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Foreign Direct Investment (FDI)

Presenter – Vamshi & savithri

(VVIT)
 Foreign Direct Investment (FDI)

• Definition:
The foreign direct investment definition says the direct
investments in any productive assets in a country by any
foreign company is called foreign direct investment or FDI.
FDI includes investments in the infrastructure development
projects including construction of bridges and flyovers,
finance sector including banking and insurance services ,
real estate development , retail sector etc.
FDI is permited as under the following forms
of investments. 

•Through financial collaborations.

•Through joint ventures and technical collaborations.

•Through capital markets via Euro issues.

•Through private placements or preferential allotments

 FDI is not permitted in the following
industrial sectors:

•Arms and ammunition.

•Atomic Energy.
•Railway Transport.
•Coal and lignite.
•Mining of iron, manganese, chrome,
sulphur, gold, diamonds, copper, zinc.
 FDI Inflows in India-
Sector-wise analysis of Top twenty (20) sectors
in India from April 2000 – Dec 2010
Industrial Sectors in India Amount of FDI inflow % of total FDI
inflows
Rs. Millions

• Service Sector 1015269 21.63

• Computer Software and Hardware 423529 9.02
• Telecommunication 398094 8.48
• Housing and Real Estate 352550 7.51
• Construction Activities 327195 6.97
• Power 200993 4.28
• Automobile Industry 197634 4.21
• Metallurgical Industry 131178 2.79
• Pertoleum and Natural Gas 112617 2.40
• Chemicals 108251 2.31
• Electrical Equipments 94888 2.02
• Trading 87001 1.85
• Hotel and Tourism 80355 1.71
• Information and Broadcasting 79569 1.70
• Cement and Gypsum Products 74579 1.59
• Drugs and Pharmaceuticals 72533 1.55
• Agriculture 71231 1.52
• Consultancy 68354 1.46
• Ports 66675 0.93
• Food Processing Industries 43884 0.77
 Graph showing Top ten sectors attracting FDI
inflows in India
since April 2000 – Dec 2010

4% 3%
6%
6% 32%

10%

11%
13%
12%

sevice sector telecommunication

construction activities pertoleum and natural gas
housing and real estate computer software and software
power Metallurgical Industry
chemicals
  
Foreign Investment Opportunities in India
• Sector-wise break-up of FDI is as follows: fuels -26.7%,
telecom-19.6%, electrical equipments-9.9%, transportation-
7.5%, services-6.5% and metallurgical industry-5.3%

•  Major FDI destinations are 

• Maharashtra-17.4%,
• Delhi-12%,
• Tamilnadu-8.6%,
• Karnataka-8.2%,
• Gujarat-6.5%, and
• Andhra Pradesh- 4.6%.

•
-› MNCs invested in India include GE, Dupont, Eli Lily ,
Monsanto, Caterpillar, GM, Hewlett Packard, Motorola, Bell
Labs, Daimler Chrysler, Intel, Texas Instruments, Cummins,
Microsoft, IBM, Toyota, Mitsubishