FDI in India

Presented by: Presented to:
Prof. Somasekhar Vuppuladhadiam • • • • • Anand Kulkarni Sushant Gholap Hrushikesh Bhave Avinash Bhor Mukund Nagda

Includes "mergers and acquisitions.  Prohibited Sector : * Real Estate * Plantation & Agriculture * Chit Funds * Atomic Energy * Gambling & Lottery * Nidhi Funds(non banking finance companies). reinvesting profits earned from overseas operations and intracompany loans  FDI . Manmohan Singh 2ND most FDI destination (China being the first) Sectors that attracted higher inflow are services. as well as the process that is used to turn raw materials into the final product. Driven by PM . construction activities and computer software and hardware($10. . building new facilities.About FDI – Foreign Direct Investment  Foreign Direct Investment :  FDI Occurs when an investor based in one country (home country) acquires asset in another country (host country)with the intent to manage the asset. the company from the United States is able to control the production process to ensure the quality of the vehicles. it is vital to ensure that the robustness of its FDI inflows is also maintained. a company in the United States might purchase the production facility that is used to manufacturer automobiles in China.4 bn)  For India to maintain its momentum of GDP growth. By owning the production facility. telecommunication.Welcome in India:     Economic reforms embarked upon by the Government of India since mid-1991 under FEMA.  In very simple terms.Dr.

. Motive is Investing in developing countries.Types of FDI  Greenfield investment : Direct Investment in New facilities or expansion of existing facilities. . its an foreign investment from the same industry. Suzuki motors investing into manufacturing . Basically. when firms perform value-adding activities stage by stage in a vertical fashion in a host country. production units into Maruti motors in India.  Mergers and Acquisition : It occurs when a transfer of existing assets from when a transfer of existing assets from local firms takes place.  Vertical FDI : Takes place when a firm through FDI moves upstream or downstream in different value chains i.  Horizontal FDI : Arises when a firm duplicates its home country-based activities at the same value chain stage in a host country through FDI. For instance.e.

2.FDI . 3.Approval Procedure/ Major Bodies FDI is permitted as under 1. Through financial collaborations Through Joint Venture & technical collaborations Through Capital market via Euro issues Through private placements or preferential allotment FDI is permitted in India under 2 routes: Major Bodies for FDI : 1991 – Foreign Investment Promotion Board(FIPB) Automatic Route in most sector Govt. 4./Approval Route for few sector 1996 – Foreign Investment Promotion Council(FIPC) 1996 – Foreign Investment Implementation Authority(FIIA) RBI FIPB 2004 .Investment Commission Secretariat for industrial assistance(SIA) No Permission required. just notify RBI within 30 days of issue Approval is granted generally in 30 days .

.  Abundance of natural resources  Well establish legal system with independent judiciary  Developed banking system and vibrant capital market  Top 3 investment TOP spots & one of the fast growing economies in the world.  Large English Speaking population.  Large & Growing Market.FDI – Why India best ideal investment destination?  Stable Democratic Environment over 66 years of independence.  Cost effective and highly skilled labor.technical & managerial power.  World class scientific .

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Sector wise Limits % of Investments .

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airports and roads. . ports.  Joint ventures and technical collaborations.  Private placements or preferential allotments. GDR investments are treated as FDI and are designated in dollars and are not subject to any ceilings on investment. This condition would be relaxed for infrastructure projects such as power generation.FDI in Equities  FDI through Equity is permitted as under the following forms of investments : THROUGH :  Financial collaborations.  Capital markets via Euro issues. Foreign Investment through GDRs (Euro Issues) : Indian companies are allowed to raise equity capital in the international market through the issue of Global Depository Receipt (GDRs). telecommunication. An applicant company seeking Government's approval in this regard should have consistent track record for good performance (financial or otherwise) for a minimum period of 3 years. petroleum exploration and refining.

