The Indian Institute of Planning And Management.

Satbari, New-Delhi

A REPORT ON FOREIGN DIRECT INVESTMENT IN INDIA

Submitted to Prof.Vaid Section-P1 Session- FW 2007-09

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The Indian Institute of Planning And Management. Satbari, New-Delhi

Submitted by:
S.NO: 1 2 3 4 5 6 7 8 9 10 NAME: TARUN BHANDARI POOJA AHUJA YOGESH SHARMA SAHIL RAVISH NIKHIL NAGAR SHEEBA AGA KHAN ASHISH BHAMBANI PRIYANKA KAKRAN NEHA MAHAJAN SANDEEP VERMA ROLL.NO : 71 39 74 54 38 60 13 43 37 56 TOPIC INTRODUCTION PRE LIBERALIZATION POST LIBERALIZATION AND CURRENT SENARIO FDI IN TELECOM SECTOR FDI IN IT SECTOR FDI IN AGRICULTURE FDI IN AVIATION SECTOR FDI IN RETAIL SECTOR COMPARISION BETWEEN INDIA AND CHINA FUTURE SCOPE OF FDI IN INDIA SIGN:

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lower ownership shares are known as portfolio investment. no longer the exclusive preserve of OECD countries.The Indian Institute of Planning And Management. The FDI relationship consists of a parent enterprise and a foreign affiliate which together form a Multinational corporation (MNC).Tarun Bhandari (71) In the years after the Second World War global FDI was dominated by the United States. The FDI relationship consists of a parent enterprise and a foreign affiliate which together form a Multinational corporation (MNC). Since that time FDI has spread to become a truly global phenomenon. as much of the world recovered from the destruction brought by the conflict. Its definition can be extended to include investments made to acquire lasting interest in enterprises operating outside of the economy of the investor. Satbari. lower ownership shares are known as portfolio investment. The US accounted for around three-quarters of new FDI (including reinvested profits) between 1945 and 1960. Foreign direct investment (FDI) in its classic definition is defined as a company from one country making a physical investment into building a factory in another country. The IMF defines control in this case as owning 10% or more of the ordinary shares or voting power of an incorporated firm or its equivalent for an unincorporated firm. 3 . New-Delhi INTRODUCTION. FDI has grown in importance in the global economy with FDI stocks now constituting 28 percent of global GDP. In order to qualify as FDI the investment must afford the parent enterprise control over its foreign affiliate. The IMF defines control in this case as owning 10% or more of the ordinary shares or voting power of an incorporated firm or its equivalent for an unincorporated firm. In order to qualify as FDI the investment must afford the parent enterprise control over its foreign affiliate. Its definition can be extended to include investments made to acquire lasting interest in enterprises operating outside of the economy of the investor. Foreign direct investment (FDI) in its classic definition is defined as a company from one country making a physical investment into building a factory in another country.

Satbari.688 1.226 Source: UNCTAD list 2007. the level of accumulated FDI in a country.049 1.110 76. New-Delhi List of countries of the world sorted by received foreign direct investment (FDI) stock. RANK 1 2 3 4 5 35 COUNTRY UNITED STATES UNITED KINGDOM HONG KONG FRANCE BELGIUM INIDA FDI(millions of USD) 2.093.026. 4 .The Indian Institute of Planning And Management.471 1. The US dollar estimates presented here are calculated at market or government official exchange rates.184.081 748.347.

as a result we throw out COCA COLA first foreign company who believed in us and our economy. For the first four decades after achieving independence from British colonial rule.The Indian Institute of Planning And Management. control and regulation. Satbari. New-Delhi Foreign Direct Investment before LiberalizationPooja Ahuja (39) In year 1947 i.e. after Independence India lost its status of golden sparrow because massive control of British people over us. There were periodic attempts at market 5 . As a result a negative wave grow against India leading to all big players pulling back to enter into Indian market pushing Indian economy on the back foot. the economic polices of the Indian government were characterized by planning. But it was us who didn’t have confidence in than. We were restricted rather afraid of welcoming any foreign player into our economy.

which remained small. A few years later. domestic firms were allowed to enter into technology licensing arrangements. Foreign Direct Investment in India 127 The big opening up came in 1991. which induced policy responses that combined exchange rate depreciation and an easing of restrictions on foreign capital inflows. following a serious balance of payments crisis and a large loan from the International Monetary Fund. Many companies did comply. But. there was a general sense of discomfort with a foreign presence in industry. New-Delhi oriented reform. following yet another external crisis. there were foreign shareholdings in many companies. like the computer industry. 6 . During the early 1980s. were asked to shut down their Indian operations. which often involved an equity stake as well. partly as a result of their pre-independence origins. This chapter first outlines the reform progress and the evolving pattern of FDI over the past decade. Moreover. This time. particularly in “non-essential” sectors like consumer goods. involving both financial and Technical relationships between Indian and Japanese manufacturers.The Indian Institute of Planning And Management. the Indian government relaxed its foreign investment policy. usually following balance of payments pressures. This culminated in a series of major policy decisions in the late 1970s that forced companies to restrict their foreign shareholdings to a maximum of 40 per cent. However. were also provided a more liberal trade and investment environment. This engendered a number of joint ventures in the automotive industry. Nevertheless. One of the key components of this new policy was a significant widening of the range of activities in which foreign firms could enter as well as an easing of the conditions under which they came in. in sectors upon which the government placed high priority. the ventures were followed by a series of arrangements between Component manufacturrs in the two countries. Here again. Other key sectors. Japanese two-wheeler manufacturers entered the domestic market. Satbari. We go on to report the key results from our FDI survey. Coca Cola and IBM. the government went much further than before in introducing a series of both domestic and external reforms that fundamentally changed the business environment. but two prominent ones who did not. the latter were relatively narrow in scope and had little impact on actual inflows. again through joint ventures with major Indian producers.

Satbari. rather than protection as the desired policy environment. New-Delhi Foreign Direct Investment post 1991 YOGESH SHARMA-(74) The new industrial policy announced in 1991 led to de-licensing of industry. 7 .The Indian Institute of Planning And Management. only five sectors remained under the ambit of industrial licensing. Within a few years. competition. The earlier requirement of approvals and licenses for any investments and expansions were abolished for all except 18 industries.

apparels. pharmaceuticals. chemicals. New-Delhi Current Scenario FDI Inflows As the fourth-largest economy in the world in PPP terms.The Indian Institute of Planning And Management. 8 . India is a preferred destination for foreign direct investments (FDI). Despite a surge in foreign investments. and jewellery. rigid FDI policies resulted in a significant hindrance. Satbari. India has strengths in information technology and other significant areas such as auto components.

FDI is allowed in financial services. Up to 45% of the shares of companies in the global mobile personal communication by satellite services (GMPCSS) sector can also be purchased. These services include the non-banking financial services sector. This was more than double the total of US$7. according to the government's Secretariat for Industrial Assistance. including the growing credit card business. Satbari. A critical factor in determining India's continued economic growth and realizing the potential to be an economic superpower is going to depend on how the government can create incentives for FDI flow across a large number of sectors in India.5bn in fiscal year 2006/07 (April-March). The FDI inflow for 2007-08 has been reported as $24bn and for 2008-09. New-Delhi Currently. FDI inflows into India reached a record US$19. although there is condition that stipulates that these banks must be multilateral financial organizations.The Indian Institute of Planning And Management. FDI outflows 9 . Foreign investors can buy up to 40% of the equity in private banks.8bn in the previous fiscal year. it is expected to be above $35 billion.

Taiwan. India held the 7th rank among developing countries for its investments in foreign countries (behind Hong Kong.4% of the Gross Fixed Capital Formation: it was less that the average in developing countries (4. But it is still a mere USD 4 billion per year. Singapore. CONCLUDING COMMENTS India has come a long way since 1991 in so far as quantum of FDI inflow is concerned. South Korea. FDI inflow in 2002 was just 3. 2003. Satbari. and 2004 represented two thirds of Indian stocks of FDI at the end of 2004. but more than the ratio prevailing in a country such as China (0. and seems to have stagnated at that level. Brazil.2%). In 2004. It is particularly interesting to put in parallel the evolution of Indian FDI inflows and outflows.The Indian Institute of Planning And Management. Indian FDI outflows amounted to 1. New-Delhi Indian FDI outflows issued in 2002. The popular wisdom is that MNCs are discouraged from 10 . and Mexico). In 2004.2 per cent higher than FDI inflows in 2001.2%).

