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Attracting long-term Creating skilled employment
foreign capital to Opportunities and Import
supplement domestic of world Class managerial
investment efforts, practices
particularly in infrastructure
and export competitive sectors


Developing attractive Promoting technology

Configurations of and other linkages to
locational advantages enhance domestic industry
at global level competitiveness
• Investments
• Quality of employment
• Generation of employment
• Better value to end customers
• Franchising opportunities to local
• Cost benefit
• Implementation of IT
• Growth of infrastructure
Does Foreign Direct Investment Help
Emerging Economies?
• In developing nations

• Equity investments as a percentage of gross

national income have been flat in recent years .

• Debt flows, however, have picked up since 2002

after plunging to zero in the previous two years.

• FDI as a share of GDP has grown rapidly,

becoming the largest source of capital moving from
developed nations to developing ones
Is FDI Always Good?
• Offers attractive benefits
• FDI may flow to riskier destinations.
• During crises capital flight can’t be ruled
• Too much FDI may not be beneficial.
• Possibility that the most solid firms will
be financed through FDI.
• Complements the host country’s
institutions and human capital
• Small kirana merchants (CPM)
• Cut throat competition
• Increase in real estate prices
• Unfair trade practices may cause
Predatory Pricing.
Investing in India – Entry Routes

Investing in India

Prior Permission
Automatic Route

General rule By exception

No prior permission Prior Government
required Approval needed.
Inform Reserve Bank Decision generally
within 30 days of Within 4-6 weeks
inflow/issue of share
Foreign Investment Policy

FDI up to 100 % permitted on automatic

route for non-licensable and non-
Drugs & recombinant DNA technology category
Hotels & FDI up to 100% permitted on automatic
Tourism route
Defence FDI up to 26% permitted subject to
Industry licensing

Telecom FDI up to 74% in ISPs with gateways

Services and limit raised from 49% to 74% in
radio paging and end-to-end bandwidth

Townships FDI up to 100% permitted in integrated

townships and settlements
Foreign Investment Policy (contd.)

NBFC’s FDI up to 100 % permitted on

automatic route

FDI up to 49 % permitted
FDI up to 26% permitted on the
Insurance automatic route subject to licensing

Broadcasting FDI up to 49% permitted in uplinking

hub and up to 20% in DTH

MRTS FDI up to 100% permitted, including

associated real estate development
India – The New Trillion Dollar
Economy and Opportunities
India: FDI Outlook

• Third most attractive investment destination

• Among the top 3 investment ‘hot spots’ for
the next 4 years
• Most Preferred Off shoring destination
FDI Outflow
• India's FDI outflow to exceed inflow in
• In 2007-08 overseas investment from
India will be around $15 billion
• The number of outbound M & A deals has
increased sharply over the past six years
from about 37 in 2001 to more than 170 in
Sectors prohibited for FDI


Arms & Ammunition

Why is FDI attracted in
India’s Retail Sector
• The Indian retail market -- one of India's fastest
growing industries -- is expected to grow from
US$ 350 billion to US$ 600 billion by 2010.

• According to Euromonitor International, the

Indian Retail market will grow in value terms by
a total of 39.6 per cent between 2006 and 2011,
averaging growth of almost 7 per cent a year.

• Modern retail formats have grown by 25-30 per

cent in India in the last year and could be worth
US$ 175-200 billion by 2016.
RETAIL sector
• The Government allows 100 per cent FDI in cash and
carry through the automatic route

• 51 per cent in single brand

• Besides, the franchise route is available for big operators

• Now, the Government also proposes further liberalisation

in the retail sector allowing 51 per cent FDI in consumer
electronics, sports goods, stationery and building

• More than 5 million outlets

• Per capita space (97% < 500 sq.ft.)
• Only 3 % organised
• 97% unorganised……………………………why?
 No supply chain management
 No Third Party Logistics
 Restrictions to FDI funding
International retailers in India:
• Franchise
– International company gives name and technology to
local partner. Gets royalty in return
– In case master franchise is appointed for region or
country, he has right to appoint local franchisees
• Nike, Pizza Hut, Tommy Hilfiger, Marks and Spencer,
• Manufacturing
– Company sets up Indian arm for production
• Bata India. It also has right to retail in India
International retailers in India:
• Distribution
– International company sets up local distribution office
– Supply products to Indian retailers to sell
– Also set up franchised outlets for brand
• Swarovski, Hugo Boss

• Wholesale trading
– 100% FDI permitted
Total wholesale and retail
37 trade
US$ bn

5 FDI in retail
150 allowed


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 Retail sales grew @ 19.6% CAGR for the next 4 years

after the introduction of FDI in 1992 .
Thank you