and equity investment in JVs in India. would need to obtain prior FIPB clearance before seeking final approval from Ministry of Finance.Equity Investment in company through FDI 1. prepayment or scheduled repayment of earlier external borrowings. Clearance from FIPB (Foreign Investment Promotion Board) : • There is no restriction on the number of Euro-issue to be floated by a company or a group of companies in the financial year. equipment and building and investment in software development. • A company engaged in the manufacture of items covered under Annex-III of the New Industrial Policy whose direct foreign investment after a proposed Euro issue is likely to exceed 51% or which is implementing a project not contained in Annex-III. capital expenditure including domestic purchase/installation of plant. 2. Use of GDRs • The proceeds of the GDRs can be used for financing capital goods imports. .

opening up export markets. bulk of the foreign direct investment in Indian business sectors of infrastructure. UK. and many others • FDI is considered to be the life blood and an important vehicle for economic development as far as the developing nation like India is concerned.Recent Developments in FDI • In recent years. . • FDI has an important impact on country’s trade balances. have been made by investors of countries like US. Singapore. telecommunication. information technology. • The Cabinet said OK for 51% FDI in Multi brand retail sector & 100% FDI in Single brand. Mauritius. and hospitality services. transfer of technology. computer hardware and software. access to international quality goods and services and thereby augmenting employment opportunities.

Recent Air-Asia & Tata JV deal • • MaThe Foreign Investment Promotion Board (FIPB) has cleared Malaysian budget carrier AirAsia’s proposal to start a passenger airline in India in partnership with the Tata Group with an investment of Rs 81 crore. AirAsia recently said it would set up a 49:30:21 joint venture with the Tata Sons and Telestra Tradeplace of Indian investor Arun Bhatia to launch a new Indian airline.77 crore cleared by FIPB.732. . The AirAsia proposal was among the six foreign direct investment proposals amounting to Rs.

 Insurance Sector Case Study 3  Insurance is one of the significant economic sectors of the country & Progressing fast with an average yearly growth rate of over 30%. General Motors and Ford have changed the dynamics of Indian car market. Suzuki Motors.  In 2007-2008 Vodafone took over hutch in on of the largest FDI deals for an amount of $11bn  India now boasts of over 250 million mobile phones  Tariff rates in India are the lowest thanks to the intense competition  Automobile Sector Case Study 2  $8 billion invested by Foreign companies  In 2007-08.Case Studies . $41 billion invested by Foreign companies. India sold over 1 million passenger cars  Key players in the sector like Hyundai Motors.  FDI in Insurance increased to 49% from 26% .FDI  Telecom Sector: Case Study 1  Total FDI investment in telecom is over $ 15 billion. Toyota .

wider choice & improved quality  Political opposition from groups-Swadeshi Jagran manch. . defense.etc  Access to new market/distribution channel for products  Improved consumer welfare by cost reduction. farmers association. ports.Advantages & Disadvantages of FDI Advantages  Inflow of equipment & technology  Competitive advantage & innovation  Financial resources for expansion  Employment Generation  Access to global market place to domestic players  Access to LOW cost resources to investors Disadvantages  Crowding of Local industry  Loss of control  Conflicts of codes/laws  Repatriation of profits/dividends by investors  Effect on local culture/sentiments –socio culture effect  Effect on Natural Environment  National Security may impact if foreign companies operate in sensitive areas airports.

broadcasting sectors. rules and regulations. . They will be able to work for the world class companies in their own motherland and will be a direct contributor in her progress. In fact. As a Group we feel that FDI will open more opportunities for the youth. About new reforms. clearance. So let's welcome FDI with open hands and usher a new era of economic reforms.After the policy paralysis that plagued the India government and gave India entrepreneurs nightmares. aviation. As foreign investors doesn’t look for fiscal concessions or special incentives but they are more of a mind in having access to a consolidated document that specified official procedures. and opportunities in India.Conclusion India needs a business environment which is conducive to the needs of business. It is for sure that FDI will create some problems in short term but we believe that the benefits will far greater than that. this can be achieved only if India implements its second generation reforms in totality and in right direction which is just started. government went in top gear and cleared FDI for retail.

India THANK YOU… .

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