there has been very little discussion about two important issues. Indeed. However. Satbari. Transfer of technology and know-how. on the other hand. an important pre-condition for growth in FDI inflow. During the decade of the nineties. Foreign Direct Investment in Telecom Sahil Ravish (54) The liberalization measures post-1990 have changed with foreign investments radically. is at least as likely to have an impact on India’s future growth as the quantum of FDI inflow. now portfolio as well as Foreign Direct Investment are not only allowed but also actively encouraged. and the extent of spillovers in the form of transfer of technology and know-how. the experience of MNCs that have invested in India and the relationship between their performance and experience with the operating environment. the importance of such spillovers can be paramount. namely. to date. New-Delhi investing in India by bureaucratic hurdles and uncertainty about the sincerity of the government(s) about economic reforms.The Indian Institute of Planning And Management. the 11 . to the extent that India’s future growth will depend on the global competitiveness of its firms. for obvious reasons. The importance of the former is that the satisfaction of expectations of the MNCs that are already operational within India is.

public mobile. as it requires investments of Rs 700 –900 million over the next 5 years. Satbari. FDI can enter India through two possible channels: * The automatic route under which companies receiving Foreign Direct Investment need to inform the Reserve Bank of India within 30 days of receipt of funds and issuance of shares to the foreign investor * For sectors that are not covered under the automatic route. This move is positive for the sector. In India where 70% of population still resides in rural areas. Korea. prior approval is needed from the Foreign Investment Promotion Board (FIPB). Also. 100 per cent Foreign Direct Investment is allowed in almost all the infrastructure sectors. which FDI can provide. Foreign currency flowing in the country Harmonious relationship with country from which foreign investment is being made There will be increase in competition with local players. The foreign direct investment in telecom has been hiked up from 49% to 74%.The Indian Institute of Planning And Management. Their is restrictions related to remote access. DOT will have the authority to restrict the license company from operating in any of the sensitive areas of the country. affordable to many 12 . New-Delhi 'ceilings' on FDI in different sectors were progressively raised. FDI inflow by 2004 was 9950. cellular unified access services. which will benefit consumers It will have a multiplier effect Telecommunication facility at reasonable price. there is a dire need of infrastructure in telecom. long distance Vast. market access. transfer of network information outside India and international transit routing of Indian traffic. and Japan telecom are likely to enter India. as India is seen as fastest growing telecom market in world. It has been decided to enchance the FDI in telecom services in areas like basic telecom. Nat /intranet.94 cores in telecom. Effect of FDI in telecom • • • • • • • • Telecom service at Subsidized prices FDI inflows will allow multiple benefits such as technology transfer. radio service & gmdcs. 100 per cent foreign investments were allowed in several industrial sectors. In 2001. Countries like Europe. and organizational skills.

it still has to appoint the chairman. 13 . managing director and CEO "in consultation with serious Indian investors". he will not be able do it so India will be seen as a black hole for foreign BPO. clouding. Nokia and Ericsson outlining ambitious expansion plans for India. majority of directors and board members including. New-Delhi More technological inflow. MD and CEO will be resident of India.• • The Indian Institute of Planning And Management. telecom firms "must provide traceable identity of their subscribers. will improve voice & data quality Free flow of capital is good for Indian consumer Doubts in the new FDI regulation • • • • • According to the policy. Foreign Direct Investment in IT- Nikhil Nagar (38) With companies such as Intel. It also says that network cannot be managed from overseas & the ironical part is that India is fighting tooth and nil to win Contract to maintain global network out of India No wonder it has been one year since the announcement of an increase in FDI limits in telecom from 49% to 74% has been made. Satbari. the FDI commitment in the telecom and IT sectors combined have touched Rs 80.why even bother to invest in India if someone else decides who's going to run the firm? At a time when the country's police/investigative arms find it impossible to trace people at times. foreign firm owns 74 per cent of the Indian telecom. Microsoft. and there are still no taker.000 crore over the last 20 months. Cisco.” The policy says "No accounting information will be send outside India" imagine a foreign investor wants to check the usage pattern. chairman. and a serious Indian investor is defined as someone who owns at least 10 per cent of the firm's equity .

17 have already infused capital. and Lenities. He said that hardware sector growth has kept pace with the growth in the software sector. and System applications and products and the units are currently operational.The Indian Institute of Planning And Management. Intel’s $1. 14 . Software major Microsoft’s $1. Microsoft’s $1. and Productivity. Last year. New-Delhi As per the data compiled by the ministry of communications and IT. The consumption of electronics equipment in the country is also expected to rise. With India becoming an attractive destination for IT and telecom. totaling over $1bn. Six of these companies have committed over $1bn each towards their India operations. services and customersupport and also funding the new service delivery centers in Bangalore and a telecom research facility in New Delhi. and SAP Lab’s $1bn investment. Satbari. EMC. The government said Foreign Direct Investment in IT and telecom sector is expected to go up by more than 100 per cent in 2006. Chip giant Intel’s announcement of multi-year investment for India. Nokia. Semidries’ $3bn proposed investment.7bn investment covers R&D. Governance. Elicited. LG. the investment committed span both manufacturing as well as research and development activities. the global IT and telecom giants announced investment of eight billion dollars in the country over a period of three to five years. and is spread over a period of four years. and $250m towards Intel Capital Fund for investment in Indian technology companies. the investment has been channelized towards R&D Centre for development of software and software solutions. Cisco’s investment — spread across its next generation network (NGN) Lab at Chennai and e-Governance networking projects — is currently under implementation. while Semidries’ ambitious proposal entailing a public-private partnership for advanced semiconductor manufacturing with technology from AMD is yet to take off in the absence of the Government’s semiconductor policy which is now being finalized. IBM’s $6bn.7bn. In the case of SAP Labs India. Alcatel. against 28 companies that outlined their investment plans. IBM’s investment plans include expansion of software. Companies whose units are already operational include Ericsson. The growing semiconductor market indicates the need to concentrate on this sector. This include Cisco’s commitment of $1. Education.25bn. includes $800m over the next five years towards business expansion.1bn.

India has a share of 25% of R&D locations among the developing countries. computer related offences and regulation of cyber cafes. FDI unto 100% is allowed under the automatic route in the IT sector and IT-enabled services.4206. New-Delhi He said the government would strive to promote electronics and hardware manufacturing sector too.68 crore in 2005. Satbari. It also generates additional employment opportunities. apart from bringing in capital. the Act is being amended. Due to recent developments. Foreign Direct Investment in AGRICULTURESHEEBA AGA KHAN (60) The present policy for FDI in Agriculture and Plantation sector is as under: 15 .The Indian Institute of Planning And Management. brings in state-of-the-art technology. FDI. The survey ranks India as the sixth global destination for R&D off shoring. Software exports have also increased in the IT sector in the last 3 years.543. Foreign Direct Investment (FDI) into India’s information technology (IT) sector have shown a record increase of over 700% in the last three years. No new FDI guidelines have been framed for the IT sector. The extant guidelines were issued in 2000. thereby enhancing competitiveness of the domestic industry in the international market. As per the UNCTAD survey 2004 contained in the UNCTAD’s World Investment Report 2005. liabilities of network service providers. having gone up from Rs. good management practices and improved skills to our employees. particularly with respect to provisions related to data protection and privacy in the context of BPO operations.66 crore in 2003 to Rs.

550123 crore) as against US$ 94664 million (Rs.68721 crore. 2007. India’s imports during August.The Indian Institute of Planning And Management. 2008 were valued at US $ 16005 million which was 26.2 per cent over the level of imports valued at US $ 19805 million in August. India’s exports during August. 2008 were valued at US$ 45967 million which was 59. Floriculture. New-Delhi i. 2008 were estimated at US $ 18985 million which was 39. which was 33. Pisciculture. imports increased by 59 per cent. FDI up to 100% with prior Government approval is permitted in Tea plantation subject to the conditions of divestment of 26% equity of the company in favour of an Indian partner/ Indian public within a period of five years. Horticulture. FDI up to 100% is permitted under the automatic route only in the under-mentioned activities viz.6 per cent higher than the oil imports of US$ 28798 million in the corresponding period last year. Aqua-culture and Cultivation of Vegetables & Mushrooms. Cumulative value of exports for the period April. 2008 was US$ 130364 million (Rs. Non-oil imports during August. 2007.246180 crore) registering a growth of 35. Animal Husbandry. In Rupee terms. 2008 were valued at US $ 29946 million representing an increase of 51. exports touched Rs. Satbari.387791 crore) registering a growth of 37. 2008 were valued at US $ 10962 million which was 76.5 per cent higher than the value of exports during August. Besides the above two.7 per cent higher than oil imports valued at US $ 6202 million in the corresponding period last year. In rupee terms. 2008 was US$ 81225 million (Rs.1 per cent in Dollar terms and 39.9 per cent in Rupee terms over the same period last year.1 per cent in Rupee terms over the same period last year. Oil imports during April.August.342477 crore) as against US$ 60101 million (Rs. FDI is not allowed in any other agricultural sector/activity. Cumulative value of imports for the period April. Development of Seeds.August. and prior approval of the State Government concerned in case of any future land use change. Oil imports during August. 2007.9 per cent higher than the level of US $ 12614 million during August.August. under controlled conditions and services related to agro and allied sectors ii.6 per cent higher than non-oil imports of US$ 13603 million in 16 .7 per cent in Dollar terms and 41. iii.

2008 were valued at US$ 84397 million which was 28. 2008 was estimated at US $ 49139 million which was higher than the deficit at US $ 34543 million during April. New-Delhi August.August.August. 2007.August.2 per cent higher than the level of such imports valued at US$ 65846 million in April. 2007. The trade deficit for April.August. Satbari. Non-oil imports during April. FOREIGN DIRECT INVESTMENT IN RETAIL SECTOR PRIYANKA KAKRAN (43) Introduction 17 . 2007.The Indian Institute of Planning And Management.

When it comes to development of retail space specially the malls. Expected Investments Reliance Retail will invest US$5. Cosmetics and Toiletries. This has also contributed to large scale investments in the real estate sector with major national and global players investing in developing the infrastructure and construction of the retailing business. In India. New Delhi-based roundthe-clock convenience chain Twenty Four Seven Retail Stores Pvt. Metro AG is investing US$400 million over the next three years. Targeting an emerging segment of night shoppers. India has the most unorganized retail market in the world. the concept of shopping has altered in terms of format and consumer buying behavior. Home & Office Products.The Indian Institute of Planning And Management. The Retail Industry in India is today amongst the fastest growing industries with several players entering the market. the organized retail sector accounts for only 2 per cent indicating a huge potential market opportunity.5 billion by 2015. Electronics. Bharti-Wal-Mart will invest US$2. accounting for over 10 per cent of the country’s GDP and around 8 per cent of the employment. With this the retail sector in India is witnessing a rejuvenation as traditional markets make way for new formats such as departmental stores. Ltd plans to invest US$200 million in the next five years. along with increasing working-women population and emerging opportunities in the services sector.5 billion by 2010-2011. the retail industry is definitely one of the pillars of the Indian economy. Trade or retailing is the single largest component of the services sector in terms of contribution to GDP. Appliances. As the contemporary retail sector in India is reflected in sprawling shopping centers. hypermarkets. Future Group (Pantaloon Retail) will invest US$260 million by 2008. India is being seen as most attractive market by retail investors from all over the world. supermarkets and specialty stores. New-Delhi The Retail Sector is the largest sector in India after agriculture. hefty pay-packets.malls and huge complexes offer shopping. the Tier II cities are no longer behind in the 18 . entertainment and food all under one roof. multiplex. Another credible factor in the prospects of the retail sector in India is the increase in the young working population.Apparel & Accessories. Most retailers of the unorganized retail market have their shop in the front and house at the back. These key factors have been the growth drivers of the organized retail sector in India which now boast of retailing almost all the preferences of life . The retailing configuration in India is fast developing as shopping malls are increasingly becoming familiar in large cities. nuclear families in urban areas. Travel and Leisure and many more. ushering in a revolution in shopping in India. Currently. Satbari.

India NEHA MAHAJAN (37) Foreign Direct Investment (FDI) is on the rise again. This presents international retailing specialists with a great opportunity. India’s vast middle class and its almost untapped retail industry are key attractions for global retail giants wanting to enter newer markets. COMPARISION BETWEEN China vs. The government of states like Delhi and National Capital Region (NCR) are very upbeat about permitting the use of land for commercial development thus increasing the availability of land for retail space. the country sorely lacks anything that can resemble a retailing industry in the modern sense of the term. New-Delhi race. Concerns over corporate 19 . Satbari. But the corporate savings overhang and investor pessimism about the global economy could dull the recovery of cross-border corporate investment. burgeoning income.The Indian Institute of Planning And Management. The organized retail sector is expected to grow stronger than GDP growth in the next five years driven by changing lifestyles. with 139 malls in metros and the remaining 81 in the Tier II cities. thus making NCR render to 50% of the malls in India. If development plans till 2007 is studied it shows the projection of 220 shopping malls. Even though India has well over 5 million retail outlets. and favorable demographic outline.

New-Delhi financial health.The Indian Institute of Planning And Management. As investors face more intense competition and the lure of higher returns overseas. The two South Asian neighbors are among the 25 most attractive FDI destinations. shareholder activism. Led by China and India. they are cautiously unloading their accumulated war chests. India and China are among the top destinations for Foreign Direct Investments while the world's centre of power continues its "perceptible shift" from developed to developing markets. emerging markets have achieved unprecedented levels of investor confidence. an unexpected economic downturn. according to a report released on Thursday by a global management consulting firm. Satbari. and the risks associated with engaging in FDI have caused investors to hoard cash over the past four years. according to Foreign Direct Investment (FDI) Confidence Index by AT Kearney. 20 . Emerging market countries are the 1st and 2nd most attractive foreign direct investment (FDI) locations in the world.

The Indian Institute of Planning And Management. Poland and Russia. while India's score has been surpassed 21 . This is nearly twice the number recorded for the next three most positively viewed markets—Brazil. New-Delhi MAJOR FINDINGS India Joins China at the Center of the FDI Radar Screen Investor enthusiasm for China and India is at an all-time high. China achieved it’s highest-ever score in this year's Index. Satbari. with roughly 45 percent of global investors more upbeat about China and India compared to last year.

6 billion. Despite India's successful positioning as a business-processing and IT outsourcing hub. This is partly because China attracts more capital-intensive manufacturing and logistics functions Conclusion 22 . compared with China's $60.The Indian Institute of Planning And Management. Satbari. strong investor interest in India is a more recent development.3 billion in FDI. these activities often translate into service-sector exports—rather than FDI flows into India. Last year. New-Delhi only by China and the United States in previous years. China and India took the 1st and 2nd positions across nearly all broad sector categories While China has held the top spot since 2002. India received just $5.

We expect the country's attractiveness to increase as long as the government maintains its focus on reforms. mostly because it did not initiate investment-attracting reforms until 1991. India appears to be on the cusp of an FDI takeoff. Indeed. By contrast. New-Delhi India has yet to build critical mass in FDI. and continues to address the country's infrastructure. and regulatory barriers. overcomes narrow business interests. China's pro-FDI regime has been in place since 1979. Satbari. Foreign Direct Investment in Aviation Industry 23 . logistics.The Indian Institute of Planning And Management. China's entire competitive manufacturing base has been largely established by foreign multinational companies. We expect this trend to continue over the next three years as more functions are sent overseas.

This will lead to many more players in the ground-handling arena. and ground handling are allows non-resident Indians (NRI) 100% investment. the government on Wednesday approved an almost complete overhaul of the foreign direct investment (FDI) policy for the sector. The ministry estimates that India will carry around 4 million tone cargo by 2010. MD of domestic chartered airline company Club One Air said. “This is fantastic for the industry and it will definitely raise the standards. New-Delhi Ashish Bhambhani-(13) In a major fillip to the high-growth aviation sector. cargo. The cargo industry is also set for a boost with most existing airlines like Spice jet and the national carrier Air India getting heavily into cargo. This sector consists of all the domestic airlines that publish fares and transport passengers. which is civil aviation minister Praful Patel’s one of the goals. He pegs the industry size at around Rs 350 crore and growing at 30 to 40% annually.” Manav Singh.The Indian Institute of Planning And Management. The move will help the sector attract around $50-$70billion investments over the next few years. has been capped at 74% on the automatic route as long as no foreign airlines are participants. leading to lower costs for the airlines and therefore result in better margins for the loss making aviation industry. The norm that all no direct or indirect 24 . subject to sectoral regulations and security clearance. FDI percentage will be 26% and the investment component of FIIs at 23%. chartered airlines and cargo airlines. FDI in groundhandling services has been hiked to 74% on the automatic route.” information and broadcasting minister PR Dasmunsi said announcing the government’s decision. The government has capped the FDI in air transport services to 49% on the automatic route and reclassified it as domestic scheduled passenger airline sector. Satbari. The FDI norms for scheduled and non-scheduled air services. The FDI in non-scheduled airlines.

the foreign direct investment (FDI) limit in domestic airlines is 49% through the automatic route. For Greenfield airport projects. there is an FDI cap of 49% through the automatic route and 100% for Non-Resident Indian investment through the automatic route. The Ministry of Civil Aviation proposes to liberalize the FDI policy further in most sectors. For existing airport facilities. for air transport services. details of which are under consideration 25 . 100% FDI is permitted through the automatic route. although foreign airlines are not permitted to hold equity. there is 100% FDI. Under current regulations. Nonresident Indians may invest up to 100%.The Indian Institute of Planning And Management. The Ministry of Civil Aviation is reviewing a proposal to increase the foreign direct investment limit to 74% in the non-scheduled and ancillary sector. New-Delhi participation by foreign airlines occurs has remained as the ministry still believes that domestic airlines need to become stronger before being exposed to foreign carriers. Satbari. with the Foreign Investment Promotion Board’s approval required for FDI beyond 74%.

Within Asia. Hong Kong and Singapore). Inflows may be low for sectors like infrastructure.The Indian Institute of Planning And Management. The report also points that India has improved its ranking in the inward FDI performance index (which measures the flow of foreign investment into a country relative to its GDP) from 110 in 2006 to 106 in 2007.95 billion. The report also mentions a survey by the Japan Bank for International Cooperation (JBIC). but above Germany and Taiwan. lagging only behind China. in which Japanese transnational manufacturing companies have rated India higher than China for establishing business operations. 26 . but other sectors are likely to see enough growth. we may not see any big inflows into the country. Foreign direct investment (FDI) inflows into the country will continue to show the robustness seen in the past couple of years despite the global financial crisis that many feel will impact economies across the world. other experts believe that the global liquidity crunch may impact FDI inflows into the country. which is below that of Hong Kong. However.” said UNCTAD’s policy expert Premila Nazareth Satyanand. it could be said that the Indian government’s FDI target of $35 billion for 2008-09 can be achieved. “It is possible that the projected FDI inflows may not happen in 2009-09 and get deferred to the next fiscal. who released the report in India today. India received the fourth largest amount of FDI inflows in 2007 (after China.” said Partha Mukhopadhyay of the Centre for Policy Research. Indonesia and even Guatemala. which stood at $22.73 per cent over $ 19. Satbari. translating into a growth of 16. New-Delhi FUTURE GROWTH IN FORIGN DIRECT INVESTMENT Sandeep Verma-(56) India has retained its position as the second most-preferred global location for foreign investment in 2008 and will continue to do so till 2010. However.66 billion in 2006. the United Nations Conference on Trade and Development (UNCTAD’s) has said in World Investment Report 2008. “Going by my personal interactions with industry.

84 billion in the previous year.” added Satyanand.23 per cent.64 billion abroad in 2007. India was also recognised as the fourth-largest source of FDI in Asia. and the automotive industry has prompted Indian companies to revamp their operations and boost productivity. an increase of 6. to the extent that some have become formidable global competitors. Domestic demand has also soared in response to these lower prices. India is bridging the gap with Singapore as a destination for FDI inflows. as Indian companies invested $13.The Indian Institute of Planning And Management. 27 . single-brand retail. better quality and a wider selection of products and services. Satbari. business-process outsourcing. New research by the McKinsey Global Institute indicates that the foreign direct investment that did find its way to India has had an overwhelmingly positive impact. as well as increasing cross-border merger and acquisitions. The introduction of foreign competition in IT. Thousands of new jobs have been created in these industries and consumers benefit from lower prices. The growth has been attributed to further opening up of telecommunications. More than a quarter of 300 international retailers told UNCTAD’s that they have either opened their first store in India during 2007 or are planning to do so in the near future. as against $ 12. New-Delhi “Significantly.

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