TAMIL NADU NATIONAL LAW UNIVERSITY

(A State University established by Act no.9 of 2012)

Navalur kuttapattu , Srirangam (TK),Tiruchirappalli – 620 009 , Tamil Nadu

The Growth ,Determinants and Need For FDI in India

SUBJECT – ECONOMICS-II- INDIAN ECONOMY
Submitted by:
Narayana.M
BA0180025
Course:-B.A., LL.B (HONS.)

Signature of the member:

Email ID: narayanam_ug18@tnnlu.ac.in

Submitted to:
Mr.Balachandran
Assistant Professor
Tamil Nadu National Law University
Tiruchirappalli – 620027
Marks awarded-
Project:
Presentation and Viva Voce:
Total:
 DECLERATION

I am NARAYANA M Pursuing B.A., LL.B (HONS.) 2nd YEAR, do hereby declare

that the project entitled “The Growth ,Determinants and Need For FDI in India”
submitted to Tamil Nadu National Law University (TNNLU),Trichy , in partial
fulfillment of requirement of award of degree in undergraduate in law is a record of
original work done by us under the guidance of Mr. Balachadran , Assistant Professor
of Law, TNNLU, and has not formed basis for award of any degree or diploma or
fellowship or any other title to any other candidate of any university.
 The Growth , Determinants and Need for FDI in India

Foreign direct investment (FDI) is considered to be the one of the resource which is
non-debt financial resource leads to economic development in India. Foreign
companies invest in India and takes the advantage of the low wages, has special
investment privileges such as tax exemptions, etc. In a country where foreign
investments are made in the country, it means that the country has achieved to know
technical to increase the employment. In India, government’s favourable policy
regime and robust business environment had made the foreign capital to keep flowing
in the country. The government has taken many initiatives in recent years such as
relaxing FDI norms across sectors such as defence, PSU oil refineries, telecom, power
exchanges, and stock exchanges, among others.
In India, there are various resolutions that determine FDI in India. First, "sector size"
refers to the fact that large sectors have large markets in the host country for their end
products, and are well-established suppliers of inputs and efficient labor. This creates
many external economies of scale (or industry size). These industries also include
sectors in which the host country has a comparative advantage. Of the various
characteristics of industry, the size of industry is a determining factor for FDI. The
second factor is the growth of the sector that is being invested in order to generate
future returns, so investors are always expected to invest in a sector where the
opportunity to trade is much better than other sectors. The emerging sector can offer a
better range and attract investors. FDI is more likely to develop the sector.
The third sector is "labor intensity", an essential feature of FDI, which implies that
FDI is expected to be directed toward relatively capital-intensive industries in order to
better exploit specific asset characteristics (eg, capital,). Fourth is to identify export
trends in developing countries for manufacturing exports as important and positive
determinants of FDI. Fifth: Import Density and Import Technique: Businesses with
high import densities are increasingly dependent on raw materials, warehouses,
capital goods and many other inputs. More import-intensive businesses are attracting
more foreign direct investment because foreign firms believe there is a better way to
import through global production and marketing networks. In many LDCs, businesses
that use advanced manufacturing techniques rely heavily on technology imports
because of the lack of high quality original import alternatives. Foreign direct
investment in these industries is expected to respond favorably to the monopoly
benefits of foreign companies with advanced technology. Sixth, the profitability of
high-yielding businesses that will sustain higher investment surpluses in the future
will give foreign companies the opportunity to send more money to their home
countries. FDI flows into more profitable industries.
The last factor is Advertising intensity is a common feature of businesses, where build
brand loyalty by enhancing the market great importance. Product Diversity by
innovations and their successful applications are typical attributes Multinational
corporations. To gain meaningful ownership benefits Foreign direct investment and
advertising play an important role. FDI in India is huge focus on advertising-intensive
industries.
With the help of these determinants the FDI in the India had led to growth which in
August 2019, Reliance Industries (RIL) announced one of India's largest foreign
direct investment deals, with Saudi Aramco acquiring a 20 per cent stake in Reliance
Oil to Chemicals (OTC) for US $ 75 billion.
In October 2018, VMware, America's leading software innovation company,
announced a $ 2 billion investment in India between 2023.In August 2018, Bharti
Airtel received approval from the Government of India to sell a 20 per cent stake in its
DTH arm to US private equity firm Warburg Pingas for about $ 350 million.
In June 2018, the Ministry of Communications (DOT) approved Idea's 100% FDI,
followed by Indian merger with Vodafone, making Vodafone Idea India's largest
telecom operator. In February 2018, IKEA announced plans to invest up to Rs 4,000
crore (US $ 612 million) in Maharashtra to build multi-storey shops and expert
centers. Kathmandu-based CG Group is set to launch a Rs. CG Corp Global CEO
Varun Chaudhry said the company expects to invest Rs 1,000 crore ($ 155.97 million)
in food and beverage.
The International Finance Corporation (IFC), the investment arm of the World Bank
Group, plans to invest about $ 6 billion in various sustainable and renewable energy
projects in India by 2022.
FDI equity flows into the administrations the division represented more than 60
percent of the absolute FDI value inflows into India. During 2018-19, FDI value
inflows into the administrations segment fell by US$696 million or1.3 percent from
the earlier year to about US$28.26 billion, which is in accordance with the little
decrease saw in by and large FDI inflows into India. This was driven by more fragile
FDI inflows into sub-areas, for example, telecom, consultancy administrations, air and
ocean transport,which balance the solid inflows saw in training, retail exchanging and
data &broadcasting
The government also took incentives for the development of FDI and they have done
In the Union Budget 2019-2020, the Government of India has proposed, in
consultation with all concerned parties, to open FDI in Aviation, Media (Animation,
AVGC) and Insurance.In February 2019, the Government of India released the draft
National E-Commerce Policy encouraging FDI in e-commerce market model. In
addition, it says that the FDI policy has been developed for the e-commerce sector to
ensure equal opportunities for all participants.
The Government of India plans to invest 100 per cent of FDI in insurance brokers in
India to raise the sector and raise more money.In December 2018, the Government of
India revised the FDI rules for electronic commerce. As a rule, 100 per cent FDI is
allowed in the market-based e-commerce model. In addition, the sales of a seller
through an e-commerce market unit or affiliate was defined as 25 percent of that
seller's total sales.
In September 2018, the Government of India released the National Digital
Communications Policy 2018, which aims to increase foreign direct investment in the
telecommunications industry by $ 100 billion by 2022.
In January 2018, the Indian government allowed foreign airlines to invest up to 49 per
cent in Air India with government approval. Investment should not directly or
indirectly exceed 49 percent.Up to 100 per cent of real estate brokerage services do
not require regulatory approval of FDI.In September 2017, the Indian government
called on the states to focus on strengthening the single-board removal mechanism for
faster approval procedures to boost Japanese investment in India.
The Ministry of Commerce and Industry of India has simplified the process of
approving ATI schemes by canceling the approval of the Ministry of Finance within
10 weeks of receipt of the application.
The Government of India talks with stakeholders for further ease FDI in defence
under the automatic route to 51 per cent from the current 49 per cent which in
discussions with the Government of India to further promote direct investment in
security, accelerate the Made in India initiative and create jobs.
In January 2018, the Government of India allowed 100 per cent FDI in retail sales of
individual brands through automated routing. These are the recent development
happened FDI in India. But why do we need FDI in India?

Since India is a developing nation, capital is one of the rare assets typically required
for monetary development. Capital is rare and there are numerous issues, for example,
well being, destitution, work, training, innovative work, specialized outdated nature
and worldwide challenge. The inflow of Foreign direct investment to India from
around the globe will help raise assets for less expensive costs, better innovation,
work creation and upgraded innovation move, which will expand the open door for
more prominent exchange, mergers and overflows with local firms, the accompanying
contentions represent remote capital

As all undeveloped and developing nations look for industrialization and development,
it is important to expand the degree of speculation essentially. As neediness and GDP
are low, investment funds are low. In this way, the hole among salary and reserve
funds must be shut by FDI.

Circumstance In the Indian setting, we need remote specialized help to give master
administrations, train Indian workers and give proficient, instructive, research and
preparing organizations. It comes just through private influence or remote
participation. India has numerous regular assets like coal, iron and steel, however
mine assets require outside collaboration.

In developing nations, the danger of putting resources into new activities or

industrialization undertakings is high since capital is a rare asset. Consequently,
remote capital aides in these ventures which require greater speculation.

As of late, outside monetary establishments and administrations of cutting edge

nations have given considerable cash-flow to undeveloped nations. Foreign direct
investment will add to foundation advancement by making various pieces of the
nation

India is the one of most developing business sector for Global Partner (GP) interests
in the following a year, as per an ongoing business sector fascination study led by the
Private Equity Association (EMPEA) of the developing business sector in the
following a year.

As indicated by a report by UBS, the nation's yearly FDI is relied upon to ascend to
$ 75 billion throughout the following five years.

The Government of India expects to raise $ 100 billion of FDI in the following two
years.

India's private interest in FY 2018-19 is required to develop by 8.8 percent over

private utilization development of 7.4 percent, in this way advancing India's Gross
Domestic Product (GDP) development for the money related year 2018-19