands like Samsung, Hyundai, and LG. The Korean government pursued liberalised FDI policy regime in the aftermath of the Asian financial crisis in 1997-98 to fulfil the conditionality of the International Monetary Fund (IMF) in exchange for standby credit. Several new institutions came into being in Korea immediately after the crisis. Invest Korea is Korea‟s national investment promotion agency mandated to offer one-stop service as a means of attracting foreign direct investment, while the Office of the Investment Ombudsman was established to provide investment after-care services to foreign-invested companies in Korea. These are affiliated to the Korea Trade Investment Promotion Agency. Korea enacted a new foreign investment promotion act in 1998 to provide foreign investors incentives which include tax exemptions and reductions, financial support for employment and training, cash grants for R&D projects, and exemptions or reductions of leasing costs for land for factory and business operations for a specified period. One of the central reasons for the delays in the construction process in Korea is said to be the lengthy environmental and cultural due diligence on proposed industrial park sites. (OECD, 2008).

Thailand

Thailand followed a traditional import-substitution strategy, imposing tariffs on imports, particularly on finished products in the 1960s. The role of state enterprises was greatly reduced from the 1950s and investment in infrastructure was raised. Attention was given to nurturing the institutional system necessary for industrial development. Major policy shift towards export promotion took place by early 1970s due to balance of payments problems since most of components, raw materials, and machinery to support the production process, had to be imported.

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On the FDI front, in 1977 a new Investment Promotion Law was passed which provided the Board of Investment (BOI) with more power to provide incentives to priority areas and remove obstacles faced by private investors (Table 4). After the East Asian financial crisis, the Thai government has taken a very favourable approach towards FDI with a number of initiatives to develop the industrial base and exports and progressive liberalisation of laws and regulations constraining foreign ownership in specified economic activities. The Alien Business Law, which was enacted in 1972 and restricted majority foreign ownership in certain activities, was amended in 1999. The new law relaxed limits on foreign participation in several professions such as law, accounting, advertising and most types of construction, which have been moved from a completely prohibited list to the less restrictive list of businesses.

To sum up, the spectacular performance of China in attracting large amount of FDI could be attributed to its proactive FDI policy comprising setting up of SEZs particularly exports catering to the international market, focus on infrastructure and comparative advantage owing to the low labour costs. A comparison of the FDI policies pursued by select emerging economies, set out above, suggests that policies although broadly common in terms of objective, regulatory framework and focus on technological upgradation and export promotion, the use of incentive structure and restrictions on certain sectors, has varied across countries. While China and Korea extend explicit tax incentives to foreign investors, other countries focus on stability and transparency of tax laws. Similarly, while all the countries promote investment in manufacturing and services sector, China stands out with its relaxation for agriculture sector as well. It is, however, apparent that though policies across countries vary in specifics, there is a common element of incentivisation of foreign investment (Table 4). Table 4: FDI Policy and Institutional Framework in Select Countries Year of Libera lisation 1979 Objective Incentives Priority Sectors Unique features

China

Transformation of traditional agriculture, promotion of industrialization, infrastructure and export promotion.

Chile

1974

Technology transfer, export promotion and greater domestic competition.

Foreign joint ventures were provided with preferential tax treatment. Additional tax benefits to exportoriented joint ventures and those employing advanced technology. Privileged access was provided to supplies of water, electricity and transportation (paying the same price as state-owned enterprises) and to interest-free RMB loans. Invariability of tax regime intended to provide a stable tax horizon.

Agriculture, energy, transportation, telecommunications, basic raw materials, and high-technology industries.

Setting up of Special Economic Zones

All productive activities and sectors of the economy, except for a few restrictions in areas that include coastal trade, air transport and the mass media.

Does not use tax incentives to attract foreign investment.

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Businesses located in Foreign Investment Zone enjoy full exemption of corporate income tax for five years from the year in which the initial profit is made and 50 percent reduction for the subsequent two years. High-tech foreign investments in the Free Economic Zones are eligible for the full exemption three years and 50 percent for the following two years. Cash grants to high-tech green field investment and R&D investment subject to the government approval. No specific tax incentives. Manufacturing services and Loan-based borrowing to an FDI-based development strategy till late1990s.

Korea

1998

Malaysia

1980s

Promotion of absorptive capacity and indigenization of foreign technology through reverse engineering at the outset of industrialization while restricting both FDI and foreign licensing. Export promotion

Manufacturing services.

and

Thailand

1977

Technology transfer and export promotion

No specific tax incentives. The Thai Board of Investment has carried out activities under the three broad categories to promote FDI. 1. Image building to demonstrate how the host country is an appropriate location for FDI. 2. Investment generation by targeting investors through various activities. 3. Servicing investors

Manufacturing services

and

Malaysian Industrial Development Authority was recognised to be one of the effective agencies in the Asian region -

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3.

Cross-Country Comparison of FDI Policies – Where does India stand? A true comparison of the policies could be attempted if the varied policies across countries could be reduced to a common comparable index or a measure. Therefore, with a view to examine and analyse „where does India stand‟ vis-a-vis other countries at the current juncture in terms of FDI policy framework, the present section draws largely from the results of a survey of 87 economies undertaken by the World Bank in 2009 and published in its latest publication titled „Investing Across Borders‟. The survey has considered four indicators, viz., „Investing across Borders‟, „Starting a Foreign Business‟, „Accessing Industrial Land‟, and „Arbitrating Commercial Disputes‟ to provide assessment about FDI climate in a particular country. Investing across Borders indicator measures the degree to which domestic laws allow foreign companies to establish or acquire local firms. Starting foreign business indicator record the time, procedures, and regulations involved in establishing a local subsidiary of a foreign company. Accessing industrial land indicator evaluates legal options for foreign companies seeking to lease or buy land in a host economy, the availability of information about land plots, and the steps involved in leasing land. Arbitrating commercial disputes indicator assesses the strength of legal frameworks for alternative dispute resolution, rules for arbitration, and the extent to which the judiciary supports and facilitates arbitration. India‟s relative position in terms of these four parameters vis-à-vis major 15 emerging economies, which compete with India in attracting foreign investment, is set out in Tables 5A and 5B. Following key observations could be made from this comparison:
 

A comparative analysis among the select countries reveals that countries such as Argentina, Brazil, Chile and the Russian Federation have sectoral caps higher than those of India implying that their FDI policy is more liberal. The sectoral caps are lower in China than in India in most of the sectors barring agriculture and forestry and insurance. A noteworthy aspect is that China permits 100 per cent FDI in agriculture while completely prohibits FDI in media. In India, on the other hand, foreign ownership is allowed up to 100 per cent in sectors like „mining, oil and gas‟, electricity and „healthcare and waste management‟. India positioned well vis-a-vis comparable counterparts in the select countries in terms of the indicator „starting a foreign business‟. In 2009, starting a foreign business took around 46 days with 16 procedures in India as compared with 99 days with 18 procedures in China and 166 days with 17 procedures in Brazil (Table 5 B). In terms of another key indicator, viz., „accessing industrial land‟ India‟s position is mixed. While the ranking in terms of indices based on lease rights and ownership rights is quite high, the time to lease private and public land is one of the highest among select countries at 90 days and 295 days, respectively. In China, it takes 59 days to lease private land and 129 days to lease public land. This also has important bearing on the investment decisions by foreign companies. In terms of the indicator „arbitrating commercial disputes‟ India is on par with Brazil and the Russian Federation. Although, the strength of laws index is fairly good, the extent of judicial assistance index is moderate.

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Table 5A: Investing Across Borders – Sector wise Caps – 2009 Country Mini ng, oil and gas 100 100 100 75 100 97.5 100 70 50 40 100 74 49 Agric ul ture and fores try 100 100 100 100 50 72 100 85 49 40 100 100 49 Light manuf act uring Tele comm unicat ions Electrici ty Banking Insura nce Trans portation Media Constr uction, touris m and retail 100 100 100 83.3 83.7 85 100 90 100 100 100 100 66 Health care and waste manag ement 100 50 100 85 100 82.5 100 65 100 100 100 100 49

Argentina Brazil Chile China India Indonesia Korea, Malaysia Mexico Philippines Russian South Thailand

100 100 100 75 81.5 68.8 100 100 100 75 100 100 87.3

100 100 100 49 74 57 49 39.5 74.5 40 100 70 49

100 100 100 85.4 100 95 85.4 30 0 65.7 100 100 49

100 100 100 62.5 87 99 100 49 100 60 100 100 49

100 100 100 50 26 80 100 49 49 100 49 100 49

79.6 68 100 49 59.6 49 79.6 100 54.4 40 79.6 100 49

30 30 100 0 63 5 39.5 65 24.5 0 75 60 27.5

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Table 5B: Investing Across Borders – Key Indicators 2009 Country Starting a Foreign Business Time (days ) Pro ced ures (nu mber ) Ease of establ i shme nt index (0 = min, 100 = max) Strengt h of lease rights index (0 = min, 100 = max) Accessing Industrial Land Arbitrating Commercial Disputes Stre Ease Extent n gth of of of proc judici laws ess al inde inde assista x (0 x (0 nce = = index min, min, (0 = 100 100 min, = = 100 = max max max) ) ) 63.5 72.2 55.1 84.9 94.9 94.9 88.5 95.4 94.9 94.9 79.1 95.4 71.6 82.4 84.9 45.7 62.8 76.1 67.6 81.8 81.9 81.8 84.7 87 76.1 79 81.8 57.2 74.8 60.2 53.4 41.3 70.2 66.7 52.7 33.7 76.6 94.5 40.8

Strengt h of owne rship rights index (0 = min, 100 = max)

Acces s to land infor m ation index (0 = min, 100 = max) 44.4 33.3 33.3 50 15.8 21.4 68.4 23.1 33.3 23.5 44.4 47.4 27.8

Argentina Brazil Chile China India Indonesia Korea, Malaysia Mexico Philippin es Russian South Thailand

50 166 29 99 46 86 17 14 31 80 31 65 34

18 17 11 18 16 12 11 11 11 17 10 8 9

65 62.5 63.2 63.7 76.3 52.6 71.1 60.5 65.8 57.9 68.4 60.5

79.3 85.7 85.7 96.4 92.9 78.6 85.7 78.5 81.3 68.8 85.7 84.5 80.7

100 100 100 n/a 87.5 n/a 100 87.5 100 n/a 100 100 62.5

Avail a bility of land infor m ation index (0 = min, 100 = max) 85 75 80 52.5 85 85 70 85 90 87.5 90 85 70

Tim e to leas e priv ate land (day s)

Tim e to leas e publ ic land (day s)

48 66 23 59 90 35 10 96 83 16 62 42 30

112 180 93 129 295 81 53 355 151 n/a 231 304 128

Thus, a review of FDI policies in India and across major EMEs suggests that though India‟s policy stance in terms of access to different sectors of the economy, repatriation of dividend and norms for owning equity are comparable to that of other EMEs, policy in terms of qualitative parameters such as „time to lease private land‟, „access to land information‟ and „Extent of Judicial assistance‟ are relatively more conservative. Since time taken to set up a project adds to the cost and affect competitiveness, an otherwise fairly liberal policy regime may turn out to be less competitive or economically unviable owing to procedural delays. Thus, latter may affect the cross border flow of investible funds. But an assessment of precise impact of these qualitative parameters on the flow of FDI is an empirical question. The following section makes an attempt to quantify the impact of various factors that govern the flow of FDI in India.

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O. FDI FLOWS TO INDIA IN RECENT PERIOD Distinct slowdown despite strong fundamentals – Plausible Explanations As stated above, global FDI flows moderated significantly since the eruption of global financial crisis in 2008, albeit with an uneven pattern across regions and countries. Though initially developing countries showed some resilience, crisis eventually spread through the trade, financial and confidence channels and FDI flows declined in both the advanced and developing economies during 2009. Subsequently, while FDI flows to advanced countries continued to decline, FDI flows to many of the Latin American and Asian countries witnessed strong rebound during 2010 on the back of improved corporate profitability and some improvement in M&A activities. FDI flows to India also moderated during 2009 but unlike trends in other EMEs, flows continued to be sluggish during 2010 despite strong domestic growth ahead of global recovery. This raised concerns for policy makers in India against the backdrop of expansion in the current account deficit. Table 6: FDI Inflows in Select EMEs (US$ billion) Argentina 2007 2008 2009 Q1-10 Q2-10 Q3-10 Q4-10 2010 6.5 9.7 (50.2) 4.0 -(92.0) 1.9 0.0 1.9 0.9 4.7 (17.5) Brazil 34.6 45.1 (30.3) 25.9 -(14.3) 5.5 6.6 10.5 25.9 48.5 (87.3) Chile 12.5 15.2 (21.1) 12.7 -(39.9) 5.5 2.5 5.3 1.9 15.2 (19.7) India 25.5 43.4 (70.3) 35.6 -(49.4) 6.1 6.0 6.7 5.3 24.1 -(32.3) Indonesia 6.9 9.3 (34.5) 4.9 -(85.9) 2.9 3.3 3.4 3.7 13.3 (171.4) Mexico 29.1 24.9 -(14.3) 14.5 -(200.8) 4.8 7.6 2.4 2.8 17.6 (21.4) South Africa 5.7 9.6 (68.1) 5.4 -(92.1) 0.4 0.4 0.1 0.9 -(80.4) Thailand 11.3 8.5 -(24.7) 5.0 -(120.2) 1.5 2.0 1.5 0.7 5.7 (14.0)

Note: Figures in brackets relate to percentage variation over the corresponding period of the previous year. Source: IMF, BOP Statistics.

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An analysis of trends in FDI flows during 2010 reveal that among the EMEs, countries such as Indonesia, Thailand, Brazil, Argentina, Chile and Mexico registered increases in the range of 14-171 per cent during 2010 over 2009 (Table 6). In contrast, FDI inflows to India declined by 32 per cent, year-on-year, during 2010. This moderation in FDI inflows warrants a deeper examination of the causal factors from a crosscountry perspective. An analysis of key macroeconomic indicators in the select EMEs reveals that India‟s macroeconomic performance compares with other EMEs which received higher FDI inflows during 2010 (Charts 1 & 2).

For instance, the GDP growth of India improved during 2010 as was the case with the select EMEs. The current account balance as percent of GDP deteriorated across the select EMEs, except Argentina. However, inflation in India was generally higher (remaining at double digits for a long period) than other select EMEs (except Argentina).

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Thus, without any significant deterioration in Indian macroeconomic performance compared to the select EMEs during 2010, the moderation in FDI inflows to India points towards the probable role of institutional factors that might have discouraged FDI inflows. 1. FDI slowdown – Explanations Offered In the recent past, various economists, policymakers, academicians and corporate researchers suggested that India‟s regulatory policies in terms of procedural delays, complex rules and regulations related to land acquisition, legal requirements and environmental obligations might have played a role in holding the investors back from investing into India. The uncertainty created by the actions taken by policy makers might have led to unfriendly business environment in India. In this context, some of the statements and observations made in various reports are detailed below: “Infrastructure projects in India carry significant risks associated with meeting government regulation, environment norms and legal requirements; inadequate user charges; and execution and construction risks” (CRISIL Report, January 2011). “Procedural delays are bothering nearly all of the respondents with almost 93 percent of the respondents indicating this issue to be „quite to very serious‟. The time consuming systems and procedures to be complied with, the bureaucratic layers to be dealt with and the multiple bodies from which clearances are to be obtained- all add up substantially to the transaction cost involved and take up a lot of management time thus making it an issue of serious concern for the investors” (FDI Survey by FICCI, December 2010). Identification of „environment clearances, land acquisition and rehabilitation‟ as the key issues that delayed large investment projects in the steel industry (Kotak Institutional Equities Research, October, 2010). “The Posco project (still in the pipeline) involves wider issues: Rs. 52,000 crore in foreign direct investments that will be seen as a test case for India‟s ability to accommodate big-ticket capital from abroad. The mining project by Vedanta in the same state (Orissa) has already been stalled on environment grounds” (The Telegraph newspaper statement, October 19, 2010).

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“When hard choices need to be made about large projects that are considered central to economic growth but are detrimental to the environment. Let us all accept the reality that there is undoubtedly a trade-off between growth and environment”(EPW, October 16, 2010). “Apart from hundreds of industry projects, he (environment Minister) has held up construction of a second airport in the commercial hub of Mumbai and dozens of road and dam projects await clearance” (China Daily, November 6, 2010). To ascertain these assertions which seek to imply that probably relatively more restrictive policy environment in India vis-à-vis other countries might have caused sluggishness in FDI flows, following section undertakes an econometric exercise using data of select EMEs. 2. Reasons for FDI slowdown – An Econometric Evidence The review of theoretical and select empirical literature reveals that FDI flows are driven by both pull and push factors. While pull factors that reflect the macroeconomic parameters could be influenced by the policies followed by the host country, push factors essentially represent global economic situation and remain beyond the control of economies receiving these flows (Box I). Box I Foreign Investment Flows – Theoretical Underpinnings The research on this subject has so far been largely devoted to factors determining the FDI and policy formulations in response to those factors. Until 1960s, FDI was modelled as a part of neoclassical capital theory and the basic motive behind the movement of this capital into a host country was search for higher rate of returns. Over the period, with growing realisation the motives for capital movement have been far more diverse than mere search for higher returns, there has been a plethora of theoretical and empirical research directed towards identifying factors determining different types of capital flows. It was the insight of Hymer (1960) who by differentiating direct investment from portfolio investment created basis for studies on factors determining the FDI flows. Hymer highlighted certain facts and evidences2 on the basis of which he concluded that the nature of the direct and portfolio investment differs and therefore same theories cannot be applied to both types of investment. The key feature that Hymer identified for motivation of FDI was the level of control which a firm of home country gets through direct investment in host country. He also stressed upon market imperfections such as the ownership of knowledge not known to rivals, existence of differentiated products giving profit advantage to a firm investing abroad, problems related to licensing the product, etc., for supporting FDI decisions. However, the literature argues that his theory over-emphasised the role of structural market failure and ignored the transaction cost side of market failure (Dunning and Rugman, 1985). Moreover, his theory did not explain the locational and dynamic aspect of FDI. Later, Caves (1971) expanded upon Hymer‟s theory of direct investment and embedded it in the industrial organisation literature. By differentiating horizontal and vertical FDI, he identified factors such as possession of superior knowledge or information, motives to avoid uncertainty in a market characterized by a few suppliers and objective of creating entry barriers, etc., as being responsible for rising FDI flows. With the rising presence of multinational enterprises in the global economy, the view on FDI was expanded with the internationalization theories of FDI that stressed on transaction costs (Dunning and Rugman, 1985; Horaguchi nad Toyne, 1990). The internationalisation theory of FDI identified accumulation and internalisation of knowledge as the motivation for FDI, which bypasses intermediate product markets in knowledge (Tolentino, 2001).

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The theorists such as Horst (1972), who stressed upon locational determinants of FDI, identified prevalence of natural resources as an important factor for FDI inflow. Wheeler and Mody (1992) identified ergodic and nonergodic systems that determine the location of FDI. The ergodic system focussed on classical variables such as geographical features, labor costs, transport costs and market size as factors determining the FDI flows. Various empirical studies still rely on these variables to determine potential for FDI flows. The non-ergodic system focussed on externalities that emerge from investment in firms experiencing agglomeration economies, in other words, indicating the clustering effects of FDI. The studies such as Venables (1996), Potter et al (2002) explained spatial patterns of FDI in terms of these factors. The research work of Dunning (1973, 1981) provided a comprehensive analysis of FDI based on ownership, location and the internationalisation (OLI) paradigm. His eclectic theory of FDI highlighted various benefits emerging from FDI: the ownership-specific advantages which comprise access to spare capacity, economies of joint supply, greater access to markets and knowledge, diversification of risk, technology and trademarks, firm size; the location-specific advantages consisting of distribution of inputs and markets, costs of labor, materials and transport costs, government intervention and policies, commercial and legal infrastructure, etc.; internalisation-specific advantages covering reduction in search, negotiation and monitoring costs, tariff avoidance, etc. The critics of eclectic theory of FDI have regarded it as a taxomony rather than a theory of FDI (Ietto-Gillies, 1992) as it covered a range of theories and employs a large number of variables. It has also been criticised for reformulation over time to incorporate new ideas and to reflect contemporary trends in FDI. The prior version of his theory ignored the role of strategy in determining the FDI flows. The role of strategic motivations, which was first analysed by Knickerbocker (1973), were extended by Acocella (1992). As per these strategic theories, the reasons behind strategic alliances included economies of scale, the reduction of risk and access to knowledge and expertise (Inkpen, 2001). The strategic alliances highlight the motivation for mergers and acquisitions taking place in the current era of M&A boom. All these theories mainly explain the supply side of FDI that creates a push to FDI for flowing out of the home economy. Broadly, these factors and motives comprise profit expansion through knowledge advantage, lower cost advantage, greater market access, gains from scale economies, strategic motives such as acquiring input supplies or creating worldwide near to monopoly powers, locational advantages, reduction in risk and agglomeration gains. A vast literature on demand side factors that pull FDI into a host economy is also available. The studies such as World Bank (1995), Blomstrom and Kokko (1998), Markusen and Venables (1999), highlight gains from FDI in the form of competition and efficiency effects, spillover effects, effects of backward and forward linkages, technological effects, accumulation of knowledge capital, stable flow of funds with no debtservicing obligation attached, greater external market discipline on macroeconomic policy, broadening and deepening of national capital markets, etc. for the host country. These theoretical studies have given a lot of space for empirical research on factors determining the inflow and outflow of FDI and the role played by policy initiatives undertaken on the part of host countries to attract FDI. The country specific studies have analysed the role of regulatory regime of the host country in attracting FDI. These studies have focussed on timing, activities of supervisory authorities and content of external and internal regulatory measures. A lot of literature highlighting the role played by policy environment discusses the issues of creating investor friendly environment for FDI. As per Oxelheim (1993), in attracting inward investment during the period of transition from a national market to an integrated part of the global market, governments can influence the relative cost of capital by using an adequate mix of interventions. Policymakers may affect the corporate decision about where to locate a production facility by managing a set of international relative prices: exchange rates, relative inflation and interest rates. In general, they can create investment incentives or business opportunities by creating deviations from the international purchasing power parity and the international Fisher effect. Additional business incentives controlled by policymakers are relative taxes and relative political risk. This study has argued that appropriate policies appear to be a necessary precondition for attracting FDI.

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The UNCTC (1991) has provided seven policy instruments used to attract FDI: ownership policies, tax and subsidy measures, policies concerning convertibility of foreign exchange and remittance of earnings, price control measures, performance requirements, sector-specific limitations and incentives and miscellaneous entry and procedural rules that are assumed to impose a considerable cost on a potential FDI. A World Bank report on indicators of FDI regulation (2010) has found that restrictive and obsolete laws and regulations impede FDI, red tape and poor implementation of laws creates further barriers to FDI, good regulations and efficient processes matter for FDI and effective institutions help in fostering FDI. Thus, the report highlights the importance of regulatory framework. Data and Methodology The paper attempts a panel exercise for the select major emerging market economies to ascertain determinants of FDI flows. The data set comprises observations for the period from 2003-04 to 2009-10 for 10 major emerging economies, viz., Argentina, Brazil, Chile, India, Malaysia, Mexico, Philippines, Russia, South Africa and Thailand. To ensure the comparability entire dataset has been sourced from the Global Development Finance, published by the World Bank. FDI flows have been measured as FDI inflows to GDP ratio which has been regressed over a range of explanatory variables. Drawing from the literature review presented above, some of the variables that have been chosen and could be significant in determining the FDI flows comprise: market size, openness, currency valuation, growth prospects, macroeconomic sustainability, regulatory regime and proportion of global FDI received by emerging economies. Market size: Larger market size is expected to attract more FDI as it provides greater potential for demand and lower production costs through scale economies. Market size has been proxied by GDP in purchasing power parity (PPP) terms. Openness: Impact of openness or liberalised trade is somewhat ambiguous and depends on relative strength of two effects. First, economy with trade barriers is expected to attract more horizontal FDI so that production sites could be built within the national boundaries of those restricted economies. Second, increasing openness attracts vertical FDI flows in search of cheap intermediate and capital goods (Resmini, 2000). Also, openness in trade is correlated with economic liberalisation policy of an economy that may sound favorable to investors. Openness has been proxied by sum of current receipts and payments to GDP ratio. Macroeconomic stability - Lower inflation rate and stable exchange rate are expected to attract greater FDI by mitigating uncertainty risk. It has been proxied by inflation and exchange rate volatility. Exchange rate valuation - Froot and Stein (1991) have evidently found that a weaker host country currency tends to increase inward FDI as depreciation makes host country assets less expensive relative to assets in the home country which may act as an attraction for vertical FDI. On the other hand, a stronger real exchange rate might be expected to strengthen the incentive of foreign companies to produce domestically thereby attract more horizontal FDI. However, the second hypothesis does not appear to have attracted much support in the empirical literature (Walsh and Yu, 2010). It has been measured by value of US dollar in terms of respective domestic currencies. Clustering effects: A larger stock of FDI is regarded as a signal of a benign business climate for foreign investors and thus may attract more FDI. Moreover, by clustering with other firms, new investors benefit from positive spillovers from existing investors in the host country. The studies of Wheeler and Mody (1992), Barrel and Pain (1999) and Campos and Kinoshida (2003) have found empirical evidence of agglomeration effects. It has been proxied by the stock of FDI.

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Institutions and Governance - Institutional and Governance quality has been identified as a likely determinant of FDI, particularly for less developed countries, for a variety of reasons. First, good governance is associated with higher economic growth, which should attract more FDI inflows. Second, poor institutions that enable corruption tend to add to investment costs and reduce profits. Third, the high sunk cost of FDI makes investors highly sensitive to uncertainty, including the political uncertainty that arises from poor institutions (Walsh and Yu, 2010). Institutional framework and governance has been captured by „Government Effectiveness‟ Index (Kaufmann Index). It captures “perceptions of the quality of public services, the quality of the civil service and the degree of its independence from political pressures, the quality of policy formulation and implementation, and the credibility of the government's commitment to such policies”. Score is assigned on the scale of -2.5 to 2.5. Higher score means Government procedures are more efficient. Macro Economic Sustainability could be a key factor in attracting foreign investment. If government finances and external sector are considered sustainable, foreign investor feel assured of the safety of its investments. Sustainability has been captured through two variables. Fiscal sustainability has been captured by GFD to GDP ratio and external sector sustainability has been captured by net IIP to GDP ratio. Apart from these pull factors, push factors such as global economic environment and policy stance of the developed world may be critical factors in determining the FDI flows. For instance, higher global liquidity would cause larger flow of resources to EMEs searching for higher returns. It could be proxied by the FDI to EMEs. Limitations of the data Inferences drawn in the study should however be seen in the light of following data limitations:
  

The study is based on the macro level data and may not capture strictly the firm specific characteristics in the determination of FDI. Dataset for each variable have been sourced from a single source to ensure comparability. Since international agencies may make suitable adjustments for the sake of comparability, data for an individual country may marginally vary from the country‟s own datasets. The sectoral caps for India, as provided by the World Bank in its survey „Investing across Borders‟, in respect of agriculture, banking, media, „construction, tourism and single brand retail‟ are apparently at variance with extant guidelines. This is because the average caps were reported for the respective sectors in its publication and the same have been reproduced in the study.

Fixed effect model4 of the following form was estimated for a group of emerging economies, where fy (i, t) is the FDI to GDP ratio of an individual economy i in the year t, and x (i, t) is the vector of explanatory variables. y(i,t) = a1 d1(i,t) + a2 d2(i,t) + ... + b¢x(i,t) + e(i,t) = a(i) + b¢x(i,t) + e(i,t), where the a(i)s are individual specific constants, and the d(i)s are group specific dummy variables which equal 1 only when j = i.

Panel has been estimated for the period 2000-01 to 2010-11 for 10 countries.

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Results

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The estimated equation is shown below, with t-statistics shown in parentheses:

where fy – foreign direct investment to GDP ratio; Openness – current flows to GDP ratio; Gdiff – growth differential amongst the sample countries; dwages – change in labour cost; FDIEMERG = size of FDI toemerging economies; IIPY – Net International Investment Position; Govt. Effect – Index of Government Effectiveness (Kaufmann Index). In line with a priori expectations, all the pull factors viz., openness, growth differential, net international investment position and Kaufmann Index of Government Effectiveness were found to be positively related. Labour cost, as expected, had inverse relationship with FDI inflows. All the variables were statistically significant. Similarly, the push factor captured through size of FDI flowing into emerging economies was also found to be positively related and impact has been statistically significant. GDP in PPP terms capturing size of the market was also examined. Although it was statistically insignificant (not reported), its sign was in line with a priori expectations, i.e., bigger the market size larger the FDI flows. Similarly, the sign for exchange rate although correct as per a priori expectation, was statistically insignificant and has not been reported. The results show that ten percentage points rise in openness, growth differential and IIP cause 0.3, 0.8 and .2 percentage point rise in FDI to GDP ratio, respectively. Similarly, every US$ 10 billion rise in the size of global FDI to emerging economies causes 0.09 percentage point rise in FDI/GDP ratio. On the other hand, every US$ 10 rise in the wage rate is likely to reduce the FDI ratio by .04 percentage points. The Index denoting „Government Effectiveness (Gov. Effect) as expected has inverse relationship with FDI flows implying that policy certainty could be a major determinant of FDI inflows. As per our results, if Gov Effect Index rises by one point on the scale of -2.5 to 2.5, FDI to GDP ratio rises by 4 percentage points. Thus, the panel results show that higher the degree of openness, expected growth of the economy, net international assets and size of FDI flows to EMEs, larger the size of FDI that flows to the country. Similarly, higher the certainty of implementation of efficient and quality policies, higher would be the flow of FDI. On the other hand, higher labour cost is likely to discourage the flow of FDI to the country.

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What caused dip in FDI flows to India during 2010-11? Our empirical exercise portrays a range of factors that significantly impact the size of FDI flows. With a view to segregate the impact of non-economic factors including government policy, a contra factual scenario is generated for the year 2010-11 by updating values for all the explanatory variables except for the Kaufmann Index. Estimated potential and actual FDI levels are presented in the Chart 3 and contra factual scenario that assumes no deterioration in government effectiveness index has been presented in Chart 3a.

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It could be observed from Chart 3 that actual FDI to India closely tracked the potential FDI path. The potential FDI level is the estimated level that should occur given the trends in underlying fundamentals. In the year 2010-11, the actual FDI flows at 1.5 per cent of GDP are marginally lower than the estimated level of 1.8 per cent of GDP. Chart 3a, presents a contra-factual scenario where potential level of FDI flows for the year 201011 is worked out by updating values of all the variables except „Govt. Effect‟. The latter is retained at preceding year‟s level. In could be observed that in case of contra-factual scenario, in the year 2010-11, gap between potential and actual level of FDI increased by more than 25 per cent. Since, the contra factual estimated for 2010-11 updated value of all other variables except Govt. Effect, the larger gap between potential and the actual in the year could be attributed to index of Government Effectiveness7. In other words, contra factual estimate of FDI for the year 2010-11 incorporates impact of all the economic variables, viz., growth differential, openness, net IIP, labour cost and size of „FDI to all emerging economies‟ whereas it keeps qualitative variable „Govt. Effect‟ unaltered. Keeping „Govt. Effect‟ unaltered means that had there been no amplification in policy uncertainty over the preceding year‟s level, FDI inflows to India would have been more than 35 per cent higher than that was actually received. Thus, empirical results corroborate our assertion made in the analytics presented above that the qualitative factors play an important role in attracting FDI flows, and slowdown in FDI flows in the absence of any deterioration in the macro economic variables could probably be on account of such qualitative factors.

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P. APPROVAL FOR FDI IN LIMITED LIABILITY PARTNERSHIP FIRM The Cabinet Committee on Economic Affairs approved the proposal to amend the policy on allowing Foreign Direct Investment (FDI) in Limited Liability Partnership (LLP) firms on 11 may 2011. The FDI in LLPs will be implemented in a calibrated manner, beginning with the „open‟ sectors where monitoring is not required, subject to the following conditions: a) LLPs with FDI will be allowed, through the Government approval route, in those sectors/activities where 100% FDI is allowed, through the automatic route and there are no FDI-linked performance related conditions. b) LLPs with FDI will not be allowed to operate in agricultural/plantation activity, print media or real estate business. c) LLPs with FDI will not be eligible to make any downstream investments.

There are also further following conditions relating to funding, ownership and management of LLPS: I. Funding of LLPs: (a) An Indian company, having FDI, will be permitted to make downstream investment in LLPs only if both the company, as well as the LLP are operating in sectors where 100% FDI is allowed, through the automatic route and there are no FDI-linked performance related conditions. (b) Foreign Capital participation in the capital structure of the LLPs will be allowed only by way of cash considerations, received by inward remittance, through normal banking channels, or by debit to NRE/FCNR account of the person concerned, maintained with an authorized dealer/authorized bank. (c) Foreign Institutional Investors (Flls) and Foreign Venture Capital Investors (FVCIs) will not be permitted to invest in LLPs. LLPs will also not be permitted to avail External Commercial Borrowings (ECBs.)

II. Ownership and management of LLPs: For the purpose of determination of the designated partners in respect of LLPs with FDI, the term "resident in India" would have the meaning, as defined for "person resident in India", under Section 2(v) (i) (A) & (B) of the Foreign Exchange Management Act, 1999.

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Q. SECTORS FOR FDI: 1. FDI in Agriculture 1. Agriculture & Animal Husbandry (a) (b) (c) (d) Floriculture, Horticulture, and 100% Automatic Cultivation of Vegetables & Mushrooms under controlled conditions Development and production of Seeds and planting material; Animal Husbandry (including of breeding of dogs), Pisciculture, Aquaculture under controlled conditions Services related to agro and allied sectors

Other conditions: For companies dealing with development of transgenic seeds/vegetables, the following conditions apply: (i) When dealing with genetically modified seeds or planting material the company shall comply with safety requirements in accordance with laws enacted under the Environment (Protection) Act on the genetically modified organisms. Any import of genetically modified materials if required shall be subject to the conditions laid down vide Notifications issued under Foreign Trade (Development and Regulation) Act, 1992. The company shall comply with any other Law, Regulation or Policy governing genetically modified material in force from time to time. Undertaking of business activities involving the use of genetically engineered cells and material shall be subject to the receipt of approvals from Genetic Engineering Approval Committee (GEAC) and Review Committee on Genetic Manipulation (RCGM). Import of materials shall be in accordance with National Seeds Policy. The term “under controlled conditions” covers the following:

(ii)

(iii)

(iv)

(v) (vi)

 „Cultivation under controlled conditions‟ for the categories of Floriculture, Horticulture, Cultivation of vegetables and Mushrooms is the practice of cultivation wherein rainfall, temperature, solar radiation, air humidity and culture medium are controlled artificially. Control in these parameters may be effected through protected cultivation under green houses, net houses, poly houses or any other improved infrastructure facilities where microclimatic conditions are regulated anthropogenically. In case of Animal Husbandry, scope of the term „under controlled conditions‟ includes – • Rearing of animals under intensive farming systems with stall-feeding. Intensive farming system will require climate systems (ventilation, temperature/humidity management), health care and nutrition, herd registering/pedigree recording, use of machinery, waste management systems. Poultry breeding farms and hatcheries where microclimate is controlled through advanced technologies like incubators, ventilation systems etc.

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 In the case of pisciculture and aquaculture, „under controlled conditions‟ includes – • • Aquariums Hatcheries where eggs are artificially fertilized and fry are hatched and incubated in an enclosed environment with artificial climate control. 2 Tea Plantation 1 Tea sector including tea plantations.

Note: Besides the above, FDI is not allowed in any other plantation Other conditions: (i) Compulsory divestment of 26% equity of the company in favour of an Indian partner/Indian public within a period of 5 years. Prior approval of the State Government concerned in case of any future land use change.

(ii)

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2. FDI in Mining 1. Mining and Exploration of metal and non-metal ores including diamond, gold, silver and precious ores but excluding titanium bearing minerals and its ores; subject to the Mines and Minerals (Development & Regulation) Act, 1957. 2. Coal and Lignite: (1) Coal & Lignite mining for captive consumption by power projects, iro& steel and cement units and other eligible activities permitted under and subject to the provisions of Coal Mines (Nationalization) Act, 1973 (2) Setting up coal processing plants like washeries subject to the condition that the company shall not do coal mining and shall not sell washed coal or sized coal from its coal processing plants in the open market and shall supply the washed or sized coal to those parties who are supplying raw coal to coal processing plants for washing or sizing. 3. Mining and mineral separation of titanium bearing minerals and ores, its value addition and integrated activities. Mining and mineral separation of titanium bearing minerals & ores, its value addition and integrated activities subject to sectorial regulations and the Mines and Minerals (Development and Regulation Act 1957) Other conditions: India has large reserves of beach sand minerals in the coastal stretches around the country. Titanium bearing minerals viz. Limonite, rutile and leucoxene, and Zirconium bearing minerals including zircon are some of the beach sand minerals which have been classified as “prescribed substances” under the Atomic Energy Act, 1962. Under the Industrial Policy Statement 1991, mining and production of minerals classified as “prescribed substances” and specified in the Schedule to the Atomic Energy (Control of Production and Use) Order, 1953 were included in the list of industries reserved for the public sector. Vide Resolution No. 8/1(1)/97-PSU/1422 dated 6th October 1998 issued by the Department of Atomic Energy laying down the policy for exploitation of beach sand minerals, private participation including Foreign Direct Investment (FDI), was permitted in mining and production of Titanium ores (Limonite, Rutile and Leucoxene) and Zirconium minerals (Zircon). Vide Notification No. S.O.61(E) dated 18.1.2006, the Department of Atomic Energy re-notified the list of “prescribed substances” under the Atomic Energy Act 1962. Titanium bearing ores and concentrates (Limonite, Rutile and Leucoxene) and Zirconium, its alloys and compounds and minerals/concentrates including Zircon, were removed from the list of “prescribed substances”. (i) FDI for separation of titanium bearing minerals & ores will be subject to the following additional conditions viz.: (A) Value addition facilities are set up within India along with transfer of technology. (B) Disposal of tailings during the mineral separation shall be carried out in accordance with regulations framed by the Atomic Energy Regulatory Board such as Atomic Energy (Radiation Protection) Rules, 2004 and the Atomic Energy (Safe Disposal of Radioactive Wastes) Rules, 1987.

(ii)

FDI will not be allowed in mining of “prescribed substances” listed in the Notification No. S.O 61(E) dated 18.1.2006 issued by the Department of Atomic Energy.

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Clarification: (1)

[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

For titanium bearing ores such as Limonite, Leucoxene and Rutile, manufacture of titanium dioxide pigment and titanium sponge constitutes value addition. Limonite can be processed to produce 'Synthetic Rutile or Titanium Slag as an intermediate value added product. The objective is to ensure that the raw material available in the country is utilized for setting up downstream industries and the technology available internationally is available for setting up such industries within the country. Thus, if with the technology transfer, the objective of the FDI Policy can be achieved, the conditions prescribed at (i) (A) above shall be deemed to be fulfilled.

(2)

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3. FDI in Manufacturing Manufacture of items reserved for production in Micro and Small Enterprises (MSEs).  FDI in MSEs will be subject to the sectorial caps, entry routes and other relevant sectorial regulations. Any industrial undertaking which is not a Micro or Small Scale Enterprise, but manufactures items reserved for the MSE sector would require Government route where foreign investment is more than 24% in the capital. Such an undertaking would also require an Industrial License under the Industries (Development & Regulation) Act 1951, for such manufacture. The issue of Industrial License is subject to a few general conditions and the specific condition that the Industrial Undertaking shall undertake to export a minimum of 50% of the new or additional annual production of the MSE reserved items to be achieved within a maximum period of three years. The export obligation would be applicable from the date of commencement of commercial production and in accordance with the provisions of section 11 of the Industries (Development & Regulation) Act 1951.

4. FDI in Power Electric Generation, Transmission, Distribution and Trading 1. Generation and transmission of electric energy produced in - hydroelectric, coal/lignite based thermal, oil based thermal and gas based thermal power plants. 2. Non-Conventional Energy Generation and Distribution. 3. Distribution of electric energy to households, industrial, commercial and other users and 4. Power Trading Note: All the above would be subject to the provisions of the Electricity Act 2003.

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5. FDI in Defence

[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

1. Defence Industry subject to Industrial license under the Industries (Development & Regulation) Act 1951. 2. Other conditions: (i) Licence applications will be considered and licences given by the Department of Industrial Policy & Promotion, Ministry of Commerce & Industry, in consultation with Ministry of Defence. (ii) (iii) The applicant should be an Indian company / partnership firm. The management of the applicant company / partnership should be in Indian hands with majority representation on the Board as well as the Chief Executives of the company / partnership firm being resident Indians. Full particulars of the Directors and the Chief Executives should be furnished along with the applications. The Government reserves the right to verify the antecedents of the foreign collaborators and domestic promoters including their financial standing and credentials in the world market. Preference would be given to original equipment manufacturers or design establishments, and companies having a good track record of past supplies to Armed Forces, Space and Atomic energy sections and having an established R & D base. There would be no minimum capitalization for the FDI. A proper assessment, however, needs to be done by the management of the applicant company depending upon the product and the technology. The licensing authority would satisfy itself about the adequacy of the net worth of the non-resident investor taking into account the category of weapons and equipment that are proposed to be manufactured. There would be a three-year lock-in period for transfer of equity from one non-resident investor to another non-resident investor (including NRIs & erstwhile OCBs with 60% or more NRI stake) and such transfer would be subject to prior approval of the FIPB and the Government. The Ministry of Defence is not in a position to give purchase guarantee for products to be manufactured. However, the planned acquisition programme for such equipment and overall requirements would be made available to the extent possible. The capacity norms for production will be provided in the licence based on the application as well as the recommendations of the Ministry of Defence, which will look into existing capacities of similar and allied products. Import of equipment for pre-production activity including development of prototype by the applicant company would be permitted. Adequate safety and security procedures would need to be put in place by the licensee once the licence is granted and production commences. These would be subject to verification by authorized Government agencies.

(iv)

(v)

(vi)

(vii)

(viii)

(ix)

(x)

(xi)

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(xii)

The standards and testing procedures for equipment to be produced under licence from foreign collaborators or from indigenous R & D will have to be provided by the licensee to the Government nominated quality assurance agency under appropriate confidentiality clause. The nominated quality assurance agency would inspect the finished product and would conduct surveillance and audit of the Quality Assurance Procedures of the licensee. Selfcertification would be permitted by the Ministry of Defence on case to case basis, which may involve either individual items, or group of items manufactured by the licensee. Such permission would be for a fixed period and subject to renewals. Purchase preference and price preference may be given to the Public Sector organizations as per guidelines of the Department of Public Enterprises. Arms and ammunition produced by the private manufacturers will be primarily sold to the Ministry of Defence. These items may also be sold to other Government entities under the control of the Ministry of Home Affairs and State Governments with the prior approval of the Ministry of Defence. No such item should be sold within the country to any other person or entity. The export of manufactured items would be subject to policy and guidelines as applicable to Ordnance Factoriesand Defence Public Sector Undertakings. Non-lethal items would be permitted for sale to persons / entities other than the Central of State Governments with the prior approval of the Ministry of Defence. Licensee would also need to institute a verifiable system of removal of all goods out of their factories. Violation of these provisions may lead to cancellation of the licence. Government decision on applications to FIPB for FDI in defence industry sector will be normally communicated within a time frame of 10 weeks from the date of acknowledgement.

(xiii)

(xiv)

(xv)

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6. FDI in Civil Aviation Sector 1. The Civil Aviation sector includes Airports, Scheduled and Non-Scheduled domestic passenger airlines, Helicopter services / Seaplane services, Ground Handling Services, Maintenance and Repair organizations; Flying training institutes; and Technical training institutions. For the purposes of the Civil Aviation sector: (i) “Airport” means a landing and taking off area for aircrafts, usually with runways and aircraft maintenance and passenger facilities and includes aerodrome as defined in clause (2) of section 2 of the Aircraft Act, 1934. "Aerodrome" means any definite or limited ground or water area intended to be used, either wholly or in part, for the landing or departure of aircraft, and includes all buildings, sheds, vessels, piers and other structures thereon or pertaining thereto. "Air transport service" means a service for the transport by air of persons, mails or any other thing, animate or inanimate, for any kind of remuneration whatsoever, whether such service consists of a single flight or series of flights "Air Transport Undertaking" means an undertaking whose business includes the carriage by air of passengers or cargo for hire or reward. "Aircraft component" means any part, the soundness and correct functioning of which, when fitted to an aircraft, is essential to the continued airworthiness or safety of the aircraft and includes any item of equipment. "Helicopter" means a heavier-than -air aircraft supported in flight by the reactions of the air on one or more power driven rotors on substantially vertical axis. "Scheduled air transport service", means an air transport service undertaken between the same two or more places and operated according to a published time table or with flights so regular or frequent that they constitute a recognizably systematic series, each flight being open to use by members of the public. “Non-Scheduled Air Transport service” means any service which is not a scheduled air transport service and will include Cargo airlines. “Cargo” airlines would mean such airlines which meet the conditions as given in the Civil Aviation Requirements issued by the Ministry of Civil Aviation. "Seaplane" means an aeroplane capable normally of taking off from and alighting solely on water.

(ii)

(iii)

(iv)

(v)

(vi)

(vii)

(viii)

(ix)

(x)

(xi)

“Ground Handling” means (i) ramp handling , (ii) traffic handling both of which shall include the activities as specified by the Ministry of Civil Aviation through the Aeronautical Information Circulars from time to time, and (iii) any other activity specified by the Central Government to be a part of either ramp handling or traffic handling.

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2. Policy for FDI in Civil Aviation sector The policy for FDI in the Civil Aviation Sector would be subject to the Aircraft Rules, 1934 as amended from time to time, Civil Aviation Requirements, and Aeronautical Information Circulars as notified by the Ministry of Civil Aviation. (i) Airports: (a) (b) Greenfield projects Existing projects

(ii)

Air Transport Services: (a) Air Transport Services would include Domestic Scheduled Passenger Airlines; NonScheduled Air Transport Services, helicopter and seaplane services. No foreign airlines would be allowed to participate directly or indirectly in the equity of an Air Transport Undertaking engaged in operating Scheduled and Non-Scheduled Air Transport Services except Cargo airlines. Foreign airlines are allowed to participate in the equity of companies operating Cargo airlines, helicopter and seaplane services. (1) Scheduled Air Transport Service/ Domestic Scheduled Passenger Airline. (2) Non-Scheduled Air Transport Service. (3) Helicopter services/seaplane services requiring DGCA approval

(b)

(c)

(iii)

Other services under Civil Aviation sector: (1) (2) Ground Handling Services subject to sectorial regulations and security clearance. Maintenance and Repair organizations; flying training institutes; and technical training Institutions

7. FDI in Banking- Public Sector Banking- Public Sector subject to Banking Companies (Acquisition & Transfer of Undertakings) Acts1970/80. This ceiling (20%) is also 20% (FDI and Portfolio Investment) applicable to the State Bank of India and its associate Banks.

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8. FDI in Credit Information Companies (CIC) Credit Information Companies 49% (FDI & FII) Government (1) Foreign investment in Credit Information Companies is subject to the Credit Information Companies (Regulation) Act, 2005. (2) Foreign investment is permitted under the Government route, subject to regulatory clearance from RBI. (3) Investment by a registered FII under the Portfolio Investment Scheme would be permitted up to 24% only in the CICs listed at the Stock Exchanges, within the overall limit of 49% for foreign investment. (4) Such FII investment would be permitted subject to the conditions that: (a) (b) (c) No single entity should directly or indirectly hold more than 10% equity. Any acquisition in excess of 1% will have to be reported to RBI as a mandatory requirement. FIIs investing in CICs shall not seek a representation on the Board of Directors based upon their shareholding.

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9. FDI in Broadcasting 1. Terrestrial Broadcasting FM (FM Radio) subject to such terms and conditions as specified from time to time by Ministry of Information and Broadcasting for grant of permission for setting up of FM Radio Stations 20% (FDI, NRI & PIO investments and Portfolio investment) 2. Cable Network subject to Cable Television Network Rules, 1994 and other conditions as specified from time to time by Ministry of Information and Broadcasting 49% (FDI, NRI & PIO investments and portfolio investment) 3. Direct –to-Home subject to such guidelines/terms and conditions as specified from time to time by Ministry of Information and Broadcasting 49% (FDI, NRI & PIO investments and portfolio investment) Within this limit, FDI component not to exceed 20% 4. Headend-In-The-Sky (HITS) Broadcasting Service refers to the multichannel downlinking and distribution of television programme in CBand or Ku Band wherein all the pay channels are downlinked at a central facility (Hub/teleport) and again uplinked to a satellite after encryption of channel. At the cable headend these encrypted pay channels are downlinked using a single satellite antenna, transmodulated and sent to the subscribers by using a land based transmission system comprising of infrastructure of cable/optical fibres network. (i) FDI limit in (HITS) Broadcasting Service is subject to such guidelines/terms and conditions as specified from time to time by Ministry of Information and Broadcasting. 74% (total direct and indirect foreign investment including portfolio and FDI) Automatic upto 49% Government route beyond 49% and up to 74%.

5. Setting up hardware facilities such as up-linking, HUB etc. (1) (2) (3) Setting up of Up-linking HUB/ Teleports 49% (FDI & FII). Up-linking a Non-News & Current Affairs TV Channel . Up-linking a News & Current Affairs TV Channel subject to the condition that the portfolio investment from FII/ NRI shall not be “persons acting in concert” with FDI investors, as defined in the SEBI(Substantial Acquisition of Shares and Takeovers) Regulations, 1997.

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10. FDI in Commodity Exchanges 1. Futures trading in commodities are regulated under the Forward Contracts (Regulation) Act, 1952. Commodity Exchanges, like Stock Exchanges, are infrastructure companies in the commodity futures market. With a view to infuse globally acceptable best practices, modern management skills and latest technology, it was decided to allow foreign investment in Commodity Exchanges. 2. For the purposes of this chapter: (i) “Commodity Exchange” is a recognized association under the provisions of the Forward Contracts (Regulation) Act, 1952, as amended from time to time, to provide exchange platform for trading in forward contracts in commodities. (ii) “Recognized association” means an association to which recognition for the time being has been granted by the Central Government under Section 6 of the Forward Contracts (Regulation) Act, 1952. (iii) “Association” means any body of individuals, whether incorporated or not, constituted for the purposes of regulating and controlling the business of the sale or purchase of any goods and commodity derivative. (iv) “Forward contract” means a contract for the delivery of goods and which is not a ready delivery contract. (v) “Commodity derivative” means• A contract for delivery of goods, which is not a ready delivery contract. Or • A contract for differences which derives its value from prices or indices of prices of such underlying goods or activities, services, rights, interests and events, as may be notified in consultation with the Forward Markets Commission by the Central Government, but does not include securities.

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11. FDI in Real Estate & Development of Townships The real estate sector in India is of great importance. According to the report of the Technical Group on Estimation of Housing Shortage, an estimated shortage of 26.53 million houses during the Eleventh Five Year Plan (2007-12) provides a big investment opportunity. According to a report „Emerging trends in Real Estate in Asia Pacific 2011', released by PricewaterhouseCoopers (PwC) and Urban Land Institute (ULI), India is the most viable investment destination in real estate. The report, which provides an outlook on Asia-Pacific real estate investment and development trends, points out that India, in particular Mumbai and Delhi, are good real estate investment options for 2011. Residential properties maintain their growth momentum and hence are viewed as more promising than other sectors. ULI is a global non-profit education and research institute. Further, real estate companies are coming up with various residential and commercial projects to fulfill the demand for residential and office properties in Tier-II and Tier-III cities. For instance, Ansal Properties has several residential projects in cities such as Jodhpur, Ajmer, Jaipur, Panipat, Kundli and Agra. Omaxe has also planned around 40 residential and integrated township projects in Tier-II and Tier-III cities, majority of them being in Uttar Pradesh, Punjab, Madhya Pradesh, Rajasthan and Haryana. The growth in real estate in Tier-II and Tier-III cities is mainly due to increase in demand for organized realty and availability of land at affordable prices in these cities. According to the data released by the Department of Industrial Policy and Promotion (DIPP), housing and real estate sector including cineplex, multiplex, integrated townships and commercial complexes etc, attracted a cumulative foreign direct investment (FDI) worth US$ 9,405 million from April 2000 to January 2011 wherein the sector witnessed FDI amounting US$ 1,048 million during April-January 2010-11. New Projects • • Private equity fund IL&FS Investment Managers (IIML) is estimated to have invested US$ 300 million in real estate and urban infrastructure projects in 2010. Close to Nalagarh in Solan district, Dabhota is set to be the latest industrial area to be developed by the Himachal Pradesh government, say officials. The state government has already issued a notification and asked the state land acquisition officials to acquire 2,020 bighas of land at Baghota to be developed into industrial plots. Ramky Estates and Farms Limited, the real estate arm of the Ramky Group, is contemplating to enter Indian market by July 2011. The company is evaluating on land acquisitions in Kolkata and Bhubaneswar. Chennai-based VGN Developers Pvt Ltd has entered into a joint venture with private equity firm Pragnya Fund to initiate a new residential project with an investment of US$ 20.06 million in the city. Ascendas has entered into an agreement with a Japanese consortium of Mizuho Corporate Bank (MCB) and JGC Corporation to develop integrated townships in India, according to a press release from Ascendas. The integrated township is likely to be in Chennai, which has attracted investment by a number of companies from Japan. Ascendas of Singapore will be the master developer.

• •

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

Godrej Group's real estate company, Godrej Properties and Frontier Home Developers, has launched a residential project in Gurgaon with joint venture partner M/s. Frontier Home Developers Pvt. Ltd. This is a debut residential project in the national capital region (NCR) for Godrej Properties. Shristi Infrastructure Development Corporation will invest US$ 444.7 million over the next three years in seven small cities in West Bengal, Tripura and Rajasthan. The money would be used to build integrated townships, healthcare facilities, hospitality and sports facilities, retail malls, logistics hubs and commercial and residential complexes. Realty major Ansal Properties & Infrastructure Ltd plans to invest about US$ 330.8 million over the next three years on expansion of its existing integrated townships and to develop a group housing project in Haryana. Vision India Real Estate, a closely-held business group in the US, is investing US$ 5 million in Gem Group's upcoming residential project in Chennai. This will be the first joint development project for the US company that is proposing to invest US$ 100 to US$ 200 million over the next three years on projects, especially in the logistics arena. Realty major Embassy Property Developments has entered into a joint venture with MK Land Holding, a Malaysian company that specializes in pre-fabricated affordable housing, to build projects in the affordable housing segment. The proposed project entails an investment of over US$ 1.2 billion. Thai real estate developer Pruksa Global plans to invest US$ 218 million in projects in India and launched its first residential project in the country at Bangalore in October 2010. The International Finance Corporation (IFC) is in talks with several real estate developers to create large affordable housing projects in India. For FY-09 and FY-10 (fiscal year ending June 30), IFC's highest exposure has been in India. Out of the US$ 3.5 billion that IFC has committed in India, US$ 2.5-2.6 billion have been disbursed. IFC will continue to invest roughly US$ 1 billion in India every year for the next two or three years. Townships, housing, built-up infrastructure and construction & development projects (which would include, but not be restricted to, housing, commercial premises, hotels, resorts, hospitals, educational institutions, recreational facilities, city and regional level infrastructure)

• •

Investment to be made will be subject to the following conditions: 1. Minimum area to be developed under each project would be as under: (i) (ii) (iii) In case of development of serviced housing plots, a minimum land area of 10 hectares In case of construction-development projects, a minimum built-up area of 50,000 sq.mts In case of a combination project, any one of the above two conditions would suffice

2. Minimum capitalization of US$10 million for wholly owned subsidiaries and US$ 5 million for joint ventures with Indian partners. The funds would have to be brought in within six months of commencement of business of the Company.

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

3. Original investment cannot be repatriated before a period of three years from completion of minimum capitalization. Original investment means the entire amount brought in as FDI. The lock-in period of three years will be applied from the date of receipt of each installment/tranche of FDI or from the date of completion of minimum capitalization, whichever is later. However, the investor may be permitted to exit earlier with prior approval of the Government through the FIPB. 4. At least 50% of the project must be developed within a period of five years from the date of obtaining all statutory clearances. The investor/investee company would not be permitted to sell undeveloped plots. For the purpose of these guidelines, “undeveloped plots” will mean where roads, water supply, street lighting, drainage, sewerage, and other conveniences, as applicable under prescribed regulations, have not been made available. It will be necessary that the investor provides this infrastructure and obtains the completion certificate from the concerned local body/service agency before he would be allowed to dispose of serviced housing plots. 5. The project shall conform to the norms and standards, including land use requirements and provision of community amenities and common facilities, as laid down in the applicable building control regulations, bye-laws, rules, and other regulations of the State Government / Municipal/Local Body concerned. 6. The investor/investee company shall be responsible for obtaining all necessary approvals, including those of the building/layout plans, developing internal and peripheral areas and other infrastructure facilities, payment of development, external development and other charges and complying with all other requirements as prescribed under applicable rules/bye-laws/regulations of the State Government/ Municipal/Local Body concerned. 7. The State Government/ Municipal/ Local Body concerned, which approves the building / development plans, would monitor compliance of the above conditions by the developer. Note: (i) The conditions at (1) to (4) above would not apply to Hotels & Tourism, Hospitals and SEZ‟s. (ii) For investment by NRIs, the conditions at (1) to (4) above would not apply. (iii) 100% FDI is allowed under the automatic route in development of Special Economic Zones (SEZ) without the conditionalities at (1) to (4) above. This will be subject to the provisions of Special Economic Zones Act 2005 and the SEZ Policy of the Department of Commerce. (iv) FDI is not allowed in Real Estate Business.

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

12. FDI in Industrial Park 1. Industrial parks both setting up and already established Industrial Parks: (i) “Industrial Park” is a project in which quality infrastructure in the form of plots of developed land or built up space or a combination with common facilities, is developed and made available to all the allottee units for the purposes of industrial activity. “Infrastructure” refers to facilities required for functioning of units located in the Industrial Park and includes roads (including approach roads), water supply and sewerage, common effluent treatment facility, telecom network, generation and distribution of power, air conditioning. “Common Facilities” refer to the facilities available for all the units located in the industrial park, and include facilities of power, roads (including approach roads), water supply and sewerage, common effluent treatment, common testing, telecom services, air conditioning, common facility buildings, industrial canteens, convention/conference halls, parking, travel desks, security service, first aid center, ambulance and other safety services, training facilities and such other facilities meant for common use of the units located in the Industrial Park. “Allocable area” in the Industrial Park means(a) (b) (c) In the case of plots of developed land- the net site area available for allocation to the units, excluding the area for common facilities. In the case of built up space- the floor area and built up space utilized for providing common facilities. In the case of a combination of developed land and built-up space the net site and floor area available for allocation to the units excluding the site area and built up space utilized for providing common facilities.

(ii)

(iii)

(iv)

(v)

“Industrial Activity” means manufacturing, electricity, gas and water supply, post and telecommunications, software publishing, consultancy and supply, data processing, database activities and distribution of electronic content, other computer related activities, Research and experimental development on natural sciences and engineering, Business and management consultancy activities and Architectural, engineering and other technical activities.

2. FDI in Industrial Parks would not be subject to the conditionality applicable for construction development projects etc. spelt out in Para above, provided the Industrial Parks meet with the under-mentioned conditions: (i) It would comprise of a minimum of 10 units and no single unit shall occupy more than 50% of the allocable area. (ii) The minimum percentage of the area to be allocated for industrial activity shall not be less than 66% of the total allocable area.

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13. FDI in Insurance

[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

(1) FDI in the Insurance sector, as prescribed in the Insurance Act, 1999, is allowed under the automatic route. (2) This will be subject to the condition that Companies bringing in FDI shall obtain necessary license from the Insurance Regulatory & Development Authority for undertaking insurance activities.

14. FDI in Infrastructure Company in the Securities Market Infrastructure companies in Securities Markets, namely, stock exchanges, depositories and clearing corporations, in compliance with SEBI Regulations 49% (FDI & FII) [FDI limit of 26 per cent and an FII limit of 23 per cent of the paid-up capital] Other Conditions: • FII can invest only through purchases in the secondary market.

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

15. FDI in Non-Banking Finance Companies (NBFC) 1. Foreign investment in NBFC is allowed under the automatic route in only the following activities: (i) Merchant Banking (ii) Under Writing (iii) Portfolio Management Services (iv) Investment Advisory Services (v) Financial Consultancy (vi) Stock Broking (vii) Asset Management (viii) Venture Capital (ix) Custodian Services (x) Factoring (xi) Credit Rating Agencies (xii) Leasing & Finance (xiii) Housing Finance (xiv) Forex Broking (xv) Credit Card Business (xvi) Money Changing Business (xvii) Micro Credit (xviii) Rural Credit 2. Other Conditions: (1) Investment would be subject to the following minimum capitalization norms: (i) (ii) US $0.5 million for foreign capital upto 51% to be brought up front. US $ 5 million for foreign capital more than 51% and upto 75% to be brought up front. US $ 50 million for foreign capital more than 75% out of which US$ 7.5 million to be brought up front and the balance in 24 months. 100% foreign owned NBFCs with a minimum capitalization of US$ 50 million can set up step down subsidiaries for specific NBFC activities, without any restriction on the number of operating subsidiaries and without bringing in additional capital. Joint Venture operating NBFCs that have 75% or less than 75% foreign investment can also set up subsidiaries for undertaking other NBFC activities, subject to the subsidiaries also complying with the applicable minimum capitalization norm mentioned in (i), (ii) and (iii) above and (vi) below. Non- Fund based activities : US $0.5 million to be brought upfront for all permitted non-fund based NBFCs irrespective of the level of foreign investment subject to the following condition: It would not be permissible for such a company to set up any subsidiary for any other activity, nor it can participate in any equity of an NBFC holding/operating company.

(iii)

(iv)

(v)

(vi)

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]
The following activities would be classified as Non-Fund Based activities: (a) Investment Advisory Services (b) Financial Consultancy (c) Forex Broking (d) Money Changing Business (e) Credit Rating Agencies

Note:

(vii)

This will be subject to compliance with the guidelines of RBI. Note: Credit Card business includes issuance, sales, marketing & design of various payment products such as credit cards, charge cards, debit cards, stored value cards, smart card, value added cards etc.

3. The NBFC will have to comply with the guidelines of the relevant regulators, as applicable.

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

16. FDI in Petroleum & Natural Gas Sector 1. Exploration activities of oil and natural gas fields, infrastructure related to marketing of petroleum products and natural gas, marketing of natural gas and petroleum products, petroleum product pipelines, natural gas/pipelines, LNG Regasification infrastructure, market study and formulation and Petroleum refining in the private sector, subject to the existing sectoral policy and regulatory framework in the oil marketing sector and the policy of the Government on private participation in exploration of oil and the discovered fields of national oil companies. 2. Petroleum refining by the Public Sector Undertakings (PSU), without any disinvestment or dilution of domestic equity in the existing PSUs. 49% Government.

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

17. FDI in Print Media 1. Publishing of Newspaper and periodicals dealing with news and current affairs 26% (FDI and investment by NRIs/PIOs/FII) 2. Publication of Indian editions of foreign magazines dealing with news and current affairs 26% (FDI and investment by NRIs/PIOs/FII) Other Conditions: (i) „Magazine‟, for the purpose of these guidelines, will be defined as a periodical publication, brought out on non-daily basis, containing public news or comments on public news. Foreign investment would also be subject to the Guidelines for Publication of Indian editions of foreign magazines dealing with news and current affairs issued by the Ministry of Information & Broadcasting on 4.12.2008.

(ii)

3. Publishing/printing of Scientific and Technical Magazines/specialty journals/ periodicals, subject to compliance with the legal framework as applicable and guidelines issued in this regard from time to time by Ministry of Information and Broadcasting. 4. Publication of facsimile edition of foreign newspapers. Other Conditions: (i) FDI should be made by the owner of the original foreign newspapers whose facsimile edition is proposed to be brought out in India. Publication of facsimile edition of foreign newspapers can be undertaken only by an entity incorporated or registered in India under the provisions of the Companies Act, 1956. Publication of facsimile edition of foreign newspaper would also be subject to the Guidelines for publication of newspapers and periodicals dealing with news and current affairs and publication of facsimile edition of foreign newspapers issued by Ministry of Information & Broadcasting on 31.3.2006, as amended from time to time.

(ii)

(iii)

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

18. FDI in Telecommunication Investment caps and other conditions for specified services are given below. However, licensing and security requirements notified by the Department of Telecommunications will need to be complied with for all services. Telecom services 74% Automatic up to 49% Government route beyond 49% and up to 74%. Other conditions: 1. General Conditions: (i) This is applicable in case of Basic, Cellular, Unified Access Services, National/ International Long Distance, V-Sat, Public Mobile Radio Trunked Services (PMRTS), Global Mobile Personal Communications Services (GMPCS) and other value added Services. Both direct and indirect foreign investment in the licensee company shall be counted for the purpose of FDI ceiling. Foreign Investment shall include investment by Foreign Institutional Investors (FIIs), Non-resident Indians (NRIs), Foreign Currency Convertible Bonds (FCCBs), American Depository Receipts (ADRs), Global Depository Receipts (GDRs) and convertible preference shares held by foreign Entity. In any case, the `Indian‟ shareholding will not be less than 26 percent. FDI in the licensee company/Indian promoters/investment companies including their holding companies shall require approval of the Foreign Investment Promotion Board (FIPB) if it has a bearing on the Overall ceiling of 74 percent. While approving the investment proposals, FIPB shall take note that investment is not coming from countries of concern and/or unfriendly entities. The investment approval by FIPB shall envisage the conditionality that Company would adhere to licence Agreement. FDI shall be subject to laws of India and not the laws of the foreign country/countries.

(ii)

(iii)

(iv)

(v)

2. Security Conditions: (i) The Chief Officer In-charge of technical network operations and the Chief Security Officer should be a resident Indian citizen. Details of infrastructure/network diagram (technical details of the network) could be provided on a need basis only to telecom equipment suppliers/manufacturers and the affiliate/parents of the licensee company. Clearance from the licensor (Department of Telecommunications) would be required if such information is to be provided to anybody else. For security reasons, domestic traffic of such entities as may be identified /specified by the licensor shall not be hauled/routed to any place outside India. The licensee company shall take adequate and timely measures to ensure that the information transacted through a network by the subscribers is secure and protected. The officers/officials of the licensee companies dealing with the lawful interception of messages will be resident Indian citizens. The majority Directors on the Board of the company shall be Indian citizens.

(ii)

(iii)

(iv)

(v)

(vi)

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(vii)

[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

The positions of the Chairman, Managing Director, Chief Executive Officer (CEO) and/or Chief Financial Officer (CFO), if held by foreign nationals, would require to be security vetted by Ministry of Home Affairs (MHA). Security vetting shall be required periodically on yearly basis. In case something adverse is found during the security vetting, the direction of MHA shall be binding on the licensee. The Company shall not transfer the following to any person/place outside India:(a) Any accounting information relating to subscriber (except for international roaming/billing) (Note: it does not restrict a statutorily required disclosure of financial nature). User information (except pertaining to foreign subscribers using Indian Operator‟s network while roaming).

(viii)

(b)

(ix)

The Company must provide traceable identity of their subscribers. However, in case of providing service to roaming subscriber of foreign Companies, the Indian Company shall endeavour to obtain traceable identity of roaming subscribers from the foreign company as a part of its roaming agreement. On request of the licensor or any other agency authorised by the licensor, the telecom service provider should be able to provide the geographical location of any subscriber (BTS location) at a given point of time. The Remote Access (RA) to Network would be provided only to approved location(s) abroad through approved location(s) in India. The approval for location(s) would be given by the Licensor (DOT) in consultation with the Ministry of Home Affairs. Under no circumstances, should any RA to the suppliers/manufacturers and affiliate(s) be enabled to access Lawful Interception System(LIS), Lawful Interception Monitoring(LIM), Call contents of the traffic and any such sensitive sector/data, which the licensor may notify from time to time. The licensee company is not allowed to use remote access facility for monitoring of content.

(x)

(xi)

(xii)

(xiii)

(xiv)

Suitable technical device should be made available at Indian end to the designated security agency /licensor in which a mirror image of the remote access information is available on line for monitoring purposes. Complete audit trail of the remote access activities pertaining to the network operated in India should be maintained for a period of six months and provided on request to the licensor or any other agency authorised by the licensor. The telecom service providers should ensure that necessary provision (hardware/software) is available in their equipment for doing the Lawful interception and monitoring from a centralized location.

(xv)

(xvi)

(xvii)

The telecom service providers should familiarize/train Vigilance Technical Monitoring (VTM)/security agency officers/officials in respect of relevant operations/features of their systems.

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

(xviii) It shall be open to the licensor to restrict the Licensee Company from operating in any sensitive area from the National Security angle. (xix) In order to maintain the privacy of voice and data, monitoring shall only be upon authorisation by the Union Home Secretary or Home Secretaries of the States/Union Territories. For monitoring traffic, the licensee company shall provide access of their network and other facilities as well as to books of accounts to the security agencies. The aforesaid Security Conditions shall be applicable to all the licensee companies operating telecom services covered under this circular irrespective of the level of FDI. Other Service Providers (OSPs), providing services like Call Centres, Business Process Outsourcing (BPO), tele-marketing, tele-education, etc, and are registered with DoT as OSP. Such OSPs operate the service using the telecom infrastructure provided by licensed telecom service providers and 100% FDI is permitted for OSPs. As the security conditions are applicable to all licensed telecom service providers, the security conditions mentioned above shall not be separately enforced on OSPs.

(xx)

(xxi)

(xxii)

3. The above General Conditions and Security Conditions shall also be applicable to the companies operating telecom service(s) with the FDI cap of 4. All the telecom service providers shall submit a compliance report on the aforesaid conditions to the licensor on 1st day of July and January on six monthly basis.

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

19. FDI in Trading 1. Cash & Carry Wholesale Trading/ Wholesale Trading (including sourcing from MSEs) Definition: Cash & Carry Wholesale trading/Wholesale trading, would mean sale of goods/merchandise to retailers, industrial, commercial, institutional or other professional business users or to other wholesalers and related subordinated service providers. Wholesale trading would, accordingly, be sales for the purpose of trade, business and profession, as opposed to sales for the purpose of personal consumption. The yardstick to determine whether the sale is wholesale or not would be the type of customers to whom the sale is made and not the size and volume of sales. Wholesale trading would include resale, processing and thereafter sale, bulk imports with ex-port/ex-bonded warehouse business sales and B2B e-Commerce. Guidelines for Cash & Carry Wholesale Trading/Wholesale Trading (WT): (a) For undertaking WT, requisite licenses/registration/ permits, as specified under the relevant Acts/Regulations/Rules/Orders of the State Government/Government Body/Government Authority/Local Self-Government Body under that State Government should be obtained. Except in case of sales to Government, sales made by the wholesaler would be considered as „cash & carry wholesale trading/wholesale trading‟ with valid business customers, only when WT are made to the following entities: (I) (II) Entities holding sales tax/ VAT registration/service tax/excise duty registration. Entities holding trade licenses i.e. a license/registration certificate/membership certificate/registration under Shops and Establishment Act, issued by a Government Authority/ Government Body/ Local Self-Government Authority, reflecting that the entity/person holding the license/ registration certificate/ membership certificate, as the case may be, is itself/ himself/herself engaged in a business involving commercial activity. Entities holding permits/license etc. for undertaking retail trade (like the bazari and similar license for hawkers) from Government Authorities/Local Self Government Bodies. Institutions having certificate of incorporation or registration as a society or registration as public trust for their self-consumption.

(b)

(III)

(IV)

Note: An Entity to whom WT is made, may fulfill any one of The 4 conditions. ( c) Full records indicating all the details of such sales like name of entity, kind of entity, registration/license/permit etc. number, amount of sale etc. should be maintained on a day to day basis. WT of goods would be permitted among companies of the same group. However, such WT to group companies taken together should not exceed 25% of the total turnover of the wholesale venture. WT can be undertaken as per normal business practice, including extending credit facilities subject to applicable regulations. A Wholesale/Cash & carry trader cannot open retail shops to sell to the consumer directly.

(d)

(e)

(f)

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

2. E-commerce activities 100% Automatic: E-commerce activities refer to the activity of buying and selling by a company through the e-commerce platform. Such companies would engage only in Business to Business (B2B) e-commerce and not in retail trading, inter-alia implying that existing restrictions on FDI in domestic trading would be applicable to ecommerce as well.

3. Test marketing of such items for which a company has approval for manufacture, provided such test marketing facility will be for a period of two years, and investment in setting up manufacturing facility commences simultaneously with test marketing.

4. Single Brand product trading4 51% Government: (i) Foreign Investment in Single Brand product trading is aimed at attracting investments in production and marketing, improving the availability of such goods for the consumer, encouraging increased sourcing of goods from India, and enhancing competitiveness of Indian enterprises through access to global designs, technologies and management practices. FDI in Single Brand products retail trade would be subject to the following conditions: (a) (b) Products to be sold should be of a „Single Brand‟ only. Products should be sold under the same brand internationally i.e. products should be sold under the same brand in one or more countries other than India. „Single Brand‟ product-retailing would cover only products which are branded during manufacturing.

(ii)

(c)

(iii)

Application seeking permission of the Government for FDI in retail trade of „Single Brand‟ products would be made to the Secretariat for Industrial Assistance (SIA) in the Department of Industrial Policy & Promotion. The application would specifically indicate the product/ product categories which are proposed to be sold under a „Single Brand‟. Any addition to the product/ product categories to be sold under „Single Brand‟ would require a fresh approval of the Government. Applications would be processed in the Department of Industrial Policy & Promotion, to determine whether the products proposed to be sold satisfy the notified guidelines, before being considered by the FIPB for Government approval.

(iv)

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

20. FDI in Courier services Courier services for carrying packages, parcels and other items which do not come within the ambit of the Indian Post Office Act, 1898. 1. 100% FDI is allowed under the Government route. 2. This will be subject to existing Law. i.e Indian Post Office Act 1898 and exclusion of activity relating to the distribution of letters. Note : Minimum capitalization includes share premium received along with the face value of the share, only when it is received by the company upon issue of the shares to the non-resident investor. Amount paid by the transferee during post-issue transfer of shares beyond the issue price of the share, cannot be taken into account while calculating minimum capitalization requirement.

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

21. FDI in the Retail sector:

Retailing is one of the world‟s largest private industries. Liberalizations in FDI have caused a massive restructuring in retail industry. The benefit of FDI in retail industry superimposes its cost factors. Opening the retail industry to FDI will bring forth benefits in terms of advance employment, organized retail stores, availability of quality products at a better and cheaper price. It enables a country‟s product or service to enter into the global market.

 Cheaper production facilities: FDI will ensure better operations in production cycle and distribution. Due to economies of operation, production facilities will be available at a cheaper rate thereby resulting in availability of variety products to the ultimate consumers at a reasonable and lesser price.

 Availability of new technology: FDI enables transfer of skills and technology from overseas and develops the infrastructure of the domestic country. Greater managerial talent inflow from other countries is made possible. Domestic consumers will benefit getting great variety and quality products at all price points.

 Long term cash liquidity: FDI will provide necessary capital for setting up organized retail chain stores. It is a long term investment because unlike equity capital, the physical capital invested in the domestic company is not easily liquidated.

 Lead driver for the country‟s economic growth: FDI would create a competition among the global investors, which would ultimately ensure better and lower prices thus benefiting people in all sections of the society. There would be an increase in the market growth and expansion. It will increase retail employment and suppress untrained manpower and lack of experience. It will ensure better managerial techniques and success. Higher wages will be paid by the international companies. Urban consumers will be exposed to international lifestyles.

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R.

[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

ECONOMIC INDICATORS
LAST 8.13 60.87 18789.34 LAST 15836.11 5170.39 88981.17 1106.80 3649.53 4.80 1.30 1841.70 LAST 1217.00 28999.00 39974.00 3.80 LAST 4.86 231.00 223.00 159.30 243.00 172.70 LAST 15102.00 7.48 19298.70 19349.17 87567.88 7.25 PREVIOUS AVERAGE TREND 8.17 60.64 19345.70 9.25 31.77 5771.00 Index points UNIT INR Billion INR Billion INR Billion USD USD Percent Percent USD Billion UNIT Million Thousand Persons Thousand Persons Percent UNIT Percent Index Points Index Points Index Points Index Points Index Points UNIT INR Billion Percent INR Billion INR Billion INR Billion Percent UNIT Percent REFERENCE 2013-08-08 2013-08-09 2013-08-08 REFERENCE 2013-02-15 2013-02-15 2011-06-30 2012-12-31 2011-12-31 2013-03-31 2012-12-31 2012-12-31 REFERENCE 2012-12-31 2011-12-31 2007-12-31 2011-12-31 REFERENCE 2013-06-30 2013-06-15 2011-06-30 2012-12-31 2011-06-30 2013-06-15 REFERENCE 2013-07-31 2013-06-15 2013-07-31 2013-07-31 2013-07-31 2013-07-30

MARKETS GOVERNMENT BOND 10Y CURRENCY STOCK MARKET GDP GDP CONSTANT PRICES GROSS FIXED CAPITAL FORMATION GROSS NATIONAL PRODUCT GDP PER CAPITA GDP PER CAPITA PPP GDP ANNUAL GROWTH RATE GDP GROWTH RATE GDP LABOUR POPULATION EMPLOYED PERSONS UNEMPLOYED PERSONS UNEMPLOYMENT RATE PRICES INFLATION RATE CONSUMER PRICE INDEX (CPI) EXPORT PRICES GDP DEFLATOR IMPORT PRICES PRODUCER PRICES MONEY FOREIGN EXCHANGE RESERVES INTERBANK RATE MONEY SUPPLY M1 MONEY SUPPLY M2 MONEY SUPPLY M3 INTEREST RATE

Mon

Mon

Mon

PREVIOUS AVERAGE TREND 15062.09 4816.38 77135.07 1085.73 3372.66 4.70 0.80 1872.90 11470.23 3454.07 12619.53 448.91 1446.39 5.84 1.63 485.65

Quar

Quar

Yea

Yea

Yea

Quar

Quar

Yea

PREVIOUS AVERAGE TREND 1202.00 28708.00 41466.00 9.40 728.64 25060.23 36801.26 7.57

Yea

Yea

Yea

Yea

PREVIOUS AVERAGE TREND 4.70 228.00 196.00 146.50 215.00 171.60 7.72 55.81 150.38 125.14 174.85 130.04

Mon

Mon

Yea

Yea

Yea

Mon

PREVIOUS AVERAGE TREND 14760.70 7.31 19197.30 19247.67 85930.00 7.25 4893.57 7.48 3691.20 6793.11 13850.82 6.57

Mon

Mon

Mon

Mon

Mon

Mon

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

TRADE CURRENT ACCOUNT CURRENT ACCOUNT TO GDP EXTERNAL DEBT FOREIGN DIRECT INVESTMENT REMITTANCES TERMS OF TRADE BALANCE OF TRADE EXPORTS IMPORTS GOVERNMENT GOVERNMENT DEBT TO GDP GOVERNMENT BUDGET VALUE GOVERNMENT EXTERNAL DEBT GOVERNMENT SPENDING CREDIT RATING GOVERNMENT BUDGET BUSINESS CAR REGISTRATIONS CHANGES IN INVENTORIES INDUSTRIAL PRODUCTION BUSINESS CONFIDENCE CONSUMER BANK LENDING RATE CONSUMER SPENDING DISPOSABLE PERSONAL INCOME PERSONAL SAVINGS CONSUMER CONFIDENCE

LAST -18.10 -4.80 345819.00 1954.00 7845.07 113.00 -715.31 1389.02 2104.33 LAST 67.57 -2628.23 345819.00 1773.81 47.12 -4.80 LAST 205381.00 597.31 -1.60 51.20 LAST 10.25 8668.54 20037.20 118.00

PREVIOUS AVERAGE TREND -32.63 -4.20 305931.00 2802.00 8173.09 91.00 -1108.12 1348.08 2456.19 -1.51 -1.45 140319.65 923.56 7657.98 90.00 -120.37 246.34 368.19

UNIT USD Billion Percent USD Million USD Million USD Million Index Points INR Billion INR Billion INR Billion UNIT Percent INR Billion USD Million INR Billion Percent of GDP UNIT Cars INR Billion Percent

REFERENCE 2013-03-31 2012-12-31 2012-12-31 2013-05-15 2013-02-15 2011-06-30 2013-06-15 2013-06-15 2013-06-15 REFERENCE 2012-12-31 2013-06-30 2012-12-31 2013-02-15 2012-12-31 REFERENCE 2013-05-15 2013-02-15 2013-05-31 2013-06-30

Quar

Yea

Yea

Mon

Quar

Yea

Mon

Mon

Mon

PREVIOUS AVERAGE TREND 68.05 -1806.91 305931.00 1821.98 -5.80 74.56 -1237.76 140319.65 1262.77 -3.84

Yea

Mon

Yea

Quar

Mon

Yea

PREVIOUS AVERAGE TREND 208507.00 556.98 2.00 51.30 87168.33 375.11 7.03 60.14

Mon

Quar

Mon

Quar

PREVIOUS AVERAGE TREND 10.25 9255.44 18329.01 120.00 14.17 6712.74 2778.25 118.88

UNIT Percent INR Billion INR Million INR Billion

REFERENCE 2013-07-15 2013-02-15 2011-06-30 2012-06-29 2013-06-30

Mon

Quar

71640930.00 60158160.00 10220093.02

Yea

Yea

Quar

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S.

[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

TOP 10 FDI EQUITY INFLOW CASES FROM APRIL 2000 TO JANUARY 2011 Country: Mauritius

Sr. No.

Name of Indian Company

FDI Route

Name of Foreign Collaborator

RBI Regional Office

Item of Manufacture

Amount of FDI Inflows (In Rs crore) 7,294.48 (In US$ million) 1,600.9 5 1,083.9 9

1

IDEA CELLUR LTD I FLIEX SOLUTIONS LTD INDIA DEBT MANAGEMEN T LTD BHAIK INFOTEL P. LTD. ETISALAT DB TELECOM P. LTD HOUSING DEVELOPME N T FINANCE CORPN. LTD. I FLEX SOLUTIONS LTD DSP MERRILL LYNCH LTD.

RBI

TMI MAURITIUS LTD ORACLE GLOBAL( MAURITIUS) LTD MAURITIUS DEBT MANAGEMENT LTD VODAFONE MAURITIUS LTD. ETISALAT MAURITIUS LTD. CMP ASIA LTD.

AHMEDABAD

TELEPHONE COMMUNICATIO N SERVICES SOFTWARE DEVELOPMENT.

2

RBI

REGION NOT INDICATED

4,805.58

3

RBI

MUMBAI

COMMERCIAL LOAN COMPANIES ACTIVITIES TELEPHONE COMMUNICATIO N SERVICES TELEPHONE COMMUNICATIO N SERVICES HOUSING FINANCE COMPANIES IT TO FINIANCIAL SERVICE INDUSTRY FINANCIAL SERVICES PROVIDER NA

3,800.00

956.39

4

FIPB

NEW DELHI

3,268.12

801.37

5

RBI

MUMBAI

3,228.45

667.93

6

RBI

MUMBAI

2,638.25

653.74

7

FIPB

8

RBI

9

10

DABHOL POWER COMPANY LTD ADITYA BIRLA TELECOM LTD.

FIPB

ORACLE GLOBAL MAURITIUS LTD MERRILL LYNCH (MAURITIUS) LTD. NA

REGION NOT INDICATED

2,578.88

563.94

REGION NOT INDICATED

2,230.02

483.55

MUMBAI

2,160.35

450.07

FIPB

P S ASIA HOLDING INVESTMENT (MAURITIUS) Grand Total

MUMBAI

TELEPHONE COMMUNICATIO N SERVICES

2,098.25

419.13

34,102.3 6

7,681.06

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

Country: Singapore
Sr. No Name of Indian Company FDI Route Name of Foreign Collaborator RBI Regional Office Item of Manufacture Amount of FDI Inflows (In Rs crore) 1,851.91 (In US$ million) 458.89

1

RELOGISTICS INFRASTRUC TURE P. LTD. DLF ASSETS LTD

RBI

BIOMETRIX MARKETING P. LTD. DAL SINGAPORE INVESTMENTS PTE LTD BARCLAYS BANK PLC

MUMBAI

2

RBI

NEW DELHI

BOTTLING OF NATURAL GAS OR LIQUIFIED PETROLEUM GAS CONSTRUCTION

1,794.59

387.37

3

AAA GLOBAL VENTURES PVT LTD ESSEL MINING INDUSTRIES LTD. LPCUBE SYSTEMS (I) P. LTD.

RBI

MUMBAI

4

RBI

SURYA ABHA INVESTEMENT PTE. VIDHYA JAYARAMAN

KOLKATA

FINANCIAL LEASING COMPANIES ACTIVITIES. MINING OF IRON ORE

1,711.24

368.35

1,496.00

378.62

5

RBI

CHENNAI

6

7

8

HINDUSTAN COCO- COLA HOLDINGS PVT LTD HINDUSTAN COCO- COLA HOLDINGS PVT LTD HINDUSTAN COCO- COLA HOLDINGS PVT LTD RELIANCE GAS TRANSPORTA TION INFRAS. RELIANCE PORTS AND TERMINALS LTD.

FIPB

FIPB

FIPB

9

RBI

HINDUSTAN COCA- COLA OVERSEAS HOLDING PT HINDUSTAN COCA- COLA OVERSEAS HOLDING PTE BHARAT COCOCOLA OVERSEAS HOLDINGS PVT LTD BIO METRIX MARKETING P. LTD. BIOMETRIX MARKETING PVT.LTD.

MUMBAI

MUMBAI

MUMBAI

DATAPROCESSIN G SOFTWARE DEVELOPMENT AND COMPUTER CONSULTANCY SERVICES INVESTMENT RESEARCH AND COUNSELLING ACTIVITIES INVESTMENT RESEARCH AND COUNSELLING ACTIVITIES INVESTMENT RESEARCH COUNSELLING ACTIVITIES GENERATION OF GAS IN GASWROKS OTHER BUSSINESS SERVICES NOT ELSEWHERE CLASSIFIED OR INCLUDED.

1,406.25

328.27

1,334.18

273.21

1,334.18

273.21

1,170.32

239.65

MUMBAI

875.60

222.01

10

RBI

AHMEDABAD

830.33

205.75

Grand Total

13,804.6 0

3,135.34

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

Country: U.S.A
Sr. No Name of Indian Company FDI Route Name of Foreign Collaborator RBI Regional Office Item of Manufacture Amount of FDI Inflows (In Rs crore) 1,903.93 1,419.82 (In US$ million) 451.97 297.21

1 2

ESSAR STEEL LTD CAIRN INDIA LTD

RBI RBI

ESSAR LOGIISTICS HOLDINGS LTD PETRONAS INTL CORPN LTD 26 VARIOUS FIIS

AHMEDABAD MUMBAI

STEEL MFR.. BUSINESS SERVICES NOT ELSEWHERE CLASSIFIED MISCELLANEOUS

3

4

GMR INFRASTRUC TURE LTD CAIRN INDIA LTD

RBI

BANGALORE

1,200.34

256.28

RBI

ORIENT GLOBAL TAMARIND FUND PVT LTD DEUTSCHE BANK TRUST CO. FORD MOTOR COMPANY

MUMBAI

BUSINESS SERVICES NOT ELSEWHERE CLASSIFIED MISCELLANEOUS

1,114.77

233.36

5

6

ANANT RAJ INDUSTRIES LTD. FORD INDIA LTD

RBI

NEW DELHI

608.07

132.30

RBI

CHENNAI

MANUFACTURE OF MOTOR CARS & OTHER MOTOR VEHICLES LESING HIRE PURCHASE

546.77

111.96

7

E-SERVE INTERNATIO NAL LTD PTC INDIA LTD.

FIPB

CITIBANK OVERSEAS INVESTMENT CORP. AS PER ANNEXURE

REGION NOT INDICATED

518.91

112.81

8

RBI

NEW DELHI

ELECTRIC ITY GENERAT ION, TRANSMISSION & DISTRIBUTION BANKING ACTIVITIES INCLUDING FINANCIAL SERVICES GENERATION AND TRANSMISSION OF ELECTRIC ENERGY PRODUCED IN HYDROELECTRIC POWER PLANTS

499.99

103.22

9

KOTAK MAHINDRA BANK LTD.

RBI

BK OF NEWYORK

MUMBAI

450.00

102.21

10

JSW ENERGY LTD

RBI

VARIOUS INVESTORS

MUMBAI

431.39

97.14

Grand Total

8,693.98

1,898.46

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

Country: United Kingdom
Sr. No Name of Indian Company FDI Route Name of Foreign Collaborator RBI Regional Office Item of Manufacture Amount of FDI Inflows (In Rs crore) 6,663.24 (In US$ million) 1,492.8 2

1

CAIRN (I) LTD.

RBI

CAIRAN UK HOLDING

MUMBAI

BUSINESS SERVICES NOT ELSEWHERE CLASSIFIED OPERATING PORT FACILITES.

2

RELIANCE PORTS AND TERMINAL LTD RELIANCE HOLIDAYS AND RESORTS INDIA LTD CASTROL INDIA LTD HIMACHAL FUTURISTIC COMMUNATI ONS LTD MUNDRA PORT AND SEZ LTD BOC (I) LTD.

RBI

HSBC BANK PLC

REGION NOT INDICATED

1,530.00

385.07

3

RBI

HSBC BANK PLC

REGION NOT INDICATED

OPERATING PORT FACILITIES.

946.56

238.23

4 5

FIPB RBI

CASTROL LTD ECOM COM COMMUNICATI ON LTD VARIOUS NIRS/ FIIS THE BOC GROUP PLC STANDARD CHARTERED BANK ENI UK HOLDINGS PLC

REGION NOT INDICATED CHANDIGARH

NA NA

864.57 810.38

192.13 168.83

6

RBI

AHMEDABAD

SERVICES NEC

710.57

178.84

7

FIPB

KOLKATA

8

STANDARD CHARTERED INVESTMENT & LOANS LD HINDUSTAN OIL EXPLORATIO N COM. LTD.

FIPB

MUMBAI

MANUFACTURE OF INDUSTRIA GASES OTHER FINANCIAL SERVICES N.E.C. EXPLORATION ON DEVELOPMENT & PRODUCTION OF OIL AND NATURAL GAS INVESTMENT RESEARCH AND COUNSELLING ACTIVITIES.

597.30

139.49

454.39

102.90

9

RBI

REGION NOT INDICATED

376.58

82.65

10

J. P. MORGAN SECURITIES PVT. LTD.

RBI

J. P. MORGAN INTERNATIONA L FINANCE LTD. Grand Total

MUMBAI

324.00

76.91

13,277.5 9

3,057.8 8

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

Country: Netherlands
Sr. No. Name of Indian Company FDI Route Name of Foreign Collaborator RBI Regional Office Item of Manufacture Amount of FDI Inflows

(In Rs crore) 1 EMAAR MGF LAND PVT. LTD. NISSAN MOTOR INDIA PVT LTD DIGITAL GLOBAL SOFT LTD EMAAR MGF LAND P. LTD. RBI HORIZON INDIA B.V. NISSAN INTL HOLDING BV NEW DELHI CONSTRUCTION OF RESIDENTIAL BUILDINGS MANUFACTURE OF MOTOR CARS & OTHER MOTOR VEHICLES COMPUTER SOFTWARE DEVELOPING AND SUBDIVIDING REAL ESTATE INTO LOTS MANUFACTURER S AND DEALERS OF PULP PAPER BOARDS BREWERIES MANUFACTURE OF CEMENT IN THE FORM OF CLINKERS MANUFACTURE OF BEER BASIC METALS & ALLOYS INDUSTRIES MANUFACTURE OF MOTOR VEHICLES FOR THE TRANSPORT OF GOODS,MANUFA CTURE MOTOR VEHICLE 1,109.90

(In US$ million) 281.44

2

RBI

CHENNAI

1,025.80

230.98

3

FIPB

HEWLETT PACKARD LEIDEN B.V. HORIZON (I) BV

REGION NOT INDICATED NEW DELHI

950.52

206.64

4

RBI

682.05

150.01

5

6 7

BILT GRAPHIC PAPER PRODUCTS LTD. SAB MILLER INDIA LTD M/S MY HOME INDUSTRIES LTD. SKOL BREWERIES LTD. SESA GOA LTD. VOLKSWAG EN GROUP SALES INDIA PVT LTD

RBI

BALLAPUR PAPER HOLDING BV

REGION NOT INDICATED

637.94

148.57

FIPB RBI CRH INDIA INVESTMENTS BV SABMILLER ASIA B.V. STICHING PENSIONFON DS ABP VOLKSWAGO N AG

NEW DELHI HYDERABAD

597.36 517.36

129.86 120.77

8 9

RBI RBI

MUMBAI PANAJI

489.11 480.00

114.22 104.78

10

RBI

MUMBAI

418.17

91.78

Grand Total

6,908.21

1,579.05

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

Country: Japan
Sr. No. Name of Indian Company FDI Route Name of Foreign Collaborator RBI Regional Office Item of Manufacture Amount of FDI Inflows (In Rs crore) 1,440.83 (In US$ million) 341.85

1

ANCHOR ELECTRICALS PVT LTD KOTAK MAHINDRA BANK LTD

FIPB

MATSUSHITA ELECTRIC WORKS LTD SUMITO MITSUI BANKING CORPORATION

REGION NOT INDICATED MUMBAI

ELECTRICAL PRODUCTS. BANKING ACTIVITIES INCLUDING FINANCIAL SERVICES MFG CONSTRUCTION EQUIPMENT

2

RBI

1,366.12

303.47

3

TELCO CONSTRUCTI ON EQUIPMENT CO LTD MARUTI UDYOG LTD TATA TELESERVICE S TATA TELESERVICE S ANCHOR ELECTRICALS PVT. LTD. RENAULT NISSAN AUTOMOTIVE INDIA PVT LTD. ANCHOR ELECTRICALS PVT. LTD.

RBI

HITACHI CONSTRUCTIO N MACHINERY CO LTD SUZUKI MOTOR CO. LTD. NTT DOCOMO INC NTT DOCOMO INC PANASONIC ELECTRIC WORKS CO LTD. NISSAN MOTOR COMPANY LTD.

REGION NOT INDICATED

1,159.50

260.56

4 5

FIPB RBI

NEW DELHI REGION NOT INDICATED REGION NOT INDICATED REGION NOT INDICATED

NA TELECOMMUNIC ATION SERVICES TELECOMMUNIC ATION S SERVICES MANUFACTURIN G & MARKETING OF ELECTRICAL MANUFACTURE OF MOTOR CARS & OTHER MOTOR VEHICLES WHOLESALE TRADE IN ELECTRICAL MACHINERY AND EQUIPMENT NA

1,000.00 567.75

208.33 110.83

6

RBI

465.14

92.91

7

RBI

460.90

98.65

8

RBI

CHENNAI

450.00

99.65

9

RBI

MATSUSHITA ELECTRICAL

MUMBAI

425.67

104.28

10

ESCORT YAMAHA MOTOR LTD.

FIPB

YAMAHA MOTOR LTD Grand Total

NEW DELHI

400.00

88.89

7,735.91

1,709.42

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

Country: Cyprus
Sr. No. Name of Indian Company FDI Route Name of Foreign Collaborator RBI Regional Office Item of Manufacture Amount of FDI Inflows (In Rs (In US$ crore) million) 1,417.59 291.35

1

TATA CAPITAL LTD.

RBI

TRAVORTO HOLDINGS LTD.

MUMBAI

FINANCIAL LEASING COMPANIES ACTIVITIES STOCK EXCHANGE.

2

NATIONAL STOCK EXCHANGE OF INDIA LTD MAHINDRA & MAHINDRA LTD. MAHINDRA & MAHINDRA LTD. D.B. REALITY PVT LTD

FIPB

GA GLOBAL INVESTMENTS LTD GOLBOOT HOLDINGS LTD.

REGION NOT INDICATED

1,086.75

257.84

3

RBI

MUMBAI

MANUFACTURE OF MOTOR CARS & OTHER MOTOR VEHICLES MOTOR CARS & OTHER MOTOR VEHICLES PURCHASE,SALE, LETTING AND OPERATING OF REAL ESTATERESIDENTIAL AND NONRESIDENTIAL BUILDINGS OTHER MANUFACTURIN G INDUSTRIES CARGO HANDLING INCIDENTAL TO LAND TRANSPORT REAL ESTATE ACTIVITIES CONSTRUCTION

700.00

153.86

4

RBI

GOLBOOT HOLDINGS LTD. WALKINSON INVESTMENTS LTD

MUMBAI

700.00

142.86

5

RBI

MUMBAI

525.00

112.37

6

MAX INDIA LTD KARANJA TERMINAL & LOGISTICS PVT LTD SWETA ESTATES PVT LTD DYNAMIX BALWAS INFRASTRUC TURE PVT. LTD. ESSAR SHIPPING PORTS &LOGISTICS LTD.

FIPB

XENOK LTD

CHANDIGARH`

521.93

112.08

7

RBI

KARANJA TERMINAL & LOGISTICS CYPRUS LTD PROCTUSSA LTD GREET HAM INVESTMENTS LTD. ESSAR SHIPPING & LOGISTICS LTD. Grand Total

MUMBAI

465.12

102.46

8 9

RBI RBI

NEW DELHI MUMBAI

434.99 387.69

86.89 83.14

10

RBI

REGION NOT INDICATED

SHIPPING & LOGISTICS SERVICE PROVIDER

249.36

55.39

6,488.43

1,398.25

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

Country: Germany
Sr. No. Name of Indian Company FDI Route Name of Foreign Collaborator RBI Regional Office Item of Manufacture Amount of FDI Inflows (In Rs crore) 847.82 (In US$ million) 190.95

1

MICRO INKS LTD

FIPB

MHM HOLDING GMBH

REGION NOT INDICATED

MFG PRINTING INKS/ PKG INKD, RESINS, ENAMELS ADHESIVES MANUFACTURE OF POWER CAPACITORS INSURANCE CARRIERS, LIFE TRADING

2

3

APOLLO ENERGY P. LTD. BAJAJ ALLIANZE LIC LTD. METRO CASH & CARRY (I) P. LTD. BAJAJ ALLIANZE LIC LTD. INDIAN OIL TANKING LTD.

RBI

RBI

DKY INIL HEALTH HOLDING ALLIEANZ SE

NEW DELHI

736.72

151.80

MUMBAI

509.88

118.75

4

FIPB

METRO CASH & CARRY INTERNATIONA L GMBH ALLIAZ SE

BANGALORE

381.16

89.01

5

RBI

MUMBAI

INSURANCE CARRIERS, LIFE CONSTRUCTION AND MAINTENANCE NOT ELSEWHERE CLASSIFIED INTERNET SERVICES NA MANUFACTURE OF CHEMICAL PRODUCTS SECURITIES DEALING ACTIVITES

302.72

74.23

6

FIPB

OIL TANKING INDIA GMBH

MUMBAI

285.71

66.54

7 8 9

10

JOHN DEERE (I) P. LTD. SAINT GOBAIN GLASS INDIA LANXESS LTD INDIA PVT LTD BOMBAY STOCK EXCHANGE

RBI FIPB RBI

DEEREE AND CO.

MUMBAI CHENNAI

221.16 210.00 206.31

54.80 43.75 44.16

FIPB

LANXESS DEUTSCHLAND GMBH DEUTCH BOARSE A.G. Grand Total

MUMBAI

MUMBAI

200.78

49.24

3,902.26

883.23

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

Country: France
Sr. No. Name of Indian Company FDI Route Name of Foreign Collaborator RBI Regional Office Item of Manufacture Amount of FDI Inflows (In Rs crore) 1,466.00 (In US$ million) 324.65

1

BHARATHI CEMENT CORPORATIO N LTD. SREI INTERNATIO NAL FINANCE LTD . BHARATHI CEMENT CORP LTD LAFARAGE AGGREGATES & CONCE(I) P. LTD. ZUARI CEMENT LTD. BILAG INDUSTRIES PVT LTD LAFARGE INDIA HOLDING PVT. LTD. SCHNEIDER ELECTRIC INDIA PVT LTD

RBI

PARFICIM

HYDERABAD

MANUFACTURE OF CEMENT, LIME & PLASTER OTHER FINANCIAL SERVICES N.E.C. MFG OF CEMENT

2

RBI

BNP PARIBAS LEASING GROUP (BPLG) PARFICIM SAS

KOLKATA

775.00

183.98

3

RBI

REGION NOT INDICATED MUMBAI

499.72

106.69

4

RBI

FINANCIERE LAFARGE NA AVENTIS CROPSCIENCE SA NA

SERVICES NEC

380.00

77.55

5 6

RBI FIPB

CHENNAI REGION NOT INDICATED MUMBAI

NA NA

295.00 243.23

65.56 50.67

7

FIPB

NA

208.98

48.60

8

RBI

SCHNEIDER ELCTRIC INDUSTRIES SAS

NEW DELHI

MANUFACTURE OF MACHINERY AND EQUIPMENT OTHER THAN TRANSPORT EQUIPMENT SECURITIES DEALING ACTIVITIES MANUFACTURE OF MOTOR CARS

195.32

40.29

9

GEOJIT FINANCIAL SERVICES LTD. MAHINDRA RENAULT PVT. LTD.

RBI

BNP PARIBAS SA

KOCHI

183.86

38.49

10

RBI

RENAULT SAS

MUMBAI

174.90

37.97

Grand Total

4,422.00

974.44

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Country: UAE
Sr. No. Name of Indian Company FDI Route Name of Foreign Collaborator RBI Regional Office Item of Manufacture Amount of FDI Inflows (In Rs (In US$ crore) million) 1,181.80 243.98

1

ADANI POWER LTD.

RBI

VARIOUS NIRS

AHMEDABAD

GENERATION & TRANSMISSION OF ELECTRIC ENERGY DATA PROCESSING, SOFTWARE DEVELOPMENT & COMPUTER CONSULTANCY SERVICES. OTHER SERVICES INCIDENTAL TO TRANSPORT N.E.C. HOTELS, ROOMING HOUSES, CAMPS & OTHER LODGING PLACES. PURCHASE,SALE, LETTING AND OPERATING OF REAL ESTATE ALUMINIUM MANUFACTURIN G WHOLESALE TRADE NOT ELSEWHERE CLASSIFIED AIR TRANSPORT CARRIERS FINANCIAL SERVCIES, ASSET FINANCE & INFRASTRUCTUR E. VEDIO PARLOURS, ELECTRONIC GAMES

2

INDIA BULLS FINANCIAL SERVICES PVT LTD

RBI

CROWN CAPITAL LTD

NEW DELHI

302.33

67.41

3

4

IL & FS TRANSPORTA TION NETWORKS LTD. BHART HOTELS LTD.

RBI

VARIOUS INVESTORS

MUMBAI

232.59

49.66

RBI

DUBAI VENTURES LTD

NEW DELHI

164.00

38.93

5

DB REALITY PVT LTD

RBI

VARIOUS

MUMBAI

153.95

33.06

6

ANRAK ALUMINIUM LTD. CONVERGEM COMMUNICA TION (INDIA) LTD LTD SPICEJET INFRASTRUC TURE LEASING & FINANCIAL SEV. BALAJI TELEFILM LTD.

RBI

RAK INVESTMENT AUTHORITY AXIOM TELECOM LLC ISTITHMAI PISC ABU DHABI INVESTMENT AUTHORITY.

HYDERABAD

143.77

30.87

7

RBI

MUMBAI

140.00

34.98

8 9

RBI RBI

NEW DELHI REGION NOT INDICATED

137.76 126.01

32.68 28.23

10

RBI

ASIAN BROADCASTIN G FZ-LLC Grand Total

MUMBAI

123.25

29.26

2,705.46

589.06

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

T. CONCLUSION An analysis of the recent trends in FDI flows at the global level as well as across regions/countries suggests that India has generally attracted higher FDI flows in line with its robust domestic economic performance and gradual liberalisation of the FDI policy as part of the cautious capital account liberalisation process. Even during the recent global crisis, FDI inflows to India did not show as much moderation as was the case at the global level as well as in other EMEs. However, when the global FDI flows to EMEs recovered during 201011, FDI flows to India remained sluggish despite relatively better domestic economic performance ahead of global recovery. This has raised questions especially in the backdrop of the widening of the current account deficit beyond the sustainable level of about 3 per cent. In order to analyse the factors behind such moderation, an empirical exercise was undertaken which did suggest the role of institutional factors (Government‟s to implement quality policy regime) in causing the slowdown in FDI inflows to India despite robustness of macroeconomic variables. A panel exercise for 10 major EMEs showed that FDI is significantly influenced by openness, growth prospects, macroeconomic sustainability (International Investment Position), labour cost and policy environment. A comparison of actual FDI flows to India vis-à-vis the potential level worked out on the basis of underlying macroeconomic fundamentals showed that actual FDI which has generally tracked the potential level till 200910, fell short of its potential by about 25 per cent during 2010-11. Further, counter factual scenario attempted to segregate economic and non-economic factors seemed to suggest that this large divergence between actual and potential during 2010-11 was partly on account of rise in policy uncertainty . Apart from the role of institutional factors, as compared to other EMEs, there are also certain sectors including agriculture where FDI is not allowed, while the sectoral caps in some sectors such as insurance and media are relatively low compared to the global patterns. In this context, it may be noted that the caps and restrictions are based on domestic considerations and there is no uniform standards that fits all countries. However, as the economy integrates further with the global economy and domestic economic and political conditions permit, there may be a need to relook at the sectoral caps (especially in insurance) and restrictions on FDI flows (especially in multi-brand retail). Further, given the international experience, it is argued that FDI in retail would help in reaping the benefits of organised supply chains and reduction in wastage in terms of better prices to both farmers and consumers. The main apprehensions in India, however, are that FDI in retail would expose the domestic retailers – especially the small family managed outlets - to unfair competition and thereby eventually leading to large-scale exit of domestic retailers and hence significant job losses. A balanced and objective view needs to be taken in this regard. Another important sector is the generation, transmission and distribution of electricity produced in atomic power, where FDI is not permitted at present, may merit a revisit. In this context, it may be noted that electricity distribution services is a preferred sector for FDI. According to UNCTAD four out of top ten cross-border deals during 2009 were in this segment, which led to increase in FDI in this sector even in the face of decline in overall FDI. Similarly, the demands for raising the present FDI limits of 26 per cent in the insurance sector may be reviewed taking into account the changing demographic patterns as well as the role of insurance companies in supplying the required long term finance in the economy.

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

Against this backdrop, it is pertinent to highlight the number of measures announced by the Government of India on April 1, 2011 to further liberalise the FDI policy to promote FDI inflows to India. These measures, inter alia included (i) allowing issuance of equity shares against non-cash transactions such as import of capital goods under the approval route, (ii) removal of the condition of prior approval in case of existing joint ventures/technical collaborations in the „same field‟, (iii) providing the flexibility to companies to prescribe a conversion formula subject to FEMA/SEBI guidelines instead of specifying the price of convertible instruments upfront, (iv) simplifying the procedures for classification of companies into two categories – „companies owned or controlled by foreign investors‟ and „companies owned and controlled by Indian residents‟ and (v) allowing FDI in the development and production of seeds and planting material without the stipulation of „under controlled conditions‟. These measures are expected to boost India‟s image as a preferred investment destination and attract FDI inflows to India in the near future.

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

U. LIST OF INVESTMENT PROMOTION AGENCIES IN INDIA STATE-WISE Andaman & Nicobar(UT) Andaman & Nicobar Islands Integrated Development Corporation Ltd (ANIIDCO) Vikas Bhawan A & N Islands Port Blair - 744101 Tel: + 91 3192 232666 Fax: + 91 3192 235098 Website: http://www.aniidco.nic.in Email: aniidco@vsnl.com Andhra Pradesh Andhra Pradesh Industrial Development Corporation Limited Parishrama Bhavan, 5-9-58/B,Fateh Maidan Road Post Box No.1049 Hyderabad - 500 004 Tel: + 91 40 23235253-56 Fax: + 91 40 23235516, 23236756 Website: http://www.apidc.org Email: apidc@ap.gov.in Arunachal Pradesh Arunachal Pradesh Industrial Development and Financial Corporation Limited C Sector Near Petrol Pump Itanagar - 791 111 Tel: + 91 360 2212672, 2212673 Fax: + 91 360 2212672 Email: koyutony@yahoo.com Assam Assam Industrial Development Corporation Ltd RGB Road Guwahati - 781 024 Tel: + 91 361 22003999 Fax: + 91 361 2202017 Email: aidcltd@gw1.dot.net.in

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

Bihar Bihar State Credit and Investment Corporation Ltd (BICICO) 4th Floor, Indira Bhawan, Ram Charitra Singh Path P.B. No. 204 GPO Patna - 800 001 Tel: + 91 612 228552, 232277 Fax: + 91 612 234298 Website: http://www.bicico.com Email: bicico@vsnl.net Chandigarh(UT) Chandigarh Industrial and Tourism Development Corporation Ltd (CITCO) SCO 121-122 Sector 17-B, Chandigarh Tel: + 91 172 2704761, 2704356 Fax: + 91 172-2705288 Website: http://www.citco.nic.in Email: info@citcochandigarh.com Chhattisgarh Chhattisgarh State Industrial Development Corporation Ltd B-4, M.R Colony Sailendra Nagar Raipur Tel: + 91 771 2429024, 5055888 Fax: + 91 771 2429025 Website: http://www.csidcindia.com Email: csidc@csidcindia.com Dadra & Nagar Haveli(UT) Omnibus Industrial Development Corporation of Daman & Diu and Dadra & Nagar Haveli Ltd Paryatan Bhavan, Nani Daman - 396210 Tel: + 91 260 2250743, 2250421, 2250903 Fax: + 91 260 2250328 Website: http://www.oidc.nic.in/ Email: paryatan_ad1@sancharnet.in

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Daman & Diu(UT) Omnibus Industrial Development Corporation of Daman & Diu and Dadra & Nagar Haveli Ltd Paryatan Bhavan, Nani Daman - 396210 Tel: + 91 260 2250743, 2250421, 2250903 Fax: + 91 260 2250328 Website: http://www.oidc.nic.in/ Email: paryatan_ad1@sancharnet.in

Delhi Delhi State Industrial Development Corporation (DSIDC) N Block Bombay Life Building Connaught Circus Delhi 110 001 Tel: + 91 11 23312013 Fax: + 91 11 23315067 Website: http://www.dsidc.org Email: dsidc@nda.vsnl.net.in Goa Goa Industrial Development Corporation (GIDC) Patto, Next to Passport Office Panaji, Goa 403 001 Tel: + 91 832 2437470 to 73 Fax: + 91 832 2228012 Website: http://www.goaidc.com Email: goaidc@sancharnet.in Gujarat Gujarat Industrial Development Corporation (GIDC) Block # 4, 2nd Floor Udyog Bhavn, Sector 11 Gandhinagar - 382 017 Tel: + 91 79 23225811, 23225805, 23225816 Fax: + 91 79 23221191, 23225815 Website: http://www.gidc.gov.in Email: info@gidc.gov.in

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Haryana Haryana State Industrial Development Corporation (HSIDC) Plot No.13-14, Institutional Area, Sector 6 Panchkula-134109 Tel: + 91 172 2590481-83 Fax: + 91 172 2590474 Website: http://www.hsiidc.org/abouthsidc.htm Email: hsidc@chd.nic.in

Himachal Pradesh The Himachal Pradesh State Industrial Development Corporation (HPSIDC) New Himrus Building Circular Road Shimla-171001 Tel: + 91 177 2624751, 2624752, 2624754, 2625422 Fax: + 91 177 2624278 Website: http://hpsidc.nic.in/ Email: hpsidc@sancharnet.in Jammu & Kashmir J&K State Industrial Development Corporation Ltd (SIDCO) Srinagar SIDCO Office Drabu House, Ram Bagh, Srinagar, J&K - 190001 Jammu SIDCO Office Shere Kashmir Bhavan, Vir Marg, Jammu - 180001 Tel: + 91 194 430036 Fax: + 91 194 430036 Jharkhand Directorate of Industry Nepal House, 3rd Floor Doranda, Ranchi Tel: + 91 651 2491844 Fax: + 91 651 2491884 Email: doijharkhand@doijharkhand.net

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Karnataka Karnataka State Industrial Investment & Development Corporation Limited (KSIIDC) MSIL House No 36 Cunningham Road Bangalore - 560 052 Tel: + 91 80 2258131 Fax: + 91 80 2255740 Website: http://www.ksiidc.com Email: ksiidc@bir.vsnl.net.in

Kerala Kerala Industrial Infrastructure Development Corporation (KINFRA) TC 31/2312 , KINFRA House Sasthamangalam Trivandrum - 695 010 Tel: + 91 471 2726585 Fax: + 91 471 2724773 Website: http://www.kinfra.com Email: kinfra@vsnl.com Lakshadweep(UT) Department of Industries UT of Lakshadweep, Kavaratti - 682 555 Tel: + 91 4896 262325 Fax: + 91 4896 263132 Website: http://www.lakshadweep.nic.in/depts/industries/home.htm Email: lk-doi@hub.nic.in Madhya Pradesh Madhya Pradesh State Industrial Development Corporation Ltd (MPSIDC) AVN Towers, 192 Zone-1 M.P Nagar Bhopal - 462011 Tel: + 91 755 5270370/246/247 Fax: + 91 755 5270280, 5203106 Website: http://www.mpsidc.org Email: mpsidc@sancharnet.in

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Maharashtra Maharashtra Industrial Development Corporation Ltd (MIDC) Udyog Sarathi Mahakali Caves Road, Andheri (E), Mumbai - 400 093 Tel: + 91 22 26870052 / 54 / 73, 26870800 Fax: + 91 22 26871587 Website: http://www.midcindia.org/ Email: feedback@midcindia.org

Manipur Manipur Industrial Development Corporation Ltd Industrial Estate Takyelpat, P.B 46 Imphal - 795001 Tel: + 91 385 2223624, 2221967 Meghalaya Meghalaya Industrial Development Corporation Ltd "Kismat", Upland Road Laitumkhrah Shillong - 793 001 Tel: + 91 364 224965, 224763, 226941, 226893 Fax: + 91 91 364 224763 Website: http://www.meghalaya.nic.in/MIDC/midc.htm Email: midc@shillong.meg.nic.in Mizoram Zoram Industrial Development Corporation M.G Road Upper Khatla Aizawal 796001 Tel: + 91 389 2323217, 2326240 Email: zidco@sancharnet.in Nagaland Nagaland Industrial Development Corporation (NIDC) IDC House P.B No 5 Dimapur 797 112 Tel: + 91 3862 226473 Fax: + 91 3862 226473

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Orissa Orissa Industrial Infrastructure Development Corporation Ltd. IDCO Tower, Janpath Bhubaneswar - 751007 Tel: + 91 674 2540820, 2542784 Fax: + 91 2542956 Website: www.idcoindia.com/ Email: cmd@idcoindia.com

Pondicherry(UT) Pondicherry Industrial Promotion Development and Investment Corporation Ltd Post Box. No. 190 60, Romain Rolland Street Pondicherry - 605 001 Tel: + 91 413 2334606, 2335116, 2334361, 2336842 Fax: + 91 413 336842 Website: http://www.pipdic.com Email: md@pipdic.com Punjab The Punjab State Industrial Development Corporation Ltd Udyog Bhawan 18, Himalaya Marg Sector - 17 Chandigarh Tel:+ 91 172 2702881-84, 2702791 Fax:+ 91 172 2704145 Website: http://www.punjabgovt.nic.in/Industry/ind552.htm Email: psidc@sancharnet.net.in Rajasthan Rajasthan State Industrial Development & Investment Corporation Ltd Udyog Bhawan Tilak Marg Jaipur - 302005 Tel:+ 91 141 5113201, 2227751 Fax:+ 91 141 5104804 Website: http://www.riico.co.in Email: riico@riico.co.in

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Sikkim Sikkim Industrial Development & Investment Corporation Limited (SIDICO) Tashiling Secretariat Gangtok - 737103 Tel:+ 91 3592 202530 Fax:+ 91 3592 202851 Website: http://www.sikkiminfo.net/sidico/

Tamil Nadu Tamil Nadu Industrial Development Corporation Ltd (TIDCO) 19-A, Rukmani Lakshmipathy Salai Egmore Chennai - 600008 Tel:+ 91 44 28554421 Fax:+ 91 44 28553729 Website: http://www.tidco.com Email: cmdtidco@vsnl.com Tripura Tripura Industrial Development Corporation Ltd (TIDC) Gorkha basti Office Complex PO: Kunjaban Agartala - 799006 Tel:+ 91 381 220342 Website: http://www.tripura.nic.in/tidc/ Uttar Pradesh Uttar Pradesh State Industrial Development Corporation UPSIDC Complex, A-1/4 Lakhanpur Kanpur Tel:+ 91 512 2582851, 2582852, 2582853 Fax:+ 91-512-2580797 Website: http://www.upsidc.com Email: feedback@upsidc.com

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Uttarakhand State Infrastructure & Industrial Development Corporation of Uttarakhand Ltd. 2, New Cantt Road Dehradun 248001 Tel:+ 91 135 2743292/97, 2743838 Fax:+ 91 135 2743288 Website: http://usidcl.gov.in/ Email: sidcul@sidcul.com West Bengal West Bengal Industrial Development Corporation (WBIDC) 5, Council Street House Kolkata 700001 Tel:+ 91 33 22435343 Fax:+ 91 33 22483747 Website: http://www.wbidc.com Email: chairman@wbidc.com

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V. REFERENCES: http://fdiindia.in/ http://dipp.nic.in/English/Publications/FDI_Statistics/FDI_Statistics.aspx http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=8209&Mode=0 http://www.rbi.org.in/scripts/BS_ViewMasCirculardetails.aspx?id=8104 http://www.allbankingsolutions.com/Banking-Tutor/FDI-in-India.htm http://fdiindia.in/list-of-investment-promotion-agencies-in-india-state-wise.php http://www.rbi.org.in/scripts/BS_ViewMasterCirculardetails.aspx http://www.ibef.org/india-at-a-glance/foreign-direct-investment.aspx http://www.ijmrbs.com/ijmrbsadmin/upload/IJMRBS_515da52cd191a.pdf http://astrology.sify.com/astronews/foreign-investment-india-2013/ http://ftbsitessvr01.ft.com/forms/fDi/report2013/files/The_fDi_Report_2013.pdf http://accman.in/images/feb13/Dharwal%20M.pdf https://www.kpmg.com/IN/en/services/Tax/FlashNews/LiberalisationofForeignDirectInvestmentPolicy2013.pdf http://almtlegal.com/articles-pdf/Newsflash%20on%20FDI%20policy%202013.pdf

**************************************

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Related Interests

s within three to five years and hence will become the fastest large economy with 9-10% growth over the next 20-25 years (Morgan Stanley). 7. Investor friendly policies and incentive based schemes. 8. Second most attractive Foreign Direct Investment (FDI) location in the world: India received a total of US$ 25.9 billion of FDI in 2009-10. 9. Healthy macro-economic fundamentals: Investment rate is expected to be 37% in 2010-11 and 38.4% in 2011-12 while Domestic Savings rate is expected to be 34% in 2010-11 and 36% in 2011-12. 10. India's economy will grow fivefold in the next 20 years (McKinsey). 11. Cost competitiveness: low labour costs. 12. Total labour force of nearly 530 million. 13. Large pool of skilled manpower; strong knowledge base with significant English speaking population. 14. 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s economy will benefit from this "demographic dividend". 15. The proportion of population in the working age group (15-59 years) is likely to increase from approximately 58% in 2001 to more than 64% by 2021. 16. Huge untapped market potential. 17. The urban population of India will double from the 2001 census figure of 290m to approximately 590m by 2030 (McKinsey). 18. Progressive simplification and rationalization of direct and indirect tax structures. 19. Reduction in import tariffs. 20. Full current account convertibility. 21. Compliance with WTO norms. 22. Robust banking and financial institutions. "* India's financial year is from April to March. 2010-11 above means April 2010-March 2011."

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I. Indian Economy

[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

India has undergone a paradigm shift owing to its competitive stand in the world. The Indian economy is on a robust growth trajectory and boasts of a stable annual growth rate, rising foreign exchange reserves and booming capital markets among others. Indian economy is estimated to grow at 8.6 percent in 2010-11 as compared to the growth rate of 8.0 percent in 2009-10. These GDP figures are based at factor cost at constant (2004-05) prices in the year 2010-11.The growth rate of 8.6 per cent in GDP during 2010-11 has been due to the robust growth rates of over 8 per cent in the sectors of manufacturing, construction, trade, hotels, transport and communication, financing, insurance, and, real estate and business services. Agriculture sector registered a growth rate of 5.4 percent in 2009-10. A growth rate of 18.3 percent is estimated for GDP at current prices in the year 2010-11.

II.

Agriculture Sector The agriculture, forestry and fishing sector is likely to show a growth of 5.4 per cent in its GDP during 201011, as against the previous year‟s growth rate of 0.4 per cent. The estimate of GDP from agriculture in 201011, according to the Department of Agriculture and Cooperation (DAC),production of food grains and oilseeds is expected to grow by 6.5 per cent and 11.9 per cent, respectively, as compared to the previous agriculture year. The production of cotton and sugarcane is also expected to rise by 41.2 per cent and 15.2 per cent, respectively, in 2010-11. Among the horticultural crops, production of fruits and vegetables is expected to increase by 4.1 per cent and 3.8 per cent, respectively, during the year 2010-11.

III. Industry Sector The growth in GDP for mining and quarrying and manufacturing sectors during 2010-11 is expected to be 6.2 and 8.8 percent respectively over previous year. According to the latest estimates available on the Index of Industrial Production (IIP), the index of mining and manufacturing registered growth rates of 8.0 per cent and 10.0 per cent during April-November, 2010. The estimated growth rate for construction sector is 8.0 percent in 2010-11. The key indicators of construction sector, namely, cement production and steel consumption have registered growth rates of 4.4 per cent and 8.8 per cent, respectively during AprilDecember, 2010.

IV. Services Sector The estimated growth in GDP for the trade, hotels, transport and communication sectors during 2010-11 is placed at 11.0 per cent, mainly on account of growth during April- November, 2010-11 of 14.9 per cent in passengers handled in civil aviation, 21.3 per cent in air cargo handled and 40.9 per cent in stock of telephone connections. The sales of commercial vehicles witnessed an increase of 34.1 per cent per cent in April-December, 2010. The financing, insurance, real estate and business services sector is expected to show a growth rate of 10.6 per cent during 2010-11, on account of 14.0 per cent growth in aggregate deposits and 22.6 per cent growth in bank credit during April- November 2010 (against the respective growth rates of 18.6 per cent and 10.1 per cent in the corresponding period of previous year). The growth rate of community, social and personal services during 2010-11 is estimated to be 5.7 per cent.

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

N. FDI POLICY FRAMEWORK Policy regime is one of the key factors driving investment flows to a country. Apart from underlying macro fundamentals, ability of a nation to attract foreign investment essentially depends upon its policy regime whether it promotes or restrains the foreign investment flows. This section undertakes a review of India‟s FDI policy framework and makes a comparison of India‟s policy vis-à-vis that of select EMEs. 1. FDI Policy Framework in India There has been a sea change in India‟s approach to foreign investment from the early 1990s when it began structural economic reforms encompassing almost all the sectors of the economy. Pre-Liberalization Period Historically, India had followed an extremely cautious and selective approach while formulating FDI policy in view of the dominance of „import-substitution strategy‟ of industrialization. With the objective of becoming „self-reliant‟, there was a dual nature of policy intention – FDI through foreign collaboration was welcomed in the areas of high technology and high priorities to build national capability and discouraged in low technology areas to protect and nurture domestic industries. The regulatory framework was consolidated through the enactment of Foreign Exchange Regulation Act (FERA), 1973 wherein foreign equity holding in a joint venture was allowed only up to 40 per cent. Subsequently, various exemptions were extended to foreign companies engaged in export oriented businesses and high technology and high priority areas including allowing equity holdings of over 40 per cent. Moreover, drawing from successes of other country experiences in Asia, Government not only established special economic zones (SEZs) but also designed liberal policy and provided incentives for promoting FDI in these zones with a view to promote exports. As India continued to be highly protective, these measures did not add substantially to export competitiveness. Recognising these limitations, partial liberalisation in the trade and investment policy was introduced in the 1980s with the objective of enhancing export competitiveness, modernisation and marketing of exports through Transnational Corporations (TNCs). The announcements of Industrial Policy (1980 and 1982) and Technology Policy (1983) provided for a liberal attitude towards foreign investments in terms of changes in policy directions. The policy was characterized by de-licensing of some of the industrial rules and promotion of Indian manufacturing exports as well as emphasizing on modernization of industries through liberalized imports of capital goods and technology. This was supported by trade liberalization measures in the form of tariff reduction and shifting of large number of items from import licensing to Open General Licensing (OGL). Post-Liberalization Period A major shift occurred when India embarked upon economic liberalization and reforms program in 1991 aiming to raise its growth potential and integrating with the world economy. Industrial policy reforms gradually removed restrictions on investment projects and business expansion on the one hand and allowed increased access to foreign technology and funding on the other. A series of measures that were directed towards liberalizing foreign investment included: (i) (ii) (iii) (iv) Introduction of dual route of approval of FDI – RBI‟s automatic route and Government‟s approval (SIA/FIPB) route, Automatic permission for technology agreements in high priority industries and removal of restriction of FDI in low technology areas as well as liberalization of technology imports, Permission to Non-resident Indians (NRIs) and Overseas Corporate Bodies (OCBs) to invest up to 100 per cent in high priorities sectors, Hike in the foreign equity participation limits to 51 per cent for existing companies and liberalization of the use of foreign „brands name‟ and

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(v)

[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

Signing the Convention of Multilateral Investment Guarantee Agency (MIGA) for protection of foreign investments. These efforts were boosted by the enactment of Foreign Exchange Management Act (FEMA), 1999 [that replaced the Foreign Exchange Regulation Act (FERA), 1973] which was less stringent. This along with the sequential financial sector reforms paved way for greater capital account liberalization in India.

Investment proposals falling under the automatic route and matters related to FEMA are dealt with by RBI, while the Government handles investment through approval route and issues that relate to FDI policy per se through its three institutions, viz., the Foreign Investment Promotion Board (FIPB), the Secretariat for Industrial Assistance (SIA) and the Foreign Investment Implementation Authority (FIIA). FDI under the automatic route does not require any prior approval either by the Government or the Reserve Bank. The investors are only required to notify the concerned regional office of the RBI within 30 days of receipt of inward remittances and file the required documents with that office within 30 days of issuance of shares to foreign investors. Under the approval route, the proposals are considered in a time-bound and transparent manner by the FIPB. Approvals of composite proposals involving foreign investment/ foreign technical collaboration are also granted on the recommendations of the FIPB. Current FDI policy in terms of sector specific limits has been summarized in Table 3 below: Table 3: Sector Specific Limits of Foreign Investment in India Sector A. Agriculture 1. Floriculture, Horticulture, Development of Seeds, Animal Husbandry, Pisciculture, Aquaculture, Cultivation of vegetables & mushrooms and services related to agro and allied sectors. 2. Tea sector, including plantation B. Industry 1. Mining covering exploration and mining of diamonds & precious stones; gold, silver and minerals. 2. Coal and lignite mining for captive consumption by power projects, and iron & steel, cement production. 3. Mining and mineral separation of titanium bearing minerals C. Manufacturing 1. Alcohol- Distillation & Brewing 2. Coffee & Rubber processing & Warehousing. 3. Defence production 4. Hazardous chemicals and isocyanates 5. Industrial explosives -Manufacture 6. Drugs and Pharmaceuticals 7. Power including generation (except Atomic energy); transmission, distribution and power trading. FDI Cap/Equity 100% Entry Route Automatic Other Conditions

100%

FIPB

(FDI is not allowed in any other agricultural sector /activity) 100% Automatic

100%

Automatic

100%

FIPB

Automatic 100% 100% 26% 100% 100% 100% 100% Automatic FIPB Automatic Automatic Automatic Automatic

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

(FDI is not permitted for generation, transmission & distribution of electricity produced in atomic power plant/atomic energy since private investment in this activity is prohibited and reserved for public sector.) D.Services 1. Civil aviation (Greenfield projects and 100% Automatic Existing projects) 2. Asset Reconstruction companies 49% FIPB 3. Banking (private) sector 4. NBFCs : underwriting, portfolio management services, investment advisory services, financial consultancy, stock broking, asset management, venture capital, custodian, factoring, leasing and finance, housing finance, forex broking, etc. 5. Broadcasting a. FM Radio b. Cable network; c. Direct to home; d. Hardware facilities such as up-linking, HUB. e. Up-linking a news and current affairs TV Channel 6. Commodity Exchanges 7. Insurance 8. Petroleum and natural gas : a. Refining 74% (FDI+FII). FII not to exceed 49% 100% Automatic s.t.minimum capitalization norms

Automatic

20% 49% (FDI+FII) 100% 49% (FDI+FII) (FDI 26 % FII 23%) 26% 49% (PSUs). 100% (Pvt. Companies)

FIPB

FIPB Automatic FIPB (for PSUs). Automatic (Pvt.) FIPB Clearance from IRDA

9. Print Media 26% a. Publishing of newspaper and periodicals dealing with news and current affairs b. Publishing of scientific magazines / speciality 100% journals/periodicals 10. Telecommunications 74% (including FDI, a. Basic and cellular, unified access services, FII, NRI, FCCBs, national / international long-distance, V-SAT, ADRs/GDRs, public mobile radio trunked services (PMRTS), convertible preference global mobile personal communication services shares, etc. (GMPCS) and others. Sectors where FDI is Banned

FIPB Automatic up to 49% and FIPB beyond 49%.

S.t.guidelines by Ministry of Information & broadcasting

1. Retail Trading (except single brand product retailing); 2. Atomic Energy; 3. Lottery Business including Government / private lottery, online lotteries etc; 4. Gambling and Betting including casinos etc.; 5. Business of chit fund; 6. Nidhi Company; 7. Trading in Transferable Development Rights (TDRs); 8. Activities/sector not opened to private sector investment; 9. Agriculture (excluding Floriculture, Horticulture, Development of seeds, Animal Husbandry, Pisciculture and cultivation of vegetables, mushrooms etc. under controlled conditions and services related to agro and allied sectors) and Plantations (Other than Tea Plantations); 10. Real estate business, or construction of farm houses; 11. Manufacturing of Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco or of tobacco substitutes.

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2.

[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

FDI Policy: The International Experience Foreign direct investment is treated as an important mechanism for channelizing transfer of capital and technology and thus perceived to be a potent factor in promoting economic growth in the host countries. Moreover, multinational corporations consider FDI as an important means to reorganise their production activities across borders in accordance with their corporate strategies and the competitive advantage of host countries. These considerations have been the key motivating elements in the evolution and attitude of EMEs towards investment flows from abroad in the past few decades particularly since the eighties. This section reviews the FDI policies of select countries to gather some perspective as to „where does India stand‟ at the current juncture to draw policy imperatives for FDI policy in India. China
 

 

Encouragement to FDI has been an integral part of the China‟s economic reform process. It has gradually opened up its economy for foreign businesses and has attracted large amount of direct foreign investment. Government policies were characterised by setting new regulations to permit joint ventures using foreign capital and setting up Special Economic Zones (SEZs) and Open Cities.The concept of SEZs was extended to fourteen more coastal cities in 1984.Favorable regulations and provisions were used to encourage FDI inflow, especially export-oriented joint ventures and joint ventures using advanced technologies in 1986. Foreign joint ventures were provided with preferential tax treatment, the freedom to import inputs such as materials and equipment, the right to retain and swap foreign exchange with each other, and simpler licensing procedures in 1986. Additional tax benefits were offered to export-oriented joint ventures and those employing advanced technology. Priority was given to FDI in the agriculture, energy, transportation, telecommunications, basic raw materials, and high-technology industries, and FDI projects which could take advantage of the rich natural resources and relatively low labour costs in the central and northwest regions. China‟s policies toward FDI have experienced roughly three stages: gradual and limited opening, active promoting through preferential treatment, and promoting FDI in accordance with domestic industrial objectives. These changes in policy priorities inevitably affected the pattern of FDI inflows in China.

Chile

   

In Chile, policy framework for foreign investment, embodied in the constitution and in the Foreign Investment Statute, is quite stable and transparent and has been the most important factor in facilitating foreign direct investment. Under this framework, an investor signs a legal contract with the state for the implementation of an individual project and in return receives a number of specific guarantees and rights. Foreign investors in Chile can own up to 100 per cent of a Chilean based company, and there is no time limit on property rights. They also have access to all productive activities and sectors of the economy, except for a few restrictions in areas that include coastal trade, air transport and the mass media. Chile attracted investment in mining, services, electricity, gas and water industries and manufacturing. Investors are guaranteed the right to repatriate capital one year after its entry and to remit profits at any time. Although Chile‟s constitution is based on the principle of non-discrimination, some tax advantages are extended to foreign investors such as invariability of income tax regime, invariability of indirect taxes, and special policy regime for large projects.

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Malaysia
   

[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

The Malaysian FDI regime is tightly regulated in that all foreign manufacturing activity must be licensed regardless of the nature of their business. Until 1998, foreign equity share limits were made conditional on performance and conditions set forth by the industrial policy of the time. In the past, the size of foreign equity share allowed for investment in the manufacturing sector hinged on the share of the products exported in order to support the country's export-oriented industrial policy. FDI projects that export at least 80 per cent of production or production involving advanced technology are promoted by the state and no equity conditions are imposed. Following the crisis in 1997-98, the restriction was abolished as the country was in need of FDI.

Korea

 

The Korean government maintained distinctive foreign investment policies giving preference to loans over direct investment to supplement its low level of domestic savings during the early stage of industrialisation. Korea‟s heavy reliance on foreign borrowing to finance its investment requirements is in sharp contrast to other countries. The Korean Government had emphasised the need to enhance absorptive capacity as well as the indigenisation of foreign technology through reverse engineering at the outset of industrialisation while restricting both FDI and foreign licensing. This facilitated Korean firms to assimilate imported technology, which eventually led to emergence of global brands like Samsung, Hyundai, and LG. The Korean government pursued liberalised FDI policy regime in the aftermath of the Asian financial crisis in 1997-98 to fulfil the conditionality of the International Monetary Fund (IMF) in exchange for standby credit. Several new institutions came into being in Korea immediately after the crisis. Invest Korea is Korea‟s national investment promotion agency mandated to offer one-stop service as a means of attracting foreign direct investment, while the Office of the Investment Ombudsman was established to provide investment after-care services to foreign-invested companies in Korea. These are affiliated to the Korea Trade Investment Promotion Agency. Korea enacted a new foreign investment promotion act in 1998 to provide foreign investors incentives which include tax exemptions and reductions, financial support for employment and training, cash grants for R&D projects, and exemptions or reductions of leasing costs for land for factory and business operations for a specified period. One of the central reasons for the delays in the construction process in Korea is said to be the lengthy environmental and cultural due diligence on proposed industrial park sites. (OECD, 2008).

Thailand

Thailand followed a traditional import-substitution strategy, imposing tariffs on imports, particularly on finished products in the 1960s. The role of state enterprises was greatly reduced from the 1950s and investment in infrastructure was raised. Attention was given to nurturing the institutional system necessary for industrial development. Major policy shift towards export promotion took place by early 1970s due to balance of payments problems since most of components, raw materials, and machinery to support the production process, had to be imported.

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On the FDI front, in 1977 a new Investment Promotion Law was passed which provided the Board of Investment (BOI) with more power to provide incentives to priority areas and remove obstacles faced by private investors (Table 4). After the East Asian financial crisis, the Thai government has taken a very favourable approach towards FDI with a number of initiatives to develop the industrial base and exports and progressive liberalisation of laws and regulations constraining foreign ownership in specified economic activities. The Alien Business Law, which was enacted in 1972 and restricted majority foreign ownership in certain activities, was amended in 1999. The new law relaxed limits on foreign participation in several professions such as law, accounting, advertising and most types of construction, which have been moved from a completely prohibited list to the less restrictive list of businesses.

To sum up, the spectacular performance of China in attracting large amount of FDI could be attributed to its proactive FDI policy comprising setting up of SEZs particularly exports catering to the international market, focus on infrastructure and comparative advantage owing to the low labour costs. A comparison of the FDI policies pursued by select emerging economies, set out above, suggests that policies although broadly common in terms of objective, regulatory framework and focus on technological upgradation and export promotion, the use of incentive structure and restrictions on certain sectors, has varied across countries. While China and Korea extend explicit tax incentives to foreign investors, other countries focus on stability and transparency of tax laws. Similarly, while all the countries promote investment in manufacturing and services sector, China stands out with its relaxation for agriculture sector as well. It is, however, apparent that though policies across countries vary in specifics, there is a common element of incentivisation of foreign investment (Table 4). Table 4: FDI Policy and Institutional Framework in Select Countries Year of Libera lisation 1979 Objective Incentives Priority Sectors Unique features

China

Transformation of traditional agriculture, promotion of industrialization, infrastructure and export promotion.

Chile

1974

Technology transfer, export promotion and greater domestic competition.

Foreign joint ventures were provided with preferential tax treatment. Additional tax benefits to exportoriented joint ventures and those employing advanced technology. Privileged access was provided to supplies of water, electricity and transportation (paying the same price as state-owned enterprises) and to interest-free RMB loans. Invariability of tax regime intended to provide a stable tax horizon.

Agriculture, energy, transportation, telecommunications, basic raw materials, and high-technology industries.

Setting up of Special Economic Zones

All productive activities and sectors of the economy, except for a few restrictions in areas that include coastal trade, air transport and the mass media.

Does not use tax incentives to attract foreign investment.

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Businesses located in Foreign Investment Zone enjoy full exemption of corporate income tax for five years from the year in which the initial profit is made and 50 percent reduction for the subsequent two years. High-tech foreign investments in the Free Economic Zones are eligible for the full exemption three years and 50 percent for the following two years. Cash grants to high-tech green field investment and R&D investment subject to the government approval. No specific tax incentives. Manufacturing services and Loan-based borrowing to an FDI-based development strategy till late1990s.

Korea

1998

Malaysia

1980s

Promotion of absorptive capacity and indigenization of foreign technology through reverse engineering at the outset of industrialization while restricting both FDI and foreign licensing. Export promotion

Manufacturing services.

and

Thailand

1977

Technology transfer and export promotion

No specific tax incentives. The Thai Board of Investment has carried out activities under the three broad categories to promote FDI. 1. Image building to demonstrate how the host country is an appropriate location for FDI. 2. Investment generation by targeting investors through various activities. 3. Servicing investors

Manufacturing services

and

Malaysian Industrial Development Authority was recognised to be one of the effective agencies in the Asian region -

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3.

Cross-Country Comparison of FDI Policies – Where does India stand? A true comparison of the policies could be attempted if the varied policies across countries could be reduced to a common comparable index or a measure. Therefore, with a view to examine and analyse „where does India stand‟ vis-a-vis other countries at the current juncture in terms of FDI policy framework, the present section draws largely from the results of a survey of 87 economies undertaken by the World Bank in 2009 and published in its latest publication titled „Investing Across Borders‟. The survey has considered four indicators, viz., „Investing across Borders‟, „Starting a Foreign Business‟, „Accessing Industrial Land‟, and „Arbitrating Commercial Disputes‟ to provide assessment about FDI climate in a particular country. Investing across Borders indicator measures the degree to which domestic laws allow foreign companies to establish or acquire local firms. Starting foreign business indicator record the time, procedures, and regulations involved in establishing a local subsidiary of a foreign company. Accessing industrial land indicator evaluates legal options for foreign companies seeking to lease or buy land in a host economy, the availability of information about land plots, and the steps involved in leasing land. Arbitrating commercial disputes indicator assesses the strength of legal frameworks for alternative dispute resolution, rules for arbitration, and the extent to which the judiciary supports and facilitates arbitration. India‟s relative position in terms of these four parameters vis-à-vis major 15 emerging economies, which compete with India in attracting foreign investment, is set out in Tables 5A and 5B. Following key observations could be made from this comparison:
 

A comparative analysis among the select countries reveals that countries such as Argentina, Brazil, Chile and the Russian Federation have sectoral caps higher than those of India implying that their FDI policy is more liberal. The sectoral caps are lower in China than in India in most of the sectors barring agriculture and forestry and insurance. A noteworthy aspect is that China permits 100 per cent FDI in agriculture while completely prohibits FDI in media. In India, on the other hand, foreign ownership is allowed up to 100 per cent in sectors like „mining, oil and gas‟, electricity and „healthcare and waste management‟. India positioned well vis-a-vis comparable counterparts in the select countries in terms of the indicator „starting a foreign business‟. In 2009, starting a foreign business took around 46 days with 16 procedures in India as compared with 99 days with 18 procedures in China and 166 days with 17 procedures in Brazil (Table 5 B). In terms of another key indicator, viz., „accessing industrial land‟ India‟s position is mixed. While the ranking in terms of indices based on lease rights and ownership rights is quite high, the time to lease private and public land is one of the highest among select countries at 90 days and 295 days, respectively. In China, it takes 59 days to lease private land and 129 days to lease public land. This also has important bearing on the investment decisions by foreign companies. In terms of the indicator „arbitrating commercial disputes‟ India is on par with Brazil and the Russian Federation. Although, the strength of laws index is fairly good, the extent of judicial assistance index is moderate.

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Table 5A: Investing Across Borders – Sector wise Caps – 2009 Country Mini ng, oil and gas 100 100 100 75 100 97.5 100 70 50 40 100 74 49 Agric ul ture and fores try 100 100 100 100 50 72 100 85 49 40 100 100 49 Light manuf act uring Tele comm unicat ions Electrici ty Banking Insura nce Trans portation Media Constr uction, touris m and retail 100 100 100 83.3 83.7 85 100 90 100 100 100 100 66 Health care and waste manag ement 100 50 100 85 100 82.5 100 65 100 100 100 100 49

Argentina Brazil Chile China India Indonesia Korea, Malaysia Mexico Philippines Russian South Thailand

100 100 100 75 81.5 68.8 100 100 100 75 100 100 87.3

100 100 100 49 74 57 49 39.5 74.5 40 100 70 49

100 100 100 85.4 100 95 85.4 30 0 65.7 100 100 49

100 100 100 62.5 87 99 100 49 100 60 100 100 49

100 100 100 50 26 80 100 49 49 100 49 100 49

79.6 68 100 49 59.6 49 79.6 100 54.4 40 79.6 100 49

30 30 100 0 63 5 39.5 65 24.5 0 75 60 27.5

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Table 5B: Investing Across Borders – Key Indicators 2009 Country Starting a Foreign Business Time (days ) Pro ced ures (nu mber ) Ease of establ i shme nt index (0 = min, 100 = max) Strengt h of lease rights index (0 = min, 100 = max) Accessing Industrial Land Arbitrating Commercial Disputes Stre Ease Extent n gth of of of proc judici laws ess al inde inde assista x (0 x (0 nce = = index min, min, (0 = 100 100 min, = = 100 = max max max) ) ) 63.5 72.2 55.1 84.9 94.9 94.9 88.5 95.4 94.9 94.9 79.1 95.4 71.6 82.4 84.9 45.7 62.8 76.1 67.6 81.8 81.9 81.8 84.7 87 76.1 79 81.8 57.2 74.8 60.2 53.4 41.3 70.2 66.7 52.7 33.7 76.6 94.5 40.8

Strengt h of owne rship rights index (0 = min, 100 = max)

Acces s to land infor m ation index (0 = min, 100 = max) 44.4 33.3 33.3 50 15.8 21.4 68.4 23.1 33.3 23.5 44.4 47.4 27.8

Argentina Brazil Chile China India Indonesia Korea, Malaysia Mexico Philippin es Russian South Thailand

50 166 29 99 46 86 17 14 31 80 31 65 34

18 17 11 18 16 12 11 11 11 17 10 8 9

65 62.5 63.2 63.7 76.3 52.6 71.1 60.5 65.8 57.9 68.4 60.5

79.3 85.7 85.7 96.4 92.9 78.6 85.7 78.5 81.3 68.8 85.7 84.5 80.7

100 100 100 n/a 87.5 n/a 100 87.5 100 n/a 100 100 62.5

Avail a bility of land infor m ation index (0 = min, 100 = max) 85 75 80 52.5 85 85 70 85 90 87.5 90 85 70

Tim e to leas e priv ate land (day s)

Tim e to leas e publ ic land (day s)

48 66 23 59 90 35 10 96 83 16 62 42 30

112 180 93 129 295 81 53 355 151 n/a 231 304 128

Thus, a review of FDI policies in India and across major EMEs suggests that though India‟s policy stance in terms of access to different sectors of the economy, repatriation of dividend and norms for owning equity are comparable to that of other EMEs, policy in terms of qualitative parameters such as „time to lease private land‟, „access to land information‟ and „Extent of Judicial assistance‟ are relatively more conservative. Since time taken to set up a project adds to the cost and affect competitiveness, an otherwise fairly liberal policy regime may turn out to be less competitive or economically unviable owing to procedural delays. Thus, latter may affect the cross border flow of investible funds. But an assessment of precise impact of these qualitative parameters on the flow of FDI is an empirical question. The following section makes an attempt to quantify the impact of various factors that govern the flow of FDI in India.

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O. FDI FLOWS TO INDIA IN RECENT PERIOD Distinct slowdown despite strong fundamentals – Plausible Explanations As stated above, global FDI flows moderated significantly since the eruption of global financial crisis in 2008, albeit with an uneven pattern across regions and countries. Though initially developing countries showed some resilience, crisis eventually spread through the trade, financial and confidence channels and FDI flows declined in both the advanced and developing economies during 2009. Subsequently, while FDI flows to advanced countries continued to decline, FDI flows to many of the Latin American and Asian countries witnessed strong rebound during 2010 on the back of improved corporate profitability and some improvement in M&A activities. FDI flows to India also moderated during 2009 but unlike trends in other EMEs, flows continued to be sluggish during 2010 despite strong domestic growth ahead of global recovery. This raised concerns for policy makers in India against the backdrop of expansion in the current account deficit. Table 6: FDI Inflows in Select EMEs (US$ billion) Argentina 2007 2008 2009 Q1-10 Q2-10 Q3-10 Q4-10 2010 6.5 9.7 (50.2) 4.0 -(92.0) 1.9 0.0 1.9 0.9 4.7 (17.5) Brazil 34.6 45.1 (30.3) 25.9 -(14.3) 5.5 6.6 10.5 25.9 48.5 (87.3) Chile 12.5 15.2 (21.1) 12.7 -(39.9) 5.5 2.5 5.3 1.9 15.2 (19.7) India 25.5 43.4 (70.3) 35.6 -(49.4) 6.1 6.0 6.7 5.3 24.1 -(32.3) Indonesia 6.9 9.3 (34.5) 4.9 -(85.9) 2.9 3.3 3.4 3.7 13.3 (171.4) Mexico 29.1 24.9 -(14.3) 14.5 -(200.8) 4.8 7.6 2.4 2.8 17.6 (21.4) South Africa 5.7 9.6 (68.1) 5.4 -(92.1) 0.4 0.4 0.1 0.9 -(80.4) Thailand 11.3 8.5 -(24.7) 5.0 -(120.2) 1.5 2.0 1.5 0.7 5.7 (14.0)

Note: Figures in brackets relate to percentage variation over the corresponding period of the previous year. Source: IMF, BOP Statistics.

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An analysis of trends in FDI flows during 2010 reveal that among the EMEs, countries such as Indonesia, Thailand, Brazil, Argentina, Chile and Mexico registered increases in the range of 14-171 per cent during 2010 over 2009 (Table 6). In contrast, FDI inflows to India declined by 32 per cent, year-on-year, during 2010. This moderation in FDI inflows warrants a deeper examination of the causal factors from a crosscountry perspective. An analysis of key macroeconomic indicators in the select EMEs reveals that India‟s macroeconomic performance compares with other EMEs which received higher FDI inflows during 2010 (Charts 1 & 2).

For instance, the GDP growth of India improved during 2010 as was the case with the select EMEs. The current account balance as percent of GDP deteriorated across the select EMEs, except Argentina. However, inflation in India was generally higher (remaining at double digits for a long period) than other select EMEs (except Argentina).

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Thus, without any significant deterioration in Indian macroeconomic performance compared to the select EMEs during 2010, the moderation in FDI inflows to India points towards the probable role of institutional factors that might have discouraged FDI inflows. 1. FDI slowdown – Explanations Offered In the recent past, various economists, policymakers, academicians and corporate researchers suggested that India‟s regulatory policies in terms of procedural delays, complex rules and regulations related to land acquisition, legal requirements and environmental obligations might have played a role in holding the investors back from investing into India. The uncertainty created by the actions taken by policy makers might have led to unfriendly business environment in India. In this context, some of the statements and observations made in various reports are detailed below: “Infrastructure projects in India carry significant risks associated with meeting government regulation, environment norms and legal requirements; inadequate user charges; and execution and construction risks” (CRISIL Report, January 2011). “Procedural delays are bothering nearly all of the respondents with almost 93 percent of the respondents indicating this issue to be „quite to very serious‟. The time consuming systems and procedures to be complied with, the bureaucratic layers to be dealt with and the multiple bodies from which clearances are to be obtained- all add up substantially to the transaction cost involved and take up a lot of management time thus making it an issue of serious concern for the investors” (FDI Survey by FICCI, December 2010). Identification of „environment clearances, land acquisition and rehabilitation‟ as the key issues that delayed large investment projects in the steel industry (Kotak Institutional Equities Research, October, 2010). “The Posco project (still in the pipeline) involves wider issues: Rs. 52,000 crore in foreign direct investments that will be seen as a test case for India‟s ability to accommodate big-ticket capital from abroad. The mining project by Vedanta in the same state (Orissa) has already been stalled on environment grounds” (The Telegraph newspaper statement, October 19, 2010).

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“When hard choices need to be made about large projects that are considered central to economic growth but are detrimental to the environment. Let us all accept the reality that there is undoubtedly a trade-off between growth and environment”(EPW, October 16, 2010). “Apart from hundreds of industry projects, he (environment Minister) has held up construction of a second airport in the commercial hub of Mumbai and dozens of road and dam projects await clearance” (China Daily, November 6, 2010). To ascertain these assertions which seek to imply that probably relatively more restrictive policy environment in India vis-à-vis other countries might have caused sluggishness in FDI flows, following section undertakes an econometric exercise using data of select EMEs. 2. Reasons for FDI slowdown – An Econometric Evidence The review of theoretical and select empirical literature reveals that FDI flows are driven by both pull and push factors. While pull factors that reflect the macroeconomic parameters could be influenced by the policies followed by the host country, push factors essentially represent global economic situation and remain beyond the control of economies receiving these flows (Box I). Box I Foreign Investment Flows – Theoretical Underpinnings The research on this subject has so far been largely devoted to factors determining the FDI and policy formulations in response to those factors. Until 1960s, FDI was modelled as a part of neoclassical capital theory and the basic motive behind the movement of this capital into a host country was search for higher rate of returns. Over the period, with growing realisation the motives for capital movement have been far more diverse than mere search for higher returns, there has been a plethora of theoretical and empirical research directed towards identifying factors determining different types of capital flows. It was the insight of Hymer (1960) who by differentiating direct investment from portfolio investment created basis for studies on factors determining the FDI flows. Hymer highlighted certain facts and evidences2 on the basis of which he concluded that the nature of the direct and portfolio investment differs and therefore same theories cannot be applied to both types of investment. The key feature that Hymer identified for motivation of FDI was the level of control which a firm of home country gets through direct investment in host country. He also stressed upon market imperfections such as the ownership of knowledge not known to rivals, existence of differentiated products giving profit advantage to a firm investing abroad, problems related to licensing the product, etc., for supporting FDI decisions. However, the literature argues that his theory over-emphasised the role of structural market failure and ignored the transaction cost side of market failure (Dunning and Rugman, 1985). Moreover, his theory did not explain the locational and dynamic aspect of FDI. Later, Caves (1971) expanded upon Hymer‟s theory of direct investment and embedded it in the industrial organisation literature. By differentiating horizontal and vertical FDI, he identified factors such as possession of superior knowledge or information, motives to avoid uncertainty in a market characterized by a few suppliers and objective of creating entry barriers, etc., as being responsible for rising FDI flows. With the rising presence of multinational enterprises in the global economy, the view on FDI was expanded with the internationalization theories of FDI that stressed on transaction costs (Dunning and Rugman, 1985; Horaguchi nad Toyne, 1990). The internationalisation theory of FDI identified accumulation and internalisation of knowledge as the motivation for FDI, which bypasses intermediate product markets in knowledge (Tolentino, 2001).

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The theorists such as Horst (1972), who stressed upon locational determinants of FDI, identified prevalence of natural resources as an important factor for FDI inflow. Wheeler and Mody (1992) identified ergodic and nonergodic systems that determine the location of FDI. The ergodic system focussed on classical variables such as geographical features, labor costs, transport costs and market size as factors determining the FDI flows. Various empirical studies still rely on these variables to determine potential for FDI flows. The non-ergodic system focussed on externalities that emerge from investment in firms experiencing agglomeration economies, in other words, indicating the clustering effects of FDI. The studies such as Venables (1996), Potter et al (2002) explained spatial patterns of FDI in terms of these factors. The research work of Dunning (1973, 1981) provided a comprehensive analysis of FDI based on ownership, location and the internationalisation (OLI) paradigm. His eclectic theory of FDI highlighted various benefits emerging from FDI: the ownership-specific advantages which comprise access to spare capacity, economies of joint supply, greater access to markets and knowledge, diversification of risk, technology and trademarks, firm size; the location-specific advantages consisting of distribution of inputs and markets, costs of labor, materials and transport costs, government intervention and policies, commercial and legal infrastructure, etc.; internalisation-specific advantages covering reduction in search, negotiation and monitoring costs, tariff avoidance, etc. The critics of eclectic theory of FDI have regarded it as a taxomony rather than a theory of FDI (Ietto-Gillies, 1992) as it covered a range of theories and employs a large number of variables. It has also been criticised for reformulation over time to incorporate new ideas and to reflect contemporary trends in FDI. The prior version of his theory ignored the role of strategy in determining the FDI flows. The role of strategic motivations, which was first analysed by Knickerbocker (1973), were extended by Acocella (1992). As per these strategic theories, the reasons behind strategic alliances included economies of scale, the reduction of risk and access to knowledge and expertise (Inkpen, 2001). The strategic alliances highlight the motivation for mergers and acquisitions taking place in the current era of M&A boom. All these theories mainly explain the supply side of FDI that creates a push to FDI for flowing out of the home economy. Broadly, these factors and motives comprise profit expansion through knowledge advantage, lower cost advantage, greater market access, gains from scale economies, strategic motives such as acquiring input supplies or creating worldwide near to monopoly powers, locational advantages, reduction in risk and agglomeration gains. A vast literature on demand side factors that pull FDI into a host economy is also available. The studies such as World Bank (1995), Blomstrom and Kokko (1998), Markusen and Venables (1999), highlight gains from FDI in the form of competition and efficiency effects, spillover effects, effects of backward and forward linkages, technological effects, accumulation of knowledge capital, stable flow of funds with no debtservicing obligation attached, greater external market discipline on macroeconomic policy, broadening and deepening of national capital markets, etc. for the host country. These theoretical studies have given a lot of space for empirical research on factors determining the inflow and outflow of FDI and the role played by policy initiatives undertaken on the part of host countries to attract FDI. The country specific studies have analysed the role of regulatory regime of the host country in attracting FDI. These studies have focussed on timing, activities of supervisory authorities and content of external and internal regulatory measures. A lot of literature highlighting the role played by policy environment discusses the issues of creating investor friendly environment for FDI. As per Oxelheim (1993), in attracting inward investment during the period of transition from a national market to an integrated part of the global market, governments can influence the relative cost of capital by using an adequate mix of interventions. Policymakers may affect the corporate decision about where to locate a production facility by managing a set of international relative prices: exchange rates, relative inflation and interest rates. In general, they can create investment incentives or business opportunities by creating deviations from the international purchasing power parity and the international Fisher effect. Additional business incentives controlled by policymakers are relative taxes and relative political risk. This study has argued that appropriate policies appear to be a necessary precondition for attracting FDI.

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The UNCTC (1991) has provided seven policy instruments used to attract FDI: ownership policies, tax and subsidy measures, policies concerning convertibility of foreign exchange and remittance of earnings, price control measures, performance requirements, sector-specific limitations and incentives and miscellaneous entry and procedural rules that are assumed to impose a considerable cost on a potential FDI. A World Bank report on indicators of FDI regulation (2010) has found that restrictive and obsolete laws and regulations impede FDI, red tape and poor implementation of laws creates further barriers to FDI, good regulations and efficient processes matter for FDI and effective institutions help in fostering FDI. Thus, the report highlights the importance of regulatory framework. Data and Methodology The paper attempts a panel exercise for the select major emerging market economies to ascertain determinants of FDI flows. The data set comprises observations for the period from 2003-04 to 2009-10 for 10 major emerging economies, viz., Argentina, Brazil, Chile, India, Malaysia, Mexico, Philippines, Russia, South Africa and Thailand. To ensure the comparability entire dataset has been sourced from the Global Development Finance, published by the World Bank. FDI flows have been measured as FDI inflows to GDP ratio which has been regressed over a range of explanatory variables. Drawing from the literature review presented above, some of the variables that have been chosen and could be significant in determining the FDI flows comprise: market size, openness, currency valuation, growth prospects, macroeconomic sustainability, regulatory regime and proportion of global FDI received by emerging economies. Market size: Larger market size is expected to attract more FDI as it provides greater potential for demand and lower production costs through scale economies. Market size has been proxied by GDP in purchasing power parity (PPP) terms. Openness: Impact of openness or liberalised trade is somewhat ambiguous and depends on relative strength of two effects. First, economy with trade barriers is expected to attract more horizontal FDI so that production sites could be built within the national boundaries of those restricted economies. Second, increasing openness attracts vertical FDI flows in search of cheap intermediate and capital goods (Resmini, 2000). Also, openness in trade is correlated with economic liberalisation policy of an economy that may sound favorable to investors. Openness has been proxied by sum of current receipts and payments to GDP ratio. Macroeconomic stability - Lower inflation rate and stable exchange rate are expected to attract greater FDI by mitigating uncertainty risk. It has been proxied by inflation and exchange rate volatility. Exchange rate valuation - Froot and Stein (1991) have evidently found that a weaker host country currency tends to increase inward FDI as depreciation makes host country assets less expensive relative to assets in the home country which may act as an attraction for vertical FDI. On the other hand, a stronger real exchange rate might be expected to strengthen the incentive of foreign companies to produce domestically thereby attract more horizontal FDI. However, the second hypothesis does not appear to have attracted much support in the empirical literature (Walsh and Yu, 2010). It has been measured by value of US dollar in terms of respective domestic currencies. Clustering effects: A larger stock of FDI is regarded as a signal of a benign business climate for foreign investors and thus may attract more FDI. Moreover, by clustering with other firms, new investors benefit from positive spillovers from existing investors in the host country. The studies of Wheeler and Mody (1992), Barrel and Pain (1999) and Campos and Kinoshida (2003) have found empirical evidence of agglomeration effects. It has been proxied by the stock of FDI.

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Institutions and Governance - Institutional and Governance quality has been identified as a likely determinant of FDI, particularly for less developed countries, for a variety of reasons. First, good governance is associated with higher economic growth, which should attract more FDI inflows. Second, poor institutions that enable corruption tend to add to investment costs and reduce profits. Third, the high sunk cost of FDI makes investors highly sensitive to uncertainty, including the political uncertainty that arises from poor institutions (Walsh and Yu, 2010). Institutional framework and governance has been captured by „Government Effectiveness‟ Index (Kaufmann Index). It captures “perceptions of the quality of public services, the quality of the civil service and the degree of its independence from political pressures, the quality of policy formulation and implementation, and the credibility of the government's commitment to such policies”. Score is assigned on the scale of -2.5 to 2.5. Higher score means Government procedures are more efficient. Macro Economic Sustainability could be a key factor in attracting foreign investment. If government finances and external sector are considered sustainable, foreign investor feel assured of the safety of its investments. Sustainability has been captured through two variables. Fiscal sustainability has been captured by GFD to GDP ratio and external sector sustainability has been captured by net IIP to GDP ratio. Apart from these pull factors, push factors such as global economic environment and policy stance of the developed world may be critical factors in determining the FDI flows. For instance, higher global liquidity would cause larger flow of resources to EMEs searching for higher returns. It could be proxied by the FDI to EMEs. Limitations of the data Inferences drawn in the study should however be seen in the light of following data limitations:
  

The study is based on the macro level data and may not capture strictly the firm specific characteristics in the determination of FDI. Dataset for each variable have been sourced from a single source to ensure comparability. Since international agencies may make suitable adjustments for the sake of comparability, data for an individual country may marginally vary from the country‟s own datasets. The sectoral caps for India, as provided by the World Bank in its survey „Investing across Borders‟, in respect of agriculture, banking, media, „construction, tourism and single brand retail‟ are apparently at variance with extant guidelines. This is because the average caps were reported for the respective sectors in its publication and the same have been reproduced in the study.

Fixed effect model4 of the following form was estimated for a group of emerging economies, where fy (i, t) is the FDI to GDP ratio of an individual economy i in the year t, and x (i, t) is the vector of explanatory variables. y(i,t) = a1 d1(i,t) + a2 d2(i,t) + ... + b¢x(i,t) + e(i,t) = a(i) + b¢x(i,t) + e(i,t), where the a(i)s are individual specific constants, and the d(i)s are group specific dummy variables which equal 1 only when j = i.

Panel has been estimated for the period 2000-01 to 2010-11 for 10 countries.

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Results

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The estimated equation is shown below, with t-statistics shown in parentheses:

where fy – foreign direct investment to GDP ratio; Openness – current flows to GDP ratio; Gdiff – growth differential amongst the sample countries; dwages – change in labour cost; FDIEMERG = size of FDI toemerging economies; IIPY – Net International Investment Position; Govt. Effect – Index of Government Effectiveness (Kaufmann Index). In line with a priori expectations, all the pull factors viz., openness, growth differential, net international investment position and Kaufmann Index of Government Effectiveness were found to be positively related. Labour cost, as expected, had inverse relationship with FDI inflows. All the variables were statistically significant. Similarly, the push factor captured through size of FDI flowing into emerging economies was also found to be positively related and impact has been statistically significant. GDP in PPP terms capturing size of the market was also examined. Although it was statistically insignificant (not reported), its sign was in line with a priori expectations, i.e., bigger the market size larger the FDI flows. Similarly, the sign for exchange rate although correct as per a priori expectation, was statistically insignificant and has not been reported. The results show that ten percentage points rise in openness, growth differential and IIP cause 0.3, 0.8 and .2 percentage point rise in FDI to GDP ratio, respectively. Similarly, every US$ 10 billion rise in the size of global FDI to emerging economies causes 0.09 percentage point rise in FDI/GDP ratio. On the other hand, every US$ 10 rise in the wage rate is likely to reduce the FDI ratio by .04 percentage points. The Index denoting „Government Effectiveness (Gov. Effect) as expected has inverse relationship with FDI flows implying that policy certainty could be a major determinant of FDI inflows. As per our results, if Gov Effect Index rises by one point on the scale of -2.5 to 2.5, FDI to GDP ratio rises by 4 percentage points. Thus, the panel results show that higher the degree of openness, expected growth of the economy, net international assets and size of FDI flows to EMEs, larger the size of FDI that flows to the country. Similarly, higher the certainty of implementation of efficient and quality policies, higher would be the flow of FDI. On the other hand, higher labour cost is likely to discourage the flow of FDI to the country.

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What caused dip in FDI flows to India during 2010-11? Our empirical exercise portrays a range of factors that significantly impact the size of FDI flows. With a view to segregate the impact of non-economic factors including government policy, a contra factual scenario is generated for the year 2010-11 by updating values for all the explanatory variables except for the Kaufmann Index. Estimated potential and actual FDI levels are presented in the Chart 3 and contra factual scenario that assumes no deterioration in government effectiveness index has been presented in Chart 3a.

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It could be observed from Chart 3 that actual FDI to India closely tracked the potential FDI path. The potential FDI level is the estimated level that should occur given the trends in underlying fundamentals. In the year 2010-11, the actual FDI flows at 1.5 per cent of GDP are marginally lower than the estimated level of 1.8 per cent of GDP. Chart 3a, presents a contra-factual scenario where potential level of FDI flows for the year 201011 is worked out by updating values of all the variables except „Govt. Effect‟. The latter is retained at preceding year‟s level. In could be observed that in case of contra-factual scenario, in the year 2010-11, gap between potential and actual level of FDI increased by more than 25 per cent. Since, the contra factual estimated for 2010-11 updated value of all other variables except Govt. Effect, the larger gap between potential and the actual in the year could be attributed to index of Government Effectiveness7. In other words, contra factual estimate of FDI for the year 2010-11 incorporates impact of all the economic variables, viz., growth differential, openness, net IIP, labour cost and size of „FDI to all emerging economies‟ whereas it keeps qualitative variable „Govt. Effect‟ unaltered. Keeping „Govt. Effect‟ unaltered means that had there been no amplification in policy uncertainty over the preceding year‟s level, FDI inflows to India would have been more than 35 per cent higher than that was actually received. Thus, empirical results corroborate our assertion made in the analytics presented above that the qualitative factors play an important role in attracting FDI flows, and slowdown in FDI flows in the absence of any deterioration in the macro economic variables could probably be on account of such qualitative factors.

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P. APPROVAL FOR FDI IN LIMITED LIABILITY PARTNERSHIP FIRM The Cabinet Committee on Economic Affairs approved the proposal to amend the policy on allowing Foreign Direct Investment (FDI) in Limited Liability Partnership (LLP) firms on 11 may 2011. The FDI in LLPs will be implemented in a calibrated manner, beginning with the „open‟ sectors where monitoring is not required, subject to the following conditions: a) LLPs with FDI will be allowed, through the Government approval route, in those sectors/activities where 100% FDI is allowed, through the automatic route and there are no FDI-linked performance related conditions. b) LLPs with FDI will not be allowed to operate in agricultural/plantation activity, print media or real estate business. c) LLPs with FDI will not be eligible to make any downstream investments.

There are also further following conditions relating to funding, ownership and management of LLPS: I. Funding of LLPs: (a) An Indian company, having FDI, will be permitted to make downstream investment in LLPs only if both the company, as well as the LLP are operating in sectors where 100% FDI is allowed, through the automatic route and there are no FDI-linked performance related conditions. (b) Foreign Capital participation in the capital structure of the LLPs will be allowed only by way of cash considerations, received by inward remittance, through normal banking channels, or by debit to NRE/FCNR account of the person concerned, maintained with an authorized dealer/authorized bank. (c) Foreign Institutional Investors (Flls) and Foreign Venture Capital Investors (FVCIs) will not be permitted to invest in LLPs. LLPs will also not be permitted to avail External Commercial Borrowings (ECBs.)

II. Ownership and management of LLPs: For the purpose of determination of the designated partners in respect of LLPs with FDI, the term "resident in India" would have the meaning, as defined for "person resident in India", under Section 2(v) (i) (A) & (B) of the Foreign Exchange Management Act, 1999.

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Q. SECTORS FOR FDI: 1. FDI in Agriculture 1. Agriculture & Animal Husbandry (a) (b) (c) (d) Floriculture, Horticulture, and 100% Automatic Cultivation of Vegetables & Mushrooms under controlled conditions Development and production of Seeds and planting material; Animal Husbandry (including of breeding of dogs), Pisciculture, Aquaculture under controlled conditions Services related to agro and allied sectors

Other conditions: For companies dealing with development of transgenic seeds/vegetables, the following conditions apply: (i) When dealing with genetically modified seeds or planting material the company shall comply with safety requirements in accordance with laws enacted under the Environment (Protection) Act on the genetically modified organisms. Any import of genetically modified materials if required shall be subject to the conditions laid down vide Notifications issued under Foreign Trade (Development and Regulation) Act, 1992. The company shall comply with any other Law, Regulation or Policy governing genetically modified material in force from time to time. Undertaking of business activities involving the use of genetically engineered cells and material shall be subject to the receipt of approvals from Genetic Engineering Approval Committee (GEAC) and Review Committee on Genetic Manipulation (RCGM). Import of materials shall be in accordance with National Seeds Policy. The term “under controlled conditions” covers the following:

(ii)

(iii)

(iv)

(v) (vi)

 „Cultivation under controlled conditions‟ for the categories of Floriculture, Horticulture, Cultivation of vegetables and Mushrooms is the practice of cultivation wherein rainfall, temperature, solar radiation, air humidity and culture medium are controlled artificially. Control in these parameters may be effected through protected cultivation under green houses, net houses, poly houses or any other improved infrastructure facilities where microclimatic conditions are regulated anthropogenically. In case of Animal Husbandry, scope of the term „under controlled conditions‟ includes – • Rearing of animals under intensive farming systems with stall-feeding. Intensive farming system will require climate systems (ventilation, temperature/humidity management), health care and nutrition, herd registering/pedigree recording, use of machinery, waste management systems. Poultry breeding farms and hatcheries where microclimate is controlled through advanced technologies like incubators, ventilation systems etc.

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 In the case of pisciculture and aquaculture, „under controlled conditions‟ includes – • • Aquariums Hatcheries where eggs are artificially fertilized and fry are hatched and incubated in an enclosed environment with artificial climate control. 2 Tea Plantation 1 Tea sector including tea plantations.

Note: Besides the above, FDI is not allowed in any other plantation Other conditions: (i) Compulsory divestment of 26% equity of the company in favour of an Indian partner/Indian public within a period of 5 years. Prior approval of the State Government concerned in case of any future land use change.

(ii)

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2. FDI in Mining 1. Mining and Exploration of metal and non-metal ores including diamond, gold, silver and precious ores but excluding titanium bearing minerals and its ores; subject to the Mines and Minerals (Development & Regulation) Act, 1957. 2. Coal and Lignite: (1) Coal & Lignite mining for captive consumption by power projects, iro& steel and cement units and other eligible activities permitted under and subject to the provisions of Coal Mines (Nationalization) Act, 1973 (2) Setting up coal processing plants like washeries subject to the condition that the company shall not do coal mining and shall not sell washed coal or sized coal from its coal processing plants in the open market and shall supply the washed or sized coal to those parties who are supplying raw coal to coal processing plants for washing or sizing. 3. Mining and mineral separation of titanium bearing minerals and ores, its value addition and integrated activities. Mining and mineral separation of titanium bearing minerals & ores, its value addition and integrated activities subject to sectorial regulations and the Mines and Minerals (Development and Regulation Act 1957) Other conditions: India has large reserves of beach sand minerals in the coastal stretches around the country. Titanium bearing minerals viz. Limonite, rutile and leucoxene, and Zirconium bearing minerals including zircon are some of the beach sand minerals which have been classified as “prescribed substances” under the Atomic Energy Act, 1962. Under the Industrial Policy Statement 1991, mining and production of minerals classified as “prescribed substances” and specified in the Schedule to the Atomic Energy (Control of Production and Use) Order, 1953 were included in the list of industries reserved for the public sector. Vide Resolution No. 8/1(1)/97-PSU/1422 dated 6th October 1998 issued by the Department of Atomic Energy laying down the policy for exploitation of beach sand minerals, private participation including Foreign Direct Investment (FDI), was permitted in mining and production of Titanium ores (Limonite, Rutile and Leucoxene) and Zirconium minerals (Zircon). Vide Notification No. S.O.61(E) dated 18.1.2006, the Department of Atomic Energy re-notified the list of “prescribed substances” under the Atomic Energy Act 1962. Titanium bearing ores and concentrates (Limonite, Rutile and Leucoxene) and Zirconium, its alloys and compounds and minerals/concentrates including Zircon, were removed from the list of “prescribed substances”. (i) FDI for separation of titanium bearing minerals & ores will be subject to the following additional conditions viz.: (A) Value addition facilities are set up within India along with transfer of technology. (B) Disposal of tailings during the mineral separation shall be carried out in accordance with regulations framed by the Atomic Energy Regulatory Board such as Atomic Energy (Radiation Protection) Rules, 2004 and the Atomic Energy (Safe Disposal of Radioactive Wastes) Rules, 1987.

(ii)

FDI will not be allowed in mining of “prescribed substances” listed in the Notification No. S.O 61(E) dated 18.1.2006 issued by the Department of Atomic Energy.

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Clarification: (1)

[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

For titanium bearing ores such as Limonite, Leucoxene and Rutile, manufacture of titanium dioxide pigment and titanium sponge constitutes value addition. Limonite can be processed to produce 'Synthetic Rutile or Titanium Slag as an intermediate value added product. The objective is to ensure that the raw material available in the country is utilized for setting up downstream industries and the technology available internationally is available for setting up such industries within the country. Thus, if with the technology transfer, the objective of the FDI Policy can be achieved, the conditions prescribed at (i) (A) above shall be deemed to be fulfilled.

(2)

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3. FDI in Manufacturing Manufacture of items reserved for production in Micro and Small Enterprises (MSEs).  FDI in MSEs will be subject to the sectorial caps, entry routes and other relevant sectorial regulations. Any industrial undertaking which is not a Micro or Small Scale Enterprise, but manufactures items reserved for the MSE sector would require Government route where foreign investment is more than 24% in the capital. Such an undertaking would also require an Industrial License under the Industries (Development & Regulation) Act 1951, for such manufacture. The issue of Industrial License is subject to a few general conditions and the specific condition that the Industrial Undertaking shall undertake to export a minimum of 50% of the new or additional annual production of the MSE reserved items to be achieved within a maximum period of three years. The export obligation would be applicable from the date of commencement of commercial production and in accordance with the provisions of section 11 of the Industries (Development & Regulation) Act 1951.

4. FDI in Power Electric Generation, Transmission, Distribution and Trading 1. Generation and transmission of electric energy produced in - hydroelectric, coal/lignite based thermal, oil based thermal and gas based thermal power plants. 2. Non-Conventional Energy Generation and Distribution. 3. Distribution of electric energy to households, industrial, commercial and other users and 4. Power Trading Note: All the above would be subject to the provisions of the Electricity Act 2003.

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5. FDI in Defence

[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

1. Defence Industry subject to Industrial license under the Industries (Development & Regulation) Act 1951. 2. Other conditions: (i) Licence applications will be considered and licences given by the Department of Industrial Policy & Promotion, Ministry of Commerce & Industry, in consultation with Ministry of Defence. (ii) (iii) The applicant should be an Indian company / partnership firm. The management of the applicant company / partnership should be in Indian hands with majority representation on the Board as well as the Chief Executives of the company / partnership firm being resident Indians. Full particulars of the Directors and the Chief Executives should be furnished along with the applications. The Government reserves the right to verify the antecedents of the foreign collaborators and domestic promoters including their financial standing and credentials in the world market. Preference would be given to original equipment manufacturers or design establishments, and companies having a good track record of past supplies to Armed Forces, Space and Atomic energy sections and having an established R & D base. There would be no minimum capitalization for the FDI. A proper assessment, however, needs to be done by the management of the applicant company depending upon the product and the technology. The licensing authority would satisfy itself about the adequacy of the net worth of the non-resident investor taking into account the category of weapons and equipment that are proposed to be manufactured. There would be a three-year lock-in period for transfer of equity from one non-resident investor to another non-resident investor (including NRIs & erstwhile OCBs with 60% or more NRI stake) and such transfer would be subject to prior approval of the FIPB and the Government. The Ministry of Defence is not in a position to give purchase guarantee for products to be manufactured. However, the planned acquisition programme for such equipment and overall requirements would be made available to the extent possible. The capacity norms for production will be provided in the licence based on the application as well as the recommendations of the Ministry of Defence, which will look into existing capacities of similar and allied products. Import of equipment for pre-production activity including development of prototype by the applicant company would be permitted. Adequate safety and security procedures would need to be put in place by the licensee once the licence is granted and production commences. These would be subject to verification by authorized Government agencies.

(iv)

(v)

(vi)

(vii)

(viii)

(ix)

(x)

(xi)

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(xii)

The standards and testing procedures for equipment to be produced under licence from foreign collaborators or from indigenous R & D will have to be provided by the licensee to the Government nominated quality assurance agency under appropriate confidentiality clause. The nominated quality assurance agency would inspect the finished product and would conduct surveillance and audit of the Quality Assurance Procedures of the licensee. Selfcertification would be permitted by the Ministry of Defence on case to case basis, which may involve either individual items, or group of items manufactured by the licensee. Such permission would be for a fixed period and subject to renewals. Purchase preference and price preference may be given to the Public Sector organizations as per guidelines of the Department of Public Enterprises. Arms and ammunition produced by the private manufacturers will be primarily sold to the Ministry of Defence. These items may also be sold to other Government entities under the control of the Ministry of Home Affairs and State Governments with the prior approval of the Ministry of Defence. No such item should be sold within the country to any other person or entity. The export of manufactured items would be subject to policy and guidelines as applicable to Ordnance Factoriesand Defence Public Sector Undertakings. Non-lethal items would be permitted for sale to persons / entities other than the Central of State Governments with the prior approval of the Ministry of Defence. Licensee would also need to institute a verifiable system of removal of all goods out of their factories. Violation of these provisions may lead to cancellation of the licence. Government decision on applications to FIPB for FDI in defence industry sector will be normally communicated within a time frame of 10 weeks from the date of acknowledgement.

(xiii)

(xiv)

(xv)

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6. FDI in Civil Aviation Sector 1. The Civil Aviation sector includes Airports, Scheduled and Non-Scheduled domestic passenger airlines, Helicopter services / Seaplane services, Ground Handling Services, Maintenance and Repair organizations; Flying training institutes; and Technical training institutions. For the purposes of the Civil Aviation sector: (i) “Airport” means a landing and taking off area for aircrafts, usually with runways and aircraft maintenance and passenger facilities and includes aerodrome as defined in clause (2) of section 2 of the Aircraft Act, 1934. "Aerodrome" means any definite or limited ground or water area intended to be used, either wholly or in part, for the landing or departure of aircraft, and includes all buildings, sheds, vessels, piers and other structures thereon or pertaining thereto. "Air transport service" means a service for the transport by air of persons, mails or any other thing, animate or inanimate, for any kind of remuneration whatsoever, whether such service consists of a single flight or series of flights "Air Transport Undertaking" means an undertaking whose business includes the carriage by air of passengers or cargo for hire or reward. "Aircraft component" means any part, the soundness and correct functioning of which, when fitted to an aircraft, is essential to the continued airworthiness or safety of the aircraft and includes any item of equipment. "Helicopter" means a heavier-than -air aircraft supported in flight by the reactions of the air on one or more power driven rotors on substantially vertical axis. "Scheduled air transport service", means an air transport service undertaken between the same two or more places and operated according to a published time table or with flights so regular or frequent that they constitute a recognizably systematic series, each flight being open to use by members of the public. “Non-Scheduled Air Transport service” means any service which is not a scheduled air transport service and will include Cargo airlines. “Cargo” airlines would mean such airlines which meet the conditions as given in the Civil Aviation Requirements issued by the Ministry of Civil Aviation. "Seaplane" means an aeroplane capable normally of taking off from and alighting solely on water.

(ii)

(iii)

(iv)

(v)

(vi)

(vii)

(viii)

(ix)

(x)

(xi)

“Ground Handling” means (i) ramp handling , (ii) traffic handling both of which shall include the activities as specified by the Ministry of Civil Aviation through the Aeronautical Information Circulars from time to time, and (iii) any other activity specified by the Central Government to be a part of either ramp handling or traffic handling.

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2. Policy for FDI in Civil Aviation sector The policy for FDI in the Civil Aviation Sector would be subject to the Aircraft Rules, 1934 as amended from time to time, Civil Aviation Requirements, and Aeronautical Information Circulars as notified by the Ministry of Civil Aviation. (i) Airports: (a) (b) Greenfield projects Existing projects

(ii)

Air Transport Services: (a) Air Transport Services would include Domestic Scheduled Passenger Airlines; NonScheduled Air Transport Services, helicopter and seaplane services. No foreign airlines would be allowed to participate directly or indirectly in the equity of an Air Transport Undertaking engaged in operating Scheduled and Non-Scheduled Air Transport Services except Cargo airlines. Foreign airlines are allowed to participate in the equity of companies operating Cargo airlines, helicopter and seaplane services. (1) Scheduled Air Transport Service/ Domestic Scheduled Passenger Airline. (2) Non-Scheduled Air Transport Service. (3) Helicopter services/seaplane services requiring DGCA approval

(b)

(c)

(iii)

Other services under Civil Aviation sector: (1) (2) Ground Handling Services subject to sectorial regulations and security clearance. Maintenance and Repair organizations; flying training institutes; and technical training Institutions

7. FDI in Banking- Public Sector Banking- Public Sector subject to Banking Companies (Acquisition & Transfer of Undertakings) Acts1970/80. This ceiling (20%) is also 20% (FDI and Portfolio Investment) applicable to the State Bank of India and its associate Banks.

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8. FDI in Credit Information Companies (CIC) Credit Information Companies 49% (FDI & FII) Government (1) Foreign investment in Credit Information Companies is subject to the Credit Information Companies (Regulation) Act, 2005. (2) Foreign investment is permitted under the Government route, subject to regulatory clearance from RBI. (3) Investment by a registered FII under the Portfolio Investment Scheme would be permitted up to 24% only in the CICs listed at the Stock Exchanges, within the overall limit of 49% for foreign investment. (4) Such FII investment would be permitted subject to the conditions that: (a) (b) (c) No single entity should directly or indirectly hold more than 10% equity. Any acquisition in excess of 1% will have to be reported to RBI as a mandatory requirement. FIIs investing in CICs shall not seek a representation on the Board of Directors based upon their shareholding.

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

9. FDI in Broadcasting 1. Terrestrial Broadcasting FM (FM Radio) subject to such terms and conditions as specified from time to time by Ministry of Information and Broadcasting for grant of permission for setting up of FM Radio Stations 20% (FDI, NRI & PIO investments and Portfolio investment) 2. Cable Network subject to Cable Television Network Rules, 1994 and other conditions as specified from time to time by Ministry of Information and Broadcasting 49% (FDI, NRI & PIO investments and portfolio investment) 3. Direct –to-Home subject to such guidelines/terms and conditions as specified from time to time by Ministry of Information and Broadcasting 49% (FDI, NRI & PIO investments and portfolio investment) Within this limit, FDI component not to exceed 20% 4. Headend-In-The-Sky (HITS) Broadcasting Service refers to the multichannel downlinking and distribution of television programme in CBand or Ku Band wherein all the pay channels are downlinked at a central facility (Hub/teleport) and again uplinked to a satellite after encryption of channel. At the cable headend these encrypted pay channels are downlinked using a single satellite antenna, transmodulated and sent to the subscribers by using a land based transmission system comprising of infrastructure of cable/optical fibres network. (i) FDI limit in (HITS) Broadcasting Service is subject to such guidelines/terms and conditions as specified from time to time by Ministry of Information and Broadcasting. 74% (total direct and indirect foreign investment including portfolio and FDI) Automatic upto 49% Government route beyond 49% and up to 74%.

5. Setting up hardware facilities such as up-linking, HUB etc. (1) (2) (3) Setting up of Up-linking HUB/ Teleports 49% (FDI & FII). Up-linking a Non-News & Current Affairs TV Channel . Up-linking a News & Current Affairs TV Channel subject to the condition that the portfolio investment from FII/ NRI shall not be “persons acting in concert” with FDI investors, as defined in the SEBI(Substantial Acquisition of Shares and Takeovers) Regulations, 1997.

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10. FDI in Commodity Exchanges 1. Futures trading in commodities are regulated under the Forward Contracts (Regulation) Act, 1952. Commodity Exchanges, like Stock Exchanges, are infrastructure companies in the commodity futures market. With a view to infuse globally acceptable best practices, modern management skills and latest technology, it was decided to allow foreign investment in Commodity Exchanges. 2. For the purposes of this chapter: (i) “Commodity Exchange” is a recognized association under the provisions of the Forward Contracts (Regulation) Act, 1952, as amended from time to time, to provide exchange platform for trading in forward contracts in commodities. (ii) “Recognized association” means an association to which recognition for the time being has been granted by the Central Government under Section 6 of the Forward Contracts (Regulation) Act, 1952. (iii) “Association” means any body of individuals, whether incorporated or not, constituted for the purposes of regulating and controlling the business of the sale or purchase of any goods and commodity derivative. (iv) “Forward contract” means a contract for the delivery of goods and which is not a ready delivery contract. (v) “Commodity derivative” means• A contract for delivery of goods, which is not a ready delivery contract. Or • A contract for differences which derives its value from prices or indices of prices of such underlying goods or activities, services, rights, interests and events, as may be notified in consultation with the Forward Markets Commission by the Central Government, but does not include securities.

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11. FDI in Real Estate & Development of Townships The real estate sector in India is of great importance. According to the report of the Technical Group on Estimation of Housing Shortage, an estimated shortage of 26.53 million houses during the Eleventh Five Year Plan (2007-12) provides a big investment opportunity. According to a report „Emerging trends in Real Estate in Asia Pacific 2011', released by PricewaterhouseCoopers (PwC) and Urban Land Institute (ULI), India is the most viable investment destination in real estate. The report, which provides an outlook on Asia-Pacific real estate investment and development trends, points out that India, in particular Mumbai and Delhi, are good real estate investment options for 2011. Residential properties maintain their growth momentum and hence are viewed as more promising than other sectors. ULI is a global non-profit education and research institute. Further, real estate companies are coming up with various residential and commercial projects to fulfill the demand for residential and office properties in Tier-II and Tier-III cities. For instance, Ansal Properties has several residential projects in cities such as Jodhpur, Ajmer, Jaipur, Panipat, Kundli and Agra. Omaxe has also planned around 40 residential and integrated township projects in Tier-II and Tier-III cities, majority of them being in Uttar Pradesh, Punjab, Madhya Pradesh, Rajasthan and Haryana. The growth in real estate in Tier-II and Tier-III cities is mainly due to increase in demand for organized realty and availability of land at affordable prices in these cities. According to the data released by the Department of Industrial Policy and Promotion (DIPP), housing and real estate sector including cineplex, multiplex, integrated townships and commercial complexes etc, attracted a cumulative foreign direct investment (FDI) worth US$ 9,405 million from April 2000 to January 2011 wherein the sector witnessed FDI amounting US$ 1,048 million during April-January 2010-11. New Projects • • Private equity fund IL&FS Investment Managers (IIML) is estimated to have invested US$ 300 million in real estate and urban infrastructure projects in 2010. Close to Nalagarh in Solan district, Dabhota is set to be the latest industrial area to be developed by the Himachal Pradesh government, say officials. The state government has already issued a notification and asked the state land acquisition officials to acquire 2,020 bighas of land at Baghota to be developed into industrial plots. Ramky Estates and Farms Limited, the real estate arm of the Ramky Group, is contemplating to enter Indian market by July 2011. The company is evaluating on land acquisitions in Kolkata and Bhubaneswar. Chennai-based VGN Developers Pvt Ltd has entered into a joint venture with private equity firm Pragnya Fund to initiate a new residential project with an investment of US$ 20.06 million in the city. Ascendas has entered into an agreement with a Japanese consortium of Mizuho Corporate Bank (MCB) and JGC Corporation to develop integrated townships in India, according to a press release from Ascendas. The integrated township is likely to be in Chennai, which has attracted investment by a number of companies from Japan. Ascendas of Singapore will be the master developer.

• •

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Godrej Group's real estate company, Godrej Properties and Frontier Home Developers, has launched a residential project in Gurgaon with joint venture partner M/s. Frontier Home Developers Pvt. Ltd. This is a debut residential project in the national capital region (NCR) for Godrej Properties. Shristi Infrastructure Development Corporation will invest US$ 444.7 million over the next three years in seven small cities in West Bengal, Tripura and Rajasthan. The money would be used to build integrated townships, healthcare facilities, hospitality and sports facilities, retail malls, logistics hubs and commercial and residential complexes. Realty major Ansal Properties & Infrastructure Ltd plans to invest about US$ 330.8 million over the next three years on expansion of its existing integrated townships and to develop a group housing project in Haryana. Vision India Real Estate, a closely-held business group in the US, is investing US$ 5 million in Gem Group's upcoming residential project in Chennai. This will be the first joint development project for the US company that is proposing to invest US$ 100 to US$ 200 million over the next three years on projects, especially in the logistics arena. Realty major Embassy Property Developments has entered into a joint venture with MK Land Holding, a Malaysian company that specializes in pre-fabricated affordable housing, to build projects in the affordable housing segment. The proposed project entails an investment of over US$ 1.2 billion. Thai real estate developer Pruksa Global plans to invest US$ 218 million in projects in India and launched its first residential project in the country at Bangalore in October 2010. The International Finance Corporation (IFC) is in talks with several real estate developers to create large affordable housing projects in India. For FY-09 and FY-10 (fiscal year ending June 30), IFC's highest exposure has been in India. Out of the US$ 3.5 billion that IFC has committed in India, US$ 2.5-2.6 billion have been disbursed. IFC will continue to invest roughly US$ 1 billion in India every year for the next two or three years. Townships, housing, built-up infrastructure and construction & development projects (which would include, but not be restricted to, housing, commercial premises, hotels, resorts, hospitals, educational institutions, recreational facilities, city and regional level infrastructure)

• •

Investment to be made will be subject to the following conditions: 1. Minimum area to be developed under each project would be as under: (i) (ii) (iii) In case of development of serviced housing plots, a minimum land area of 10 hectares In case of construction-development projects, a minimum built-up area of 50,000 sq.mts In case of a combination project, any one of the above two conditions would suffice

2. Minimum capitalization of US$10 million for wholly owned subsidiaries and US$ 5 million for joint ventures with Indian partners. The funds would have to be brought in within six months of commencement of business of the Company.

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

3. Original investment cannot be repatriated before a period of three years from completion of minimum capitalization. Original investment means the entire amount brought in as FDI. The lock-in period of three years will be applied from the date of receipt of each installment/tranche of FDI or from the date of completion of minimum capitalization, whichever is later. However, the investor may be permitted to exit earlier with prior approval of the Government through the FIPB. 4. At least 50% of the project must be developed within a period of five years from the date of obtaining all statutory clearances. The investor/investee company would not be permitted to sell undeveloped plots. For the purpose of these guidelines, “undeveloped plots” will mean where roads, water supply, street lighting, drainage, sewerage, and other conveniences, as applicable under prescribed regulations, have not been made available. It will be necessary that the investor provides this infrastructure and obtains the completion certificate from the concerned local body/service agency before he would be allowed to dispose of serviced housing plots. 5. The project shall conform to the norms and standards, including land use requirements and provision of community amenities and common facilities, as laid down in the applicable building control regulations, bye-laws, rules, and other regulations of the State Government / Municipal/Local Body concerned. 6. The investor/investee company shall be responsible for obtaining all necessary approvals, including those of the building/layout plans, developing internal and peripheral areas and other infrastructure facilities, payment of development, external development and other charges and complying with all other requirements as prescribed under applicable rules/bye-laws/regulations of the State Government/ Municipal/Local Body concerned. 7. The State Government/ Municipal/ Local Body concerned, which approves the building / development plans, would monitor compliance of the above conditions by the developer. Note: (i) The conditions at (1) to (4) above would not apply to Hotels & Tourism, Hospitals and SEZ‟s. (ii) For investment by NRIs, the conditions at (1) to (4) above would not apply. (iii) 100% FDI is allowed under the automatic route in development of Special Economic Zones (SEZ) without the conditionalities at (1) to (4) above. This will be subject to the provisions of Special Economic Zones Act 2005 and the SEZ Policy of the Department of Commerce. (iv) FDI is not allowed in Real Estate Business.

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

12. FDI in Industrial Park 1. Industrial parks both setting up and already established Industrial Parks: (i) “Industrial Park” is a project in which quality infrastructure in the form of plots of developed land or built up space or a combination with common facilities, is developed and made available to all the allottee units for the purposes of industrial activity. “Infrastructure” refers to facilities required for functioning of units located in the Industrial Park and includes roads (including approach roads), water supply and sewerage, common effluent treatment facility, telecom network, generation and distribution of power, air conditioning. “Common Facilities” refer to the facilities available for all the units located in the industrial park, and include facilities of power, roads (including approach roads), water supply and sewerage, common effluent treatment, common testing, telecom services, air conditioning, common facility buildings, industrial canteens, convention/conference halls, parking, travel desks, security service, first aid center, ambulance and other safety services, training facilities and such other facilities meant for common use of the units located in the Industrial Park. “Allocable area” in the Industrial Park means(a) (b) (c) In the case of plots of developed land- the net site area available for allocation to the units, excluding the area for common facilities. In the case of built up space- the floor area and built up space utilized for providing common facilities. In the case of a combination of developed land and built-up space the net site and floor area available for allocation to the units excluding the site area and built up space utilized for providing common facilities.

(ii)

(iii)

(iv)

(v)

“Industrial Activity” means manufacturing, electricity, gas and water supply, post and telecommunications, software publishing, consultancy and supply, data processing, database activities and distribution of electronic content, other computer related activities, Research and experimental development on natural sciences and engineering, Business and management consultancy activities and Architectural, engineering and other technical activities.

2. FDI in Industrial Parks would not be subject to the conditionality applicable for construction development projects etc. spelt out in Para above, provided the Industrial Parks meet with the under-mentioned conditions: (i) It would comprise of a minimum of 10 units and no single unit shall occupy more than 50% of the allocable area. (ii) The minimum percentage of the area to be allocated for industrial activity shall not be less than 66% of the total allocable area.

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13. FDI in Insurance

[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

(1) FDI in the Insurance sector, as prescribed in the Insurance Act, 1999, is allowed under the automatic route. (2) This will be subject to the condition that Companies bringing in FDI shall obtain necessary license from the Insurance Regulatory & Development Authority for undertaking insurance activities.

14. FDI in Infrastructure Company in the Securities Market Infrastructure companies in Securities Markets, namely, stock exchanges, depositories and clearing corporations, in compliance with SEBI Regulations 49% (FDI & FII) [FDI limit of 26 per cent and an FII limit of 23 per cent of the paid-up capital] Other Conditions: • FII can invest only through purchases in the secondary market.

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

15. FDI in Non-Banking Finance Companies (NBFC) 1. Foreign investment in NBFC is allowed under the automatic route in only the following activities: (i) Merchant Banking (ii) Under Writing (iii) Portfolio Management Services (iv) Investment Advisory Services (v) Financial Consultancy (vi) Stock Broking (vii) Asset Management (viii) Venture Capital (ix) Custodian Services (x) Factoring (xi) Credit Rating Agencies (xii) Leasing & Finance (xiii) Housing Finance (xiv) Forex Broking (xv) Credit Card Business (xvi) Money Changing Business (xvii) Micro Credit (xviii) Rural Credit 2. Other Conditions: (1) Investment would be subject to the following minimum capitalization norms: (i) (ii) US $0.5 million for foreign capital upto 51% to be brought up front. US $ 5 million for foreign capital more than 51% and upto 75% to be brought up front. US $ 50 million for foreign capital more than 75% out of which US$ 7.5 million to be brought up front and the balance in 24 months. 100% foreign owned NBFCs with a minimum capitalization of US$ 50 million can set up step down subsidiaries for specific NBFC activities, without any restriction on the number of operating subsidiaries and without bringing in additional capital. Joint Venture operating NBFCs that have 75% or less than 75% foreign investment can also set up subsidiaries for undertaking other NBFC activities, subject to the subsidiaries also complying with the applicable minimum capitalization norm mentioned in (i), (ii) and (iii) above and (vi) below. Non- Fund based activities : US $0.5 million to be brought upfront for all permitted non-fund based NBFCs irrespective of the level of foreign investment subject to the following condition: It would not be permissible for such a company to set up any subsidiary for any other activity, nor it can participate in any equity of an NBFC holding/operating company.

(iii)

(iv)

(v)

(vi)

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]
The following activities would be classified as Non-Fund Based activities: (a) Investment Advisory Services (b) Financial Consultancy (c) Forex Broking (d) Money Changing Business (e) Credit Rating Agencies

Note:

(vii)

This will be subject to compliance with the guidelines of RBI. Note: Credit Card business includes issuance, sales, marketing & design of various payment products such as credit cards, charge cards, debit cards, stored value cards, smart card, value added cards etc.

3. The NBFC will have to comply with the guidelines of the relevant regulators, as applicable.

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

16. FDI in Petroleum & Natural Gas Sector 1. Exploration activities of oil and natural gas fields, infrastructure related to marketing of petroleum products and natural gas, marketing of natural gas and petroleum products, petroleum product pipelines, natural gas/pipelines, LNG Regasification infrastructure, market study and formulation and Petroleum refining in the private sector, subject to the existing sectoral policy and regulatory framework in the oil marketing sector and the policy of the Government on private participation in exploration of oil and the discovered fields of national oil companies. 2. Petroleum refining by the Public Sector Undertakings (PSU), without any disinvestment or dilution of domestic equity in the existing PSUs. 49% Government.

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

17. FDI in Print Media 1. Publishing of Newspaper and periodicals dealing with news and current affairs 26% (FDI and investment by NRIs/PIOs/FII) 2. Publication of Indian editions of foreign magazines dealing with news and current affairs 26% (FDI and investment by NRIs/PIOs/FII) Other Conditions: (i) „Magazine‟, for the purpose of these guidelines, will be defined as a periodical publication, brought out on non-daily basis, containing public news or comments on public news. Foreign investment would also be subject to the Guidelines for Publication of Indian editions of foreign magazines dealing with news and current affairs issued by the Ministry of Information & Broadcasting on 4.12.2008.

(ii)

3. Publishing/printing of Scientific and Technical Magazines/specialty journals/ periodicals, subject to compliance with the legal framework as applicable and guidelines issued in this regard from time to time by Ministry of Information and Broadcasting. 4. Publication of facsimile edition of foreign newspapers. Other Conditions: (i) FDI should be made by the owner of the original foreign newspapers whose facsimile edition is proposed to be brought out in India. Publication of facsimile edition of foreign newspapers can be undertaken only by an entity incorporated or registered in India under the provisions of the Companies Act, 1956. Publication of facsimile edition of foreign newspaper would also be subject to the Guidelines for publication of newspapers and periodicals dealing with news and current affairs and publication of facsimile edition of foreign newspapers issued by Ministry of Information & Broadcasting on 31.3.2006, as amended from time to time.

(ii)

(iii)

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

18. FDI in Telecommunication Investment caps and other conditions for specified services are given below. However, licensing and security requirements notified by the Department of Telecommunications will need to be complied with for all services. Telecom services 74% Automatic up to 49% Government route beyond 49% and up to 74%. Other conditions: 1. General Conditions: (i) This is applicable in case of Basic, Cellular, Unified Access Services, National/ International Long Distance, V-Sat, Public Mobile Radio Trunked Services (PMRTS), Global Mobile Personal Communications Services (GMPCS) and other value added Services. Both direct and indirect foreign investment in the licensee company shall be counted for the purpose of FDI ceiling. Foreign Investment shall include investment by Foreign Institutional Investors (FIIs), Non-resident Indians (NRIs), Foreign Currency Convertible Bonds (FCCBs), American Depository Receipts (ADRs), Global Depository Receipts (GDRs) and convertible preference shares held by foreign Entity. In any case, the `Indian‟ shareholding will not be less than 26 percent. FDI in the licensee company/Indian promoters/investment companies including their holding companies shall require approval of the Foreign Investment Promotion Board (FIPB) if it has a bearing on the Overall ceiling of 74 percent. While approving the investment proposals, FIPB shall take note that investment is not coming from countries of concern and/or unfriendly entities. The investment approval by FIPB shall envisage the conditionality that Company would adhere to licence Agreement. FDI shall be subject to laws of India and not the laws of the foreign country/countries.

(ii)

(iii)

(iv)

(v)

2. Security Conditions: (i) The Chief Officer In-charge of technical network operations and the Chief Security Officer should be a resident Indian citizen. Details of infrastructure/network diagram (technical details of the network) could be provided on a need basis only to telecom equipment suppliers/manufacturers and the affiliate/parents of the licensee company. Clearance from the licensor (Department of Telecommunications) would be required if such information is to be provided to anybody else. For security reasons, domestic traffic of such entities as may be identified /specified by the licensor shall not be hauled/routed to any place outside India. The licensee company shall take adequate and timely measures to ensure that the information transacted through a network by the subscribers is secure and protected. The officers/officials of the licensee companies dealing with the lawful interception of messages will be resident Indian citizens. The majority Directors on the Board of the company shall be Indian citizens.

(ii)

(iii)

(iv)

(v)

(vi)

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(vii)

[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

The positions of the Chairman, Managing Director, Chief Executive Officer (CEO) and/or Chief Financial Officer (CFO), if held by foreign nationals, would require to be security vetted by Ministry of Home Affairs (MHA). Security vetting shall be required periodically on yearly basis. In case something adverse is found during the security vetting, the direction of MHA shall be binding on the licensee. The Company shall not transfer the following to any person/place outside India:(a) Any accounting information relating to subscriber (except for international roaming/billing) (Note: it does not restrict a statutorily required disclosure of financial nature). User information (except pertaining to foreign subscribers using Indian Operator‟s network while roaming).

(viii)

(b)

(ix)

The Company must provide traceable identity of their subscribers. However, in case of providing service to roaming subscriber of foreign Companies, the Indian Company shall endeavour to obtain traceable identity of roaming subscribers from the foreign company as a part of its roaming agreement. On request of the licensor or any other agency authorised by the licensor, the telecom service provider should be able to provide the geographical location of any subscriber (BTS location) at a given point of time. The Remote Access (RA) to Network would be provided only to approved location(s) abroad through approved location(s) in India. The approval for location(s) would be given by the Licensor (DOT) in consultation with the Ministry of Home Affairs. Under no circumstances, should any RA to the suppliers/manufacturers and affiliate(s) be enabled to access Lawful Interception System(LIS), Lawful Interception Monitoring(LIM), Call contents of the traffic and any such sensitive sector/data, which the licensor may notify from time to time. The licensee company is not allowed to use remote access facility for monitoring of content.

(x)

(xi)

(xii)

(xiii)

(xiv)

Suitable technical device should be made available at Indian end to the designated security agency /licensor in which a mirror image of the remote access information is available on line for monitoring purposes. Complete audit trail of the remote access activities pertaining to the network operated in India should be maintained for a period of six months and provided on request to the licensor or any other agency authorised by the licensor. The telecom service providers should ensure that necessary provision (hardware/software) is available in their equipment for doing the Lawful interception and monitoring from a centralized location.

(xv)

(xvi)

(xvii)

The telecom service providers should familiarize/train Vigilance Technical Monitoring (VTM)/security agency officers/officials in respect of relevant operations/features of their systems.

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

(xviii) It shall be open to the licensor to restrict the Licensee Company from operating in any sensitive area from the National Security angle. (xix) In order to maintain the privacy of voice and data, monitoring shall only be upon authorisation by the Union Home Secretary or Home Secretaries of the States/Union Territories. For monitoring traffic, the licensee company shall provide access of their network and other facilities as well as to books of accounts to the security agencies. The aforesaid Security Conditions shall be applicable to all the licensee companies operating telecom services covered under this circular irrespective of the level of FDI. Other Service Providers (OSPs), providing services like Call Centres, Business Process Outsourcing (BPO), tele-marketing, tele-education, etc, and are registered with DoT as OSP. Such OSPs operate the service using the telecom infrastructure provided by licensed telecom service providers and 100% FDI is permitted for OSPs. As the security conditions are applicable to all licensed telecom service providers, the security conditions mentioned above shall not be separately enforced on OSPs.

(xx)

(xxi)

(xxii)

3. The above General Conditions and Security Conditions shall also be applicable to the companies operating telecom service(s) with the FDI cap of 4. All the telecom service providers shall submit a compliance report on the aforesaid conditions to the licensor on 1st day of July and January on six monthly basis.

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

19. FDI in Trading 1. Cash & Carry Wholesale Trading/ Wholesale Trading (including sourcing from MSEs) Definition: Cash & Carry Wholesale trading/Wholesale trading, would mean sale of goods/merchandise to retailers, industrial, commercial, institutional or other professional business users or to other wholesalers and related subordinated service providers. Wholesale trading would, accordingly, be sales for the purpose of trade, business and profession, as opposed to sales for the purpose of personal consumption. The yardstick to determine whether the sale is wholesale or not would be the type of customers to whom the sale is made and not the size and volume of sales. Wholesale trading would include resale, processing and thereafter sale, bulk imports with ex-port/ex-bonded warehouse business sales and B2B e-Commerce. Guidelines for Cash & Carry Wholesale Trading/Wholesale Trading (WT): (a) For undertaking WT, requisite licenses/registration/ permits, as specified under the relevant Acts/Regulations/Rules/Orders of the State Government/Government Body/Government Authority/Local Self-Government Body under that State Government should be obtained. Except in case of sales to Government, sales made by the wholesaler would be considered as „cash & carry wholesale trading/wholesale trading‟ with valid business customers, only when WT are made to the following entities: (I) (II) Entities holding sales tax/ VAT registration/service tax/excise duty registration. Entities holding trade licenses i.e. a license/registration certificate/membership certificate/registration under Shops and Establishment Act, issued by a Government Authority/ Government Body/ Local Self-Government Authority, reflecting that the entity/person holding the license/ registration certificate/ membership certificate, as the case may be, is itself/ himself/herself engaged in a business involving commercial activity. Entities holding permits/license etc. for undertaking retail trade (like the bazari and similar license for hawkers) from Government Authorities/Local Self Government Bodies. Institutions having certificate of incorporation or registration as a society or registration as public trust for their self-consumption.

(b)

(III)

(IV)

Note: An Entity to whom WT is made, may fulfill any one of The 4 conditions. ( c) Full records indicating all the details of such sales like name of entity, kind of entity, registration/license/permit etc. number, amount of sale etc. should be maintained on a day to day basis. WT of goods would be permitted among companies of the same group. However, such WT to group companies taken together should not exceed 25% of the total turnover of the wholesale venture. WT can be undertaken as per normal business practice, including extending credit facilities subject to applicable regulations. A Wholesale/Cash & carry trader cannot open retail shops to sell to the consumer directly.

(d)

(e)

(f)

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

2. E-commerce activities 100% Automatic: E-commerce activities refer to the activity of buying and selling by a company through the e-commerce platform. Such companies would engage only in Business to Business (B2B) e-commerce and not in retail trading, inter-alia implying that existing restrictions on FDI in domestic trading would be applicable to ecommerce as well.

3. Test marketing of such items for which a company has approval for manufacture, provided such test marketing facility will be for a period of two years, and investment in setting up manufacturing facility commences simultaneously with test marketing.

4. Single Brand product trading4 51% Government: (i) Foreign Investment in Single Brand product trading is aimed at attracting investments in production and marketing, improving the availability of such goods for the consumer, encouraging increased sourcing of goods from India, and enhancing competitiveness of Indian enterprises through access to global designs, technologies and management practices. FDI in Single Brand products retail trade would be subject to the following conditions: (a) (b) Products to be sold should be of a „Single Brand‟ only. Products should be sold under the same brand internationally i.e. products should be sold under the same brand in one or more countries other than India. „Single Brand‟ product-retailing would cover only products which are branded during manufacturing.

(ii)

(c)

(iii)

Application seeking permission of the Government for FDI in retail trade of „Single Brand‟ products would be made to the Secretariat for Industrial Assistance (SIA) in the Department of Industrial Policy & Promotion. The application would specifically indicate the product/ product categories which are proposed to be sold under a „Single Brand‟. Any addition to the product/ product categories to be sold under „Single Brand‟ would require a fresh approval of the Government. Applications would be processed in the Department of Industrial Policy & Promotion, to determine whether the products proposed to be sold satisfy the notified guidelines, before being considered by the FIPB for Government approval.

(iv)

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

20. FDI in Courier services Courier services for carrying packages, parcels and other items which do not come within the ambit of the Indian Post Office Act, 1898. 1. 100% FDI is allowed under the Government route. 2. This will be subject to existing Law. i.e Indian Post Office Act 1898 and exclusion of activity relating to the distribution of letters. Note : Minimum capitalization includes share premium received along with the face value of the share, only when it is received by the company upon issue of the shares to the non-resident investor. Amount paid by the transferee during post-issue transfer of shares beyond the issue price of the share, cannot be taken into account while calculating minimum capitalization requirement.

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

21. FDI in the Retail sector:

Retailing is one of the world‟s largest private industries. Liberalizations in FDI have caused a massive restructuring in retail industry. The benefit of FDI in retail industry superimposes its cost factors. Opening the retail industry to FDI will bring forth benefits in terms of advance employment, organized retail stores, availability of quality products at a better and cheaper price. It enables a country‟s product or service to enter into the global market.

 Cheaper production facilities: FDI will ensure better operations in production cycle and distribution. Due to economies of operation, production facilities will be available at a cheaper rate thereby resulting in availability of variety products to the ultimate consumers at a reasonable and lesser price.

 Availability of new technology: FDI enables transfer of skills and technology from overseas and develops the infrastructure of the domestic country. Greater managerial talent inflow from other countries is made possible. Domestic consumers will benefit getting great variety and quality products at all price points.

 Long term cash liquidity: FDI will provide necessary capital for setting up organized retail chain stores. It is a long term investment because unlike equity capital, the physical capital invested in the domestic company is not easily liquidated.

 Lead driver for the country‟s economic growth: FDI would create a competition among the global investors, which would ultimately ensure better and lower prices thus benefiting people in all sections of the society. There would be an increase in the market growth and expansion. It will increase retail employment and suppress untrained manpower and lack of experience. It will ensure better managerial techniques and success. Higher wages will be paid by the international companies. Urban consumers will be exposed to international lifestyles.

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R.

[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

ECONOMIC INDICATORS
LAST 8.13 60.87 18789.34 LAST 15836.11 5170.39 88981.17 1106.80 3649.53 4.80 1.30 1841.70 LAST 1217.00 28999.00 39974.00 3.80 LAST 4.86 231.00 223.00 159.30 243.00 172.70 LAST 15102.00 7.48 19298.70 19349.17 87567.88 7.25 PREVIOUS AVERAGE TREND 8.17 60.64 19345.70 9.25 31.77 5771.00 Index points UNIT INR Billion INR Billion INR Billion USD USD Percent Percent USD Billion UNIT Million Thousand Persons Thousand Persons Percent UNIT Percent Index Points Index Points Index Points Index Points Index Points UNIT INR Billion Percent INR Billion INR Billion INR Billion Percent UNIT Percent REFERENCE 2013-08-08 2013-08-09 2013-08-08 REFERENCE 2013-02-15 2013-02-15 2011-06-30 2012-12-31 2011-12-31 2013-03-31 2012-12-31 2012-12-31 REFERENCE 2012-12-31 2011-12-31 2007-12-31 2011-12-31 REFERENCE 2013-06-30 2013-06-15 2011-06-30 2012-12-31 2011-06-30 2013-06-15 REFERENCE 2013-07-31 2013-06-15 2013-07-31 2013-07-31 2013-07-31 2013-07-30

MARKETS GOVERNMENT BOND 10Y CURRENCY STOCK MARKET GDP GDP CONSTANT PRICES GROSS FIXED CAPITAL FORMATION GROSS NATIONAL PRODUCT GDP PER CAPITA GDP PER CAPITA PPP GDP ANNUAL GROWTH RATE GDP GROWTH RATE GDP LABOUR POPULATION EMPLOYED PERSONS UNEMPLOYED PERSONS UNEMPLOYMENT RATE PRICES INFLATION RATE CONSUMER PRICE INDEX (CPI) EXPORT PRICES GDP DEFLATOR IMPORT PRICES PRODUCER PRICES MONEY FOREIGN EXCHANGE RESERVES INTERBANK RATE MONEY SUPPLY M1 MONEY SUPPLY M2 MONEY SUPPLY M3 INTEREST RATE

Mon

Mon

Mon

PREVIOUS AVERAGE TREND 15062.09 4816.38 77135.07 1085.73 3372.66 4.70 0.80 1872.90 11470.23 3454.07 12619.53 448.91 1446.39 5.84 1.63 485.65

Quar

Quar

Yea

Yea

Yea

Quar

Quar

Yea

PREVIOUS AVERAGE TREND 1202.00 28708.00 41466.00 9.40 728.64 25060.23 36801.26 7.57

Yea

Yea

Yea

Yea

PREVIOUS AVERAGE TREND 4.70 228.00 196.00 146.50 215.00 171.60 7.72 55.81 150.38 125.14 174.85 130.04

Mon

Mon

Yea

Yea

Yea

Mon

PREVIOUS AVERAGE TREND 14760.70 7.31 19197.30 19247.67 85930.00 7.25 4893.57 7.48 3691.20 6793.11 13850.82 6.57

Mon

Mon

Mon

Mon

Mon

Mon

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

TRADE CURRENT ACCOUNT CURRENT ACCOUNT TO GDP EXTERNAL DEBT FOREIGN DIRECT INVESTMENT REMITTANCES TERMS OF TRADE BALANCE OF TRADE EXPORTS IMPORTS GOVERNMENT GOVERNMENT DEBT TO GDP GOVERNMENT BUDGET VALUE GOVERNMENT EXTERNAL DEBT GOVERNMENT SPENDING CREDIT RATING GOVERNMENT BUDGET BUSINESS CAR REGISTRATIONS CHANGES IN INVENTORIES INDUSTRIAL PRODUCTION BUSINESS CONFIDENCE CONSUMER BANK LENDING RATE CONSUMER SPENDING DISPOSABLE PERSONAL INCOME PERSONAL SAVINGS CONSUMER CONFIDENCE

LAST -18.10 -4.80 345819.00 1954.00 7845.07 113.00 -715.31 1389.02 2104.33 LAST 67.57 -2628.23 345819.00 1773.81 47.12 -4.80 LAST 205381.00 597.31 -1.60 51.20 LAST 10.25 8668.54 20037.20 118.00

PREVIOUS AVERAGE TREND -32.63 -4.20 305931.00 2802.00 8173.09 91.00 -1108.12 1348.08 2456.19 -1.51 -1.45 140319.65 923.56 7657.98 90.00 -120.37 246.34 368.19

UNIT USD Billion Percent USD Million USD Million USD Million Index Points INR Billion INR Billion INR Billion UNIT Percent INR Billion USD Million INR Billion Percent of GDP UNIT Cars INR Billion Percent

REFERENCE 2013-03-31 2012-12-31 2012-12-31 2013-05-15 2013-02-15 2011-06-30 2013-06-15 2013-06-15 2013-06-15 REFERENCE 2012-12-31 2013-06-30 2012-12-31 2013-02-15 2012-12-31 REFERENCE 2013-05-15 2013-02-15 2013-05-31 2013-06-30

Quar

Yea

Yea

Mon

Quar

Yea

Mon

Mon

Mon

PREVIOUS AVERAGE TREND 68.05 -1806.91 305931.00 1821.98 -5.80 74.56 -1237.76 140319.65 1262.77 -3.84

Yea

Mon

Yea

Quar

Mon

Yea

PREVIOUS AVERAGE TREND 208507.00 556.98 2.00 51.30 87168.33 375.11 7.03 60.14

Mon

Quar

Mon

Quar

PREVIOUS AVERAGE TREND 10.25 9255.44 18329.01 120.00 14.17 6712.74 2778.25 118.88

UNIT Percent INR Billion INR Million INR Billion

REFERENCE 2013-07-15 2013-02-15 2011-06-30 2012-06-29 2013-06-30

Mon

Quar

71640930.00 60158160.00 10220093.02

Yea

Yea

Quar

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S.

[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

TOP 10 FDI EQUITY INFLOW CASES FROM APRIL 2000 TO JANUARY 2011 Country: Mauritius

Sr. No.

Name of Indian Company

FDI Route

Name of Foreign Collaborator

RBI Regional Office

Item of Manufacture

Amount of FDI Inflows (In Rs crore) 7,294.48 (In US$ million) 1,600.9 5 1,083.9 9

1

IDEA CELLUR LTD I FLIEX SOLUTIONS LTD INDIA DEBT MANAGEMEN T LTD BHAIK INFOTEL P. LTD. ETISALAT DB TELECOM P. LTD HOUSING DEVELOPME N T FINANCE CORPN. LTD. I FLEX SOLUTIONS LTD DSP MERRILL LYNCH LTD.

RBI

TMI MAURITIUS LTD ORACLE GLOBAL( MAURITIUS) LTD MAURITIUS DEBT MANAGEMENT LTD VODAFONE MAURITIUS LTD. ETISALAT MAURITIUS LTD. CMP ASIA LTD.

AHMEDABAD

TELEPHONE COMMUNICATIO N SERVICES SOFTWARE DEVELOPMENT.

2

RBI

REGION NOT INDICATED

4,805.58

3

RBI

MUMBAI

COMMERCIAL LOAN COMPANIES ACTIVITIES TELEPHONE COMMUNICATIO N SERVICES TELEPHONE COMMUNICATIO N SERVICES HOUSING FINANCE COMPANIES IT TO FINIANCIAL SERVICE INDUSTRY FINANCIAL SERVICES PROVIDER NA

3,800.00

956.39

4

FIPB

NEW DELHI

3,268.12

801.37

5

RBI

MUMBAI

3,228.45

667.93

6

RBI

MUMBAI

2,638.25

653.74

7

FIPB

8

RBI

9

10

DABHOL POWER COMPANY LTD ADITYA BIRLA TELECOM LTD.

FIPB

ORACLE GLOBAL MAURITIUS LTD MERRILL LYNCH (MAURITIUS) LTD. NA

REGION NOT INDICATED

2,578.88

563.94

REGION NOT INDICATED

2,230.02

483.55

MUMBAI

2,160.35

450.07

FIPB

P S ASIA HOLDING INVESTMENT (MAURITIUS) Grand Total

MUMBAI

TELEPHONE COMMUNICATIO N SERVICES

2,098.25

419.13

34,102.3 6

7,681.06

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

Country: Singapore
Sr. No Name of Indian Company FDI Route Name of Foreign Collaborator RBI Regional Office Item of Manufacture Amount of FDI Inflows (In Rs crore) 1,851.91 (In US$ million) 458.89

1

RELOGISTICS INFRASTRUC TURE P. LTD. DLF ASSETS LTD

RBI

BIOMETRIX MARKETING P. LTD. DAL SINGAPORE INVESTMENTS PTE LTD BARCLAYS BANK PLC

MUMBAI

2

RBI

NEW DELHI

BOTTLING OF NATURAL GAS OR LIQUIFIED PETROLEUM GAS CONSTRUCTION

1,794.59

387.37

3

AAA GLOBAL VENTURES PVT LTD ESSEL MINING INDUSTRIES LTD. LPCUBE SYSTEMS (I) P. LTD.

RBI

MUMBAI

4

RBI

SURYA ABHA INVESTEMENT PTE. VIDHYA JAYARAMAN

KOLKATA

FINANCIAL LEASING COMPANIES ACTIVITIES. MINING OF IRON ORE

1,711.24

368.35

1,496.00

378.62

5

RBI

CHENNAI

6

7

8

HINDUSTAN COCO- COLA HOLDINGS PVT LTD HINDUSTAN COCO- COLA HOLDINGS PVT LTD HINDUSTAN COCO- COLA HOLDINGS PVT LTD RELIANCE GAS TRANSPORTA TION INFRAS. RELIANCE PORTS AND TERMINALS LTD.

FIPB

FIPB

FIPB

9

RBI

HINDUSTAN COCA- COLA OVERSEAS HOLDING PT HINDUSTAN COCA- COLA OVERSEAS HOLDING PTE BHARAT COCOCOLA OVERSEAS HOLDINGS PVT LTD BIO METRIX MARKETING P. LTD. BIOMETRIX MARKETING PVT.LTD.

MUMBAI

MUMBAI

MUMBAI

DATAPROCESSIN G SOFTWARE DEVELOPMENT AND COMPUTER CONSULTANCY SERVICES INVESTMENT RESEARCH AND COUNSELLING ACTIVITIES INVESTMENT RESEARCH AND COUNSELLING ACTIVITIES INVESTMENT RESEARCH COUNSELLING ACTIVITIES GENERATION OF GAS IN GASWROKS OTHER BUSSINESS SERVICES NOT ELSEWHERE CLASSIFIED OR INCLUDED.

1,406.25

328.27

1,334.18

273.21

1,334.18

273.21

1,170.32

239.65

MUMBAI

875.60

222.01

10

RBI

AHMEDABAD

830.33

205.75

Grand Total

13,804.6 0

3,135.34

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

Country: U.S.A
Sr. No Name of Indian Company FDI Route Name of Foreign Collaborator RBI Regional Office Item of Manufacture Amount of FDI Inflows (In Rs crore) 1,903.93 1,419.82 (In US$ million) 451.97 297.21

1 2

ESSAR STEEL LTD CAIRN INDIA LTD

RBI RBI

ESSAR LOGIISTICS HOLDINGS LTD PETRONAS INTL CORPN LTD 26 VARIOUS FIIS

AHMEDABAD MUMBAI

STEEL MFR.. BUSINESS SERVICES NOT ELSEWHERE CLASSIFIED MISCELLANEOUS

3

4

GMR INFRASTRUC TURE LTD CAIRN INDIA LTD

RBI

BANGALORE

1,200.34

256.28

RBI

ORIENT GLOBAL TAMARIND FUND PVT LTD DEUTSCHE BANK TRUST CO. FORD MOTOR COMPANY

MUMBAI

BUSINESS SERVICES NOT ELSEWHERE CLASSIFIED MISCELLANEOUS

1,114.77

233.36

5

6

ANANT RAJ INDUSTRIES LTD. FORD INDIA LTD

RBI

NEW DELHI

608.07

132.30

RBI

CHENNAI

MANUFACTURE OF MOTOR CARS & OTHER MOTOR VEHICLES LESING HIRE PURCHASE

546.77

111.96

7

E-SERVE INTERNATIO NAL LTD PTC INDIA LTD.

FIPB

CITIBANK OVERSEAS INVESTMENT CORP. AS PER ANNEXURE

REGION NOT INDICATED

518.91

112.81

8

RBI

NEW DELHI

ELECTRIC ITY GENERAT ION, TRANSMISSION & DISTRIBUTION BANKING ACTIVITIES INCLUDING FINANCIAL SERVICES GENERATION AND TRANSMISSION OF ELECTRIC ENERGY PRODUCED IN HYDROELECTRIC POWER PLANTS

499.99

103.22

9

KOTAK MAHINDRA BANK LTD.

RBI

BK OF NEWYORK

MUMBAI

450.00

102.21

10

JSW ENERGY LTD

RBI

VARIOUS INVESTORS

MUMBAI

431.39

97.14

Grand Total

8,693.98

1,898.46

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

Country: United Kingdom
Sr. No Name of Indian Company FDI Route Name of Foreign Collaborator RBI Regional Office Item of Manufacture Amount of FDI Inflows (In Rs crore) 6,663.24 (In US$ million) 1,492.8 2

1

CAIRN (I) LTD.

RBI

CAIRAN UK HOLDING

MUMBAI

BUSINESS SERVICES NOT ELSEWHERE CLASSIFIED OPERATING PORT FACILITES.

2

RELIANCE PORTS AND TERMINAL LTD RELIANCE HOLIDAYS AND RESORTS INDIA LTD CASTROL INDIA LTD HIMACHAL FUTURISTIC COMMUNATI ONS LTD MUNDRA PORT AND SEZ LTD BOC (I) LTD.

RBI

HSBC BANK PLC

REGION NOT INDICATED

1,530.00

385.07

3

RBI

HSBC BANK PLC

REGION NOT INDICATED

OPERATING PORT FACILITIES.

946.56

238.23

4 5

FIPB RBI

CASTROL LTD ECOM COM COMMUNICATI ON LTD VARIOUS NIRS/ FIIS THE BOC GROUP PLC STANDARD CHARTERED BANK ENI UK HOLDINGS PLC

REGION NOT INDICATED CHANDIGARH

NA NA

864.57 810.38

192.13 168.83

6

RBI

AHMEDABAD

SERVICES NEC

710.57

178.84

7

FIPB

KOLKATA

8

STANDARD CHARTERED INVESTMENT & LOANS LD HINDUSTAN OIL EXPLORATIO N COM. LTD.

FIPB

MUMBAI

MANUFACTURE OF INDUSTRIA GASES OTHER FINANCIAL SERVICES N.E.C. EXPLORATION ON DEVELOPMENT & PRODUCTION OF OIL AND NATURAL GAS INVESTMENT RESEARCH AND COUNSELLING ACTIVITIES.

597.30

139.49

454.39

102.90

9

RBI

REGION NOT INDICATED

376.58

82.65

10

J. P. MORGAN SECURITIES PVT. LTD.

RBI

J. P. MORGAN INTERNATIONA L FINANCE LTD. Grand Total

MUMBAI

324.00

76.91

13,277.5 9

3,057.8 8

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

Country: Netherlands
Sr. No. Name of Indian Company FDI Route Name of Foreign Collaborator RBI Regional Office Item of Manufacture Amount of FDI Inflows

(In Rs crore) 1 EMAAR MGF LAND PVT. LTD. NISSAN MOTOR INDIA PVT LTD DIGITAL GLOBAL SOFT LTD EMAAR MGF LAND P. LTD. RBI HORIZON INDIA B.V. NISSAN INTL HOLDING BV NEW DELHI CONSTRUCTION OF RESIDENTIAL BUILDINGS MANUFACTURE OF MOTOR CARS & OTHER MOTOR VEHICLES COMPUTER SOFTWARE DEVELOPING AND SUBDIVIDING REAL ESTATE INTO LOTS MANUFACTURER S AND DEALERS OF PULP PAPER BOARDS BREWERIES MANUFACTURE OF CEMENT IN THE FORM OF CLINKERS MANUFACTURE OF BEER BASIC METALS & ALLOYS INDUSTRIES MANUFACTURE OF MOTOR VEHICLES FOR THE TRANSPORT OF GOODS,MANUFA CTURE MOTOR VEHICLE 1,109.90

(In US$ million) 281.44

2

RBI

CHENNAI

1,025.80

230.98

3

FIPB

HEWLETT PACKARD LEIDEN B.V. HORIZON (I) BV

REGION NOT INDICATED NEW DELHI

950.52

206.64

4

RBI

682.05

150.01

5

6 7

BILT GRAPHIC PAPER PRODUCTS LTD. SAB MILLER INDIA LTD M/S MY HOME INDUSTRIES LTD. SKOL BREWERIES LTD. SESA GOA LTD. VOLKSWAG EN GROUP SALES INDIA PVT LTD

RBI

BALLAPUR PAPER HOLDING BV

REGION NOT INDICATED

637.94

148.57

FIPB RBI CRH INDIA INVESTMENTS BV SABMILLER ASIA B.V. STICHING PENSIONFON DS ABP VOLKSWAGO N AG

NEW DELHI HYDERABAD

597.36 517.36

129.86 120.77

8 9

RBI RBI

MUMBAI PANAJI

489.11 480.00

114.22 104.78

10

RBI

MUMBAI

418.17

91.78

Grand Total

6,908.21

1,579.05

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

Country: Japan
Sr. No. Name of Indian Company FDI Route Name of Foreign Collaborator RBI Regional Office Item of Manufacture Amount of FDI Inflows (In Rs crore) 1,440.83 (In US$ million) 341.85

1

ANCHOR ELECTRICALS PVT LTD KOTAK MAHINDRA BANK LTD

FIPB

MATSUSHITA ELECTRIC WORKS LTD SUMITO MITSUI BANKING CORPORATION

REGION NOT INDICATED MUMBAI

ELECTRICAL PRODUCTS. BANKING ACTIVITIES INCLUDING FINANCIAL SERVICES MFG CONSTRUCTION EQUIPMENT

2

RBI

1,366.12

303.47

3

TELCO CONSTRUCTI ON EQUIPMENT CO LTD MARUTI UDYOG LTD TATA TELESERVICE S TATA TELESERVICE S ANCHOR ELECTRICALS PVT. LTD. RENAULT NISSAN AUTOMOTIVE INDIA PVT LTD. ANCHOR ELECTRICALS PVT. LTD.

RBI

HITACHI CONSTRUCTIO N MACHINERY CO LTD SUZUKI MOTOR CO. LTD. NTT DOCOMO INC NTT DOCOMO INC PANASONIC ELECTRIC WORKS CO LTD. NISSAN MOTOR COMPANY LTD.

REGION NOT INDICATED

1,159.50

260.56

4 5

FIPB RBI

NEW DELHI REGION NOT INDICATED REGION NOT INDICATED REGION NOT INDICATED

NA TELECOMMUNIC ATION SERVICES TELECOMMUNIC ATION S SERVICES MANUFACTURIN G & MARKETING OF ELECTRICAL MANUFACTURE OF MOTOR CARS & OTHER MOTOR VEHICLES WHOLESALE TRADE IN ELECTRICAL MACHINERY AND EQUIPMENT NA

1,000.00 567.75

208.33 110.83

6

RBI

465.14

92.91

7

RBI

460.90

98.65

8

RBI

CHENNAI

450.00

99.65

9

RBI

MATSUSHITA ELECTRICAL

MUMBAI

425.67

104.28

10

ESCORT YAMAHA MOTOR LTD.

FIPB

YAMAHA MOTOR LTD Grand Total

NEW DELHI

400.00

88.89

7,735.91

1,709.42

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

Country: Cyprus
Sr. No. Name of Indian Company FDI Route Name of Foreign Collaborator RBI Regional Office Item of Manufacture Amount of FDI Inflows (In Rs (In US$ crore) million) 1,417.59 291.35

1

TATA CAPITAL LTD.

RBI

TRAVORTO HOLDINGS LTD.

MUMBAI

FINANCIAL LEASING COMPANIES ACTIVITIES STOCK EXCHANGE.

2

NATIONAL STOCK EXCHANGE OF INDIA LTD MAHINDRA & MAHINDRA LTD. MAHINDRA & MAHINDRA LTD. D.B. REALITY PVT LTD

FIPB

GA GLOBAL INVESTMENTS LTD GOLBOOT HOLDINGS LTD.

REGION NOT INDICATED

1,086.75

257.84

3

RBI

MUMBAI

MANUFACTURE OF MOTOR CARS & OTHER MOTOR VEHICLES MOTOR CARS & OTHER MOTOR VEHICLES PURCHASE,SALE, LETTING AND OPERATING OF REAL ESTATERESIDENTIAL AND NONRESIDENTIAL BUILDINGS OTHER MANUFACTURIN G INDUSTRIES CARGO HANDLING INCIDENTAL TO LAND TRANSPORT REAL ESTATE ACTIVITIES CONSTRUCTION

700.00

153.86

4

RBI

GOLBOOT HOLDINGS LTD. WALKINSON INVESTMENTS LTD

MUMBAI

700.00

142.86

5

RBI

MUMBAI

525.00

112.37

6

MAX INDIA LTD KARANJA TERMINAL & LOGISTICS PVT LTD SWETA ESTATES PVT LTD DYNAMIX BALWAS INFRASTRUC TURE PVT. LTD. ESSAR SHIPPING PORTS &LOGISTICS LTD.

FIPB

XENOK LTD

CHANDIGARH`

521.93

112.08

7

RBI

KARANJA TERMINAL & LOGISTICS CYPRUS LTD PROCTUSSA LTD GREET HAM INVESTMENTS LTD. ESSAR SHIPPING & LOGISTICS LTD. Grand Total

MUMBAI

465.12

102.46

8 9

RBI RBI

NEW DELHI MUMBAI

434.99 387.69

86.89 83.14

10

RBI

REGION NOT INDICATED

SHIPPING & LOGISTICS SERVICE PROVIDER

249.36

55.39

6,488.43

1,398.25

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

Country: Germany
Sr. No. Name of Indian Company FDI Route Name of Foreign Collaborator RBI Regional Office Item of Manufacture Amount of FDI Inflows (In Rs crore) 847.82 (In US$ million) 190.95

1

MICRO INKS LTD

FIPB

MHM HOLDING GMBH

REGION NOT INDICATED

MFG PRINTING INKS/ PKG INKD, RESINS, ENAMELS ADHESIVES MANUFACTURE OF POWER CAPACITORS INSURANCE CARRIERS, LIFE TRADING

2

3

APOLLO ENERGY P. LTD. BAJAJ ALLIANZE LIC LTD. METRO CASH & CARRY (I) P. LTD. BAJAJ ALLIANZE LIC LTD. INDIAN OIL TANKING LTD.

RBI

RBI

DKY INIL HEALTH HOLDING ALLIEANZ SE

NEW DELHI

736.72

151.80

MUMBAI

509.88

118.75

4

FIPB

METRO CASH & CARRY INTERNATIONA L GMBH ALLIAZ SE

BANGALORE

381.16

89.01

5

RBI

MUMBAI

INSURANCE CARRIERS, LIFE CONSTRUCTION AND MAINTENANCE NOT ELSEWHERE CLASSIFIED INTERNET SERVICES NA MANUFACTURE OF CHEMICAL PRODUCTS SECURITIES DEALING ACTIVITES

302.72

74.23

6

FIPB

OIL TANKING INDIA GMBH

MUMBAI

285.71

66.54

7 8 9

10

JOHN DEERE (I) P. LTD. SAINT GOBAIN GLASS INDIA LANXESS LTD INDIA PVT LTD BOMBAY STOCK EXCHANGE

RBI FIPB RBI

DEEREE AND CO.

MUMBAI CHENNAI

221.16 210.00 206.31

54.80 43.75 44.16

FIPB

LANXESS DEUTSCHLAND GMBH DEUTCH BOARSE A.G. Grand Total

MUMBAI

MUMBAI

200.78

49.24

3,902.26

883.23

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

Country: France
Sr. No. Name of Indian Company FDI Route Name of Foreign Collaborator RBI Regional Office Item of Manufacture Amount of FDI Inflows (In Rs crore) 1,466.00 (In US$ million) 324.65

1

BHARATHI CEMENT CORPORATIO N LTD. SREI INTERNATIO NAL FINANCE LTD . BHARATHI CEMENT CORP LTD LAFARAGE AGGREGATES & CONCE(I) P. LTD. ZUARI CEMENT LTD. BILAG INDUSTRIES PVT LTD LAFARGE INDIA HOLDING PVT. LTD. SCHNEIDER ELECTRIC INDIA PVT LTD

RBI

PARFICIM

HYDERABAD

MANUFACTURE OF CEMENT, LIME & PLASTER OTHER FINANCIAL SERVICES N.E.C. MFG OF CEMENT

2

RBI

BNP PARIBAS LEASING GROUP (BPLG) PARFICIM SAS

KOLKATA

775.00

183.98

3

RBI

REGION NOT INDICATED MUMBAI

499.72

106.69

4

RBI

FINANCIERE LAFARGE NA AVENTIS CROPSCIENCE SA NA

SERVICES NEC

380.00

77.55

5 6

RBI FIPB

CHENNAI REGION NOT INDICATED MUMBAI

NA NA

295.00 243.23

65.56 50.67

7

FIPB

NA

208.98

48.60

8

RBI

SCHNEIDER ELCTRIC INDUSTRIES SAS

NEW DELHI

MANUFACTURE OF MACHINERY AND EQUIPMENT OTHER THAN TRANSPORT EQUIPMENT SECURITIES DEALING ACTIVITIES MANUFACTURE OF MOTOR CARS

195.32

40.29

9

GEOJIT FINANCIAL SERVICES LTD. MAHINDRA RENAULT PVT. LTD.

RBI

BNP PARIBAS SA

KOCHI

183.86

38.49

10

RBI

RENAULT SAS

MUMBAI

174.90

37.97

Grand Total

4,422.00

974.44

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Country: UAE
Sr. No. Name of Indian Company FDI Route Name of Foreign Collaborator RBI Regional Office Item of Manufacture Amount of FDI Inflows (In Rs (In US$ crore) million) 1,181.80 243.98

1

ADANI POWER LTD.

RBI

VARIOUS NIRS

AHMEDABAD

GENERATION & TRANSMISSION OF ELECTRIC ENERGY DATA PROCESSING, SOFTWARE DEVELOPMENT & COMPUTER CONSULTANCY SERVICES. OTHER SERVICES INCIDENTAL TO TRANSPORT N.E.C. HOTELS, ROOMING HOUSES, CAMPS & OTHER LODGING PLACES. PURCHASE,SALE, LETTING AND OPERATING OF REAL ESTATE ALUMINIUM MANUFACTURIN G WHOLESALE TRADE NOT ELSEWHERE CLASSIFIED AIR TRANSPORT CARRIERS FINANCIAL SERVCIES, ASSET FINANCE & INFRASTRUCTUR E. VEDIO PARLOURS, ELECTRONIC GAMES

2

INDIA BULLS FINANCIAL SERVICES PVT LTD

RBI

CROWN CAPITAL LTD

NEW DELHI

302.33

67.41

3

4

IL & FS TRANSPORTA TION NETWORKS LTD. BHART HOTELS LTD.

RBI

VARIOUS INVESTORS

MUMBAI

232.59

49.66

RBI

DUBAI VENTURES LTD

NEW DELHI

164.00

38.93

5

DB REALITY PVT LTD

RBI

VARIOUS

MUMBAI

153.95

33.06

6

ANRAK ALUMINIUM LTD. CONVERGEM COMMUNICA TION (INDIA) LTD LTD SPICEJET INFRASTRUC TURE LEASING & FINANCIAL SEV. BALAJI TELEFILM LTD.

RBI

RAK INVESTMENT AUTHORITY AXIOM TELECOM LLC ISTITHMAI PISC ABU DHABI INVESTMENT AUTHORITY.

HYDERABAD

143.77

30.87

7

RBI

MUMBAI

140.00

34.98

8 9

RBI RBI

NEW DELHI REGION NOT INDICATED

137.76 126.01

32.68 28.23

10

RBI

ASIAN BROADCASTIN G FZ-LLC Grand Total

MUMBAI

123.25

29.26

2,705.46

589.06

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

T. CONCLUSION An analysis of the recent trends in FDI flows at the global level as well as across regions/countries suggests that India has generally attracted higher FDI flows in line with its robust domestic economic performance and gradual liberalisation of the FDI policy as part of the cautious capital account liberalisation process. Even during the recent global crisis, FDI inflows to India did not show as much moderation as was the case at the global level as well as in other EMEs. However, when the global FDI flows to EMEs recovered during 201011, FDI flows to India remained sluggish despite relatively better domestic economic performance ahead of global recovery. This has raised questions especially in the backdrop of the widening of the current account deficit beyond the sustainable level of about 3 per cent. In order to analyse the factors behind such moderation, an empirical exercise was undertaken which did suggest the role of institutional factors (Government‟s to implement quality policy regime) in causing the slowdown in FDI inflows to India despite robustness of macroeconomic variables. A panel exercise for 10 major EMEs showed that FDI is significantly influenced by openness, growth prospects, macroeconomic sustainability (International Investment Position), labour cost and policy environment. A comparison of actual FDI flows to India vis-à-vis the potential level worked out on the basis of underlying macroeconomic fundamentals showed that actual FDI which has generally tracked the potential level till 200910, fell short of its potential by about 25 per cent during 2010-11. Further, counter factual scenario attempted to segregate economic and non-economic factors seemed to suggest that this large divergence between actual and potential during 2010-11 was partly on account of rise in policy uncertainty . Apart from the role of institutional factors, as compared to other EMEs, there are also certain sectors including agriculture where FDI is not allowed, while the sectoral caps in some sectors such as insurance and media are relatively low compared to the global patterns. In this context, it may be noted that the caps and restrictions are based on domestic considerations and there is no uniform standards that fits all countries. However, as the economy integrates further with the global economy and domestic economic and political conditions permit, there may be a need to relook at the sectoral caps (especially in insurance) and restrictions on FDI flows (especially in multi-brand retail). Further, given the international experience, it is argued that FDI in retail would help in reaping the benefits of organised supply chains and reduction in wastage in terms of better prices to both farmers and consumers. The main apprehensions in India, however, are that FDI in retail would expose the domestic retailers – especially the small family managed outlets - to unfair competition and thereby eventually leading to large-scale exit of domestic retailers and hence significant job losses. A balanced and objective view needs to be taken in this regard. Another important sector is the generation, transmission and distribution of electricity produced in atomic power, where FDI is not permitted at present, may merit a revisit. In this context, it may be noted that electricity distribution services is a preferred sector for FDI. According to UNCTAD four out of top ten cross-border deals during 2009 were in this segment, which led to increase in FDI in this sector even in the face of decline in overall FDI. Similarly, the demands for raising the present FDI limits of 26 per cent in the insurance sector may be reviewed taking into account the changing demographic patterns as well as the role of insurance companies in supplying the required long term finance in the economy.

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

Against this backdrop, it is pertinent to highlight the number of measures announced by the Government of India on April 1, 2011 to further liberalise the FDI policy to promote FDI inflows to India. These measures, inter alia included (i) allowing issuance of equity shares against non-cash transactions such as import of capital goods under the approval route, (ii) removal of the condition of prior approval in case of existing joint ventures/technical collaborations in the „same field‟, (iii) providing the flexibility to companies to prescribe a conversion formula subject to FEMA/SEBI guidelines instead of specifying the price of convertible instruments upfront, (iv) simplifying the procedures for classification of companies into two categories – „companies owned or controlled by foreign investors‟ and „companies owned and controlled by Indian residents‟ and (v) allowing FDI in the development and production of seeds and planting material without the stipulation of „under controlled conditions‟. These measures are expected to boost India‟s image as a preferred investment destination and attract FDI inflows to India in the near future.

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

U. LIST OF INVESTMENT PROMOTION AGENCIES IN INDIA STATE-WISE Andaman & Nicobar(UT) Andaman & Nicobar Islands Integrated Development Corporation Ltd (ANIIDCO) Vikas Bhawan A & N Islands Port Blair - 744101 Tel: + 91 3192 232666 Fax: + 91 3192 235098 Website: http://www.aniidco.nic.in Email: aniidco@vsnl.com Andhra Pradesh Andhra Pradesh Industrial Development Corporation Limited Parishrama Bhavan, 5-9-58/B,Fateh Maidan Road Post Box No.1049 Hyderabad - 500 004 Tel: + 91 40 23235253-56 Fax: + 91 40 23235516, 23236756 Website: http://www.apidc.org Email: apidc@ap.gov.in Arunachal Pradesh Arunachal Pradesh Industrial Development and Financial Corporation Limited C Sector Near Petrol Pump Itanagar - 791 111 Tel: + 91 360 2212672, 2212673 Fax: + 91 360 2212672 Email: koyutony@yahoo.com Assam Assam Industrial Development Corporation Ltd RGB Road Guwahati - 781 024 Tel: + 91 361 22003999 Fax: + 91 361 2202017 Email: aidcltd@gw1.dot.net.in

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[FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]

Bihar Bihar State Credit and Investment Corporation Ltd (BICICO) 4th Floor, Indira Bhawan, Ram Charitra Singh Path P.B. No. 204 GPO Patna - 800 001 Tel: + 91 612 228552, 232277 Fax: + 91 612 234298 Website: http://www.bicico.com Email: bicico@vsnl.net Chandigarh(UT) Chandigarh Industrial and Tourism Development Corporation Ltd (CITCO) SCO 121-122 Sector 17-B, Chandigarh Tel: + 91 172 2704761, 2704356 Fax: + 91 172-2705288 Website: http://www.citco.nic.in Email: info@citcochandigarh.com Chhattisgarh Chhattisgarh State Industrial Development Corporation Ltd B-4, M.R Colony Sailendra Nagar Raipur Tel: + 91 771 2429024, 5055888 Fax: + 91 771 2429025 Website: http://www.csidcindia.com Email: csidc@csidcindia.com Dadra & Nagar Haveli(UT) Omnibus Industrial Development Corporation of Daman & Diu and Dadra & Nagar Haveli Ltd Paryatan Bhavan, Nani Daman - 396210 Tel: + 91 260 2250743, 2250421, 2250903 Fax: + 91 260 2250328 Website: http://www.oidc.nic.in/ Email: paryatan_ad1@sancharnet.in

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Daman & Diu(UT) Omnibus Industrial Development Corporation of Daman & Diu and Dadra & Nagar Haveli Ltd Paryatan Bhavan, Nani Daman - 396210 Tel: + 91 260 2250743, 2250421, 2250903 Fax: + 91 260 2250328 Website: http://www.oidc.nic.in/ Email: paryatan_ad1@sancharnet.in

Delhi Delhi State Industrial Development Corporation (DSIDC) N Block Bombay Life Building Connaught Circus Delhi 110 001 Tel: + 91 11 23312013 Fax: + 91 11 23315067 Website: http://www.dsidc.org Email: dsidc@nda.vsnl.net.in Goa Goa Industrial Development Corporation (GIDC) Patto, Next to Passport Office Panaji, Goa 403 001 Tel: + 91 832 2437470 to 73 Fax: + 91 832 2228012 Website: http://www.goaidc.com Email: goaidc@sancharnet.in Gujarat Gujarat Industrial Development Corporation (GIDC) Block # 4, 2nd Floor Udyog Bhavn, Sector 11 Gandhinagar - 382 017 Tel: + 91 79 23225811, 23225805, 23225816 Fax: + 91 79 23221191, 23225815 Website: http://www.gidc.gov.in Email: info@gidc.gov.in

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Haryana Haryana State Industrial Development Corporation (HSIDC) Plot No.13-14, Institutional Area, Sector 6 Panchkula-134109 Tel: + 91 172 2590481-83 Fax: + 91 172 2590474 Website: http://www.hsiidc.org/abouthsidc.htm Email: hsidc@chd.nic.in

Himachal Pradesh The Himachal Pradesh State Industrial Development Corporation (HPSIDC) New Himrus Building Circular Road Shimla-171001 Tel: + 91 177 2624751, 2624752, 2624754, 2625422 Fax: + 91 177 2624278 Website: http://hpsidc.nic.in/ Email: hpsidc@sancharnet.in Jammu & Kashmir J&K State Industrial Development Corporation Ltd (SIDCO) Srinagar SIDCO Office Drabu House, Ram Bagh, Srinagar, J&K - 190001 Jammu SIDCO Office Shere Kashmir Bhavan, Vir Marg, Jammu - 180001 Tel: + 91 194 430036 Fax: + 91 194 430036 Jharkhand Directorate of Industry Nepal House, 3rd Floor Doranda, Ranchi Tel: + 91 651 2491844 Fax: + 91 651 2491884 Email: doijharkhand@doijharkhand.net

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Karnataka Karnataka State Industrial Investment & Development Corporation Limited (KSIIDC) MSIL House No 36 Cunningham Road Bangalore - 560 052 Tel: + 91 80 2258131 Fax: + 91 80 2255740 Website: http://www.ksiidc.com Email: ksiidc@bir.vsnl.net.in

Kerala Kerala Industrial Infrastructure Development Corporation (KINFRA) TC 31/2312 , KINFRA House Sasthamangalam Trivandrum - 695 010 Tel: + 91 471 2726585 Fax: + 91 471 2724773 Website: http://www.kinfra.com Email: kinfra@vsnl.com Lakshadweep(UT) Department of Industries UT of Lakshadweep, Kavaratti - 682 555 Tel: + 91 4896 262325 Fax: + 91 4896 263132 Website: http://www.lakshadweep.nic.in/depts/industries/home.htm Email: lk-doi@hub.nic.in Madhya Pradesh Madhya Pradesh State Industrial Development Corporation Ltd (MPSIDC) AVN Towers, 192 Zone-1 M.P Nagar Bhopal - 462011 Tel: + 91 755 5270370/246/247 Fax: + 91 755 5270280, 5203106 Website: http://www.mpsidc.org Email: mpsidc@sancharnet.in

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Maharashtra Maharashtra Industrial Development Corporation Ltd (MIDC) Udyog Sarathi Mahakali Caves Road, Andheri (E), Mumbai - 400 093 Tel: + 91 22 26870052 / 54 / 73, 26870800 Fax: + 91 22 26871587 Website: http://www.midcindia.org/ Email: feedback@midcindia.org

Manipur Manipur Industrial Development Corporation Ltd Industrial Estate Takyelpat, P.B 46 Imphal - 795001 Tel: + 91 385 2223624, 2221967 Meghalaya Meghalaya Industrial Development Corporation Ltd "Kismat", Upland Road Laitumkhrah Shillong - 793 001 Tel: + 91 364 224965, 224763, 226941, 226893 Fax: + 91 91 364 224763 Website: http://www.meghalaya.nic.in/MIDC/midc.htm Email: midc@shillong.meg.nic.in Mizoram Zoram Industrial Development Corporation M.G Road Upper Khatla Aizawal 796001 Tel: + 91 389 2323217, 2326240 Email: zidco@sancharnet.in Nagaland Nagaland Industrial Development Corporation (NIDC) IDC House P.B No 5 Dimapur 797 112 Tel: + 91 3862 226473 Fax: + 91 3862 226473

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Orissa Orissa Industrial Infrastructure Development Corporation Ltd. IDCO Tower, Janpath Bhubaneswar - 751007 Tel: + 91 674 2540820, 2542784 Fax: + 91 2542956 Website: www.idcoindia.com/ Email: cmd@idcoindia.com

Pondicherry(UT) Pondicherry Industrial Promotion Development and Investment Corporation Ltd Post Box. No. 190 60, Romain Rolland Street Pondicherry - 605 001 Tel: + 91 413 2334606, 2335116, 2334361, 2336842 Fax: + 91 413 336842 Website: http://www.pipdic.com Email: md@pipdic.com Punjab The Punjab State Industrial Development Corporation Ltd Udyog Bhawan 18, Himalaya Marg Sector - 17 Chandigarh Tel:+ 91 172 2702881-84, 2702791 Fax:+ 91 172 2704145 Website: http://www.punjabgovt.nic.in/Industry/ind552.htm Email: psidc@sancharnet.net.in Rajasthan Rajasthan State Industrial Development & Investment Corporation Ltd Udyog Bhawan Tilak Marg Jaipur - 302005 Tel:+ 91 141 5113201, 2227751 Fax:+ 91 141 5104804 Website: http://www.riico.co.in Email: riico@riico.co.in

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Sikkim Sikkim Industrial Development & Investment Corporation Limited (SIDICO) Tashiling Secretariat Gangtok - 737103 Tel:+ 91 3592 202530 Fax:+ 91 3592 202851 Website: http://www.sikkiminfo.net/sidico/

Tamil Nadu Tamil Nadu Industrial Development Corporation Ltd (TIDCO) 19-A, Rukmani Lakshmipathy Salai Egmore Chennai - 600008 Tel:+ 91 44 28554421 Fax:+ 91 44 28553729 Website: http://www.tidco.com Email: cmdtidco@vsnl.com Tripura Tripura Industrial Development Corporation Ltd (TIDC) Gorkha basti Office Complex PO: Kunjaban Agartala - 799006 Tel:+ 91 381 220342 Website: http://www.tripura.nic.in/tidc/ Uttar Pradesh Uttar Pradesh State Industrial Development Corporation UPSIDC Complex, A-1/4 Lakhanpur Kanpur Tel:+ 91 512 2582851, 2582852, 2582853 Fax:+ 91-512-2580797 Website: http://www.upsidc.com Email: feedback@upsidc.com

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Uttarakhand State Infrastructure & Industrial Development Corporation of Uttarakhand Ltd. 2, New Cantt Road Dehradun 248001 Tel:+ 91 135 2743292/97, 2743838 Fax:+ 91 135 2743288 Website: http://usidcl.gov.in/ Email: sidcul@sidcul.com West Bengal West Bengal Industrial Development Corporation (WBIDC) 5, Council Street House Kolkata 700001 Tel:+ 91 33 22435343 Fax:+ 91 33 22483747 Website: http://www.wbidc.com Email: chairman@wbidc.com

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V. REFERENCES: http://fdiindia.in/ http://dipp.nic.in/English/Publications/FDI_Statistics/FDI_Statistics.aspx http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=8209&Mode=0 http://www.rbi.org.in/scripts/BS_ViewMasCirculardetails.aspx?id=8104 http://www.allbankingsolutions.com/Banking-Tutor/FDI-in-India.htm http://fdiindia.in/list-of-investment-promotion-agencies-in-india-state-wise.php http://www.rbi.org.in/scripts/BS_ViewMasterCirculardetails.aspx http://www.ibef.org/india-at-a-glance/foreign-direct-investment.aspx http://www.ijmrbs.com/ijmrbsadmin/upload/IJMRBS_515da52cd191a.pdf http://astrology.sify.com/astronews/foreign-investment-india-2013/ http://ftbsitessvr01.ft.com/forms/fDi/report2013/files/The_fDi_Report_2013.pdf http://accman.in/images/feb13/Dharwal%20M.pdf https://www.kpmg.com/IN/en/services/Tax/FlashNews/LiberalisationofForeignDirectInvestmentPolicy2013.pdf http://almtlegal.com/articles-pdf/Newsflash%20on%20FDI%20policy%202013.pdf

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