Dr.

SHAKUNTALA MISRA NATIONAL REHABILITATIOUNIVERSITY

Lucknow

Faculty of Law

RESEARCH PROJECT ON

[FDI IN INDIA]

For

COURSE ON ‘BUSINESS ENVIRONMENT: REGULATORY FRAMEWORKAND

IT’s CHALLENGES’

CLASS: B.Com., LL. B (Hons.) 9th Semester

Submitted by

[Santosh Lakhmani]

[37]

Academic Session: 2020-21

Under the Supervision of

Ms. Sushmita Rajput

Prof. in Law
Faculty of Law
Dr. Shakuntala Misra National Rehabilitation University

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 ACKNOWLEDGEMENT

I would like to express my special thanks of gratitude to my teacher Ms. Sushmita

Rajput who gave me the golden opportunity to do this wonderful project on the
topic FDI in INDIA, which also helped me in doing a lot of Research and I came to
know about so many new things I am really thankful to them.
Secondly, I would also like to thank my parents and friends who helped me a lot in
finalizing this project within the limited time frame.

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 INDEX
S.NO TOPIC PAGE.NO REMARK
1. WHAT IS FDI? 4
2. FDI IN INDIA 4-5
3. FDI PROHIBITION 6
4. FDI INFLOW 6
5. MARKET SIZE & GOVERNMENT 7
INITIATIVES
6. FDI UPDATES 8
7. CONCLUSION 9
8. BIBLIOGRAPHY 10

WHAT IS FOREIGN DIRECT INVESTMENT (FDI)

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 Foreign direct investment (FDI) is when a company takes controlling ownership in a
business entity in another country. With FDI, foreign companies are directly
involved with day-to-day operations in the other country. This means they aren’t
just bringing money with them, but also knowledge, skills and technology.

 
Generally, FDI takes place when an investor establishes foreign business operations
or acquires foreign business assets, including establishing ownership or controlling
interest in a foreign company.  
 
Where is FDI made?
 
Foreign Direct Investments are commonly made in open economies that have skilled
workforce and growth prospect. FDIs not only bring money with them but also
skills, technology and knowledge.
 
FDI in India
 
FDI is an important monetary source for India's economic development. Economic
liberalisation started in India in the wake of the 1991 crisis and since then, FDI has
steadily increased in the country. India, today is a part of top 100-club on Ease of
Doing Business (EoDB) and globally ranks number 1 in the greenfield FDI ranking.
 
ROUTES THROUGH WHICH INDIA GETS FDI
 
Automatic route: The non-resident or Indian company does not require prior nod of
the RBI or government of India for FDI.
 
Sectors which come under the ' 100% Automatic Route' category are
 
Agriculture & Animal Husbandry, Air-Transport Services (non-scheduled and other
services under civil aviation sector), Airports (Greenfield + Brownfield), Asset
Reconstruction Companies, Auto-components, Automobiles, Biotechnology
(Greenfield), Broadcast Content Services (Up-linking & down-linking of TV
channels, Broadcasting Carriage Services, Capital Goods, Cash & Carry Wholesale
Trading (including sourcing from MSEs), Chemicals, Coal & Lignite, Construction
Development, Construction of Hospitals, Credit Information Companies, Duty Free
Shops, E-commerce Activities, Electronic Systems, Food Processing, Gems &
Jewellery, Healthcare, Industrial Parks, IT & BPM, Leather, Manufacturing, Mining
& Exploration of metals & non-metal ores, Other Financial Services, Services under
Civil Aviation Services such as Maintenance & Repair Organizations, Petroleum &
Natural gas, Pharmaceuticals, Plantation sector, Ports & Shipping, Railway
Infrastructure, Renewable Energy, Roads & Highways, Single Brand Retail Trading,

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Textiles & Garments, Thermal Power, Tourism & Hospitality and White Label ATM
Operations.
 
Sectors which come under up to 100% Automatic Route' category are
 

 Infrastructure Company in the Securities Market: 49%

 Insurance: up to 49%
 Medical Devices: up to 100%
 Pension: 49%
 Petroleum Refining (By PSUs): 49%
 Power Exchanges: 49%

 
Government route

Govt route: The government's approval is mandatory. The company will have to file
an application through Foreign Investment Facilitation Portal, which facilitates
single-window clearance. The application is then forwarded to the respective
ministry, which will approve/reject the application in consultation with the
Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of
Commerce. DPIIT will issue the Standard Operating Procedure (SOP) for processing
of applications under the existing FDI policy.
 
Sectors which come under the 'up to 100% Government Route' category are
 

 Banking & Public sector: 20%

 Broadcasting Content Services: 49%
 Core Investment Company: 100%
 Food Products Retail Trading: 100%
 Mining & Minerals separations of titanium bearing minerals and ores: 100%
 Multi-Brand Retail Trading: 51%
 Print Media (publications/ printing of scientific and technical magazines/
specialty journals/ periodicals and facsimile edition of foreign newspapers):
100%
 Print Media (publishing of newspaper, periodicals and Indian editions of
foreign magazines dealing with news & current affairs): 26%
 Satellite (Establishment and operations): 100%

 
FDI PROHIBITION
 

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There are a few industries where FDI is strictly prohibited under any route. These
industries are
 

 Atomic Energy Generation

 Any Gambling or Betting businesses
 Lotteries (online, private, government, etc)
 Investment in Chit Funds
 Nidhi Company
 Agricultural or Plantation Activities (although there are many exceptions like
horticulture, fisheries, tea plantations, Pisciculture, animal husbandry, etc)
 Housing and Real Estate (except townships, commercial projects, etc)
 Trading in TDR’s
 Cigars, Cigarettes, or any related tobacco industry

 
FDI INFLOW
 
During the fiscal ended March 2019, India received the highest-ever FDI inflow of
$64.37 billion. The FDI inflows were $45.14 billion during 2014-15 and $55.55 billion
in the following year.

MARKET SIZE

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According to Department for Promotion of Industry and Internal Trade (DPIIT), FDI
equity inflow in India stood at US$ 500.12 billion between April 2000 and September
2020, indicating that Government's effort to improve ease of doing business and
relaxing FDI norms has yield results.
FDI equity inflows in India stood at US$ 30.0 billion in 2020-21 (between April 2020
and September 2020). Data for 2020-21 indicates that computer software and
hardware sector attracted the highest FDI equity inflows of US$ 17.55 billion,
followed by the service sector at US$ 2.25 billion, trading at US$ 949 million and
chemicals (other than fertilisers) at US$ 437 million.
In 2020-21 (between April 2020 and September 2020), India received the maximum
FDI equity inflows from Singapore (US$ 8.30 billion), followed by the US (US$ 7.12
billion), Cayman Islands (US$ 2.10 billion), Mauritius (US$ 2.0 billion), the
Netherlands (US$ 1.49 billion) and the UK (US$ 1.35 billion).
In 2020-21 (between April 2020 and September 2020), Gujarat received the maximum
FDI equity inflows of US$ 16.0 billion, followed by Maharashtra at US$ 3.61 billion,
Karnataka at US$ 3.66 billion and Delhi at US$ 2.66 billion.

GOVERNMENT INITIATIVES

In December 2020, the government of Uttar Pradesh agreed to provide Samsung

Display Noida Private Limited with special incentives to set up a mobile and IT
display product manufacturing unit. Under the Central Government's scheme for
promotion of manufacturing electronic components and semiconductors (SPECS),
Samsung will also receive a financial incentive of Rs. 460 crore (US$ 62.61 million).
This project will develop a global export hub in Uttar Pradesh and will help the state
attract more foreign direct investments (FDI).
In December 2020, changes in the guidelines for the provision of Direct-to-Home
(DTH) services have been approved by the Union Cabinet, enabling 100% FDI in the
DTH broadcasting services market.
In October 2020, 16 qualifying applicants under the PLI scheme were approved by
the Ministry of Electronics and Information Technology (MeitY). For five years,
subsequent to the base year (FY2019-20), the PLI for large-scale electronics
production will extend an incentive of 4-6% on the incremental sales of products
manufactured in India to the qualifying firms. Samsung, Foxconn, Rising Star,
Wistron and Pegatron are the foreign mobile phone manufacturing companies that
have been approved in the mobile phone market.

FDI UPDATES
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  India's foreign direct investment inflows grew by 81 percent in November
2020 to $10 billion

India has attracted total FDI inflow of $58.37 billion during April to November 2020.
It is the highest ever for the first eight months of a financial year (F.Y.) and 22%
higher as compared to the first eight months of 2019-20 ($47.67 billion)

 India considers easing rules to attract FDI in construction sector

A proposal to allow limited liability partnerships to invest in the construction of

townships, roads, hotels and hospitals is under discussion, the people said, asking
not to be identified citing rules. A plan to allow 100% foreign direct investment in
animation, visual effects, gaming and comics sector may also find mention in the
government’s budget to be presented Feb. 1, one of the people said

 FDI into India rose 13% in 2020 while global inflows sunk to lows seen in ‘90s

As per official data, FDI equity inflows into India grew 21% to $35.33 billion in the
April-October period of fiscal 2021 from $29.31 billion a year earlier. China was the
world’s largest FDI recipient, with flows to the Asian giant rising by 4% to $163
billion, according to UNCTAD.

 India planning tighter FDI rules for e-commerce sector

FDI Rules for E-Commerce: DPIIT may issue a clarification through a Press Note,
expressly prohibiting e-commerce platforms — such as Amazon India and Walmart-
Flipkart — from holding stake in a seller, directly or indirectly.

 Government planning tighter FDI rules for ecommerce sector

The Department for Promotion of Industry and Internal Trade (DPIIT) may issue a
clarification through a Press Note, expressly prohibiting e-commerce platforms from
holding stake in a seller, directly or indirectly.

CONCLUSION
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Summarizes the main findings from the research presenting details on the
determinants of linkages and spillovers in different value chain, country, and
development contexts. Spillovers from foreign direct investment (FDI) in the short
term are not necessarily positive in developing countries, due in part to competition
over scarce skilled labor, yet over time, FDI can lead to a beneficial restructuring of
the entire industry, including opportunities for better-performing local participants
and suppliers. In most developing countries, foreign investors offer the most
valuable potential source of knowledge and technology to build local capabilities,
but the willingness and capacity of foreign-owned firms to support spillovers varies
hugely across sectors and firms, and is shaped by the dynamics of the global value
chains in which they operate. The scale of linkages between FDI and the local
economy—particularly through supply chains—is clearly the starting point; from
this base comes the incentive for assistance through which knowledge and
technology can be transferred.

BIBLIOGRAPHY

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The content has been taken from: -

WEB

 The Economic Times e-paper

 The Times of India e-paper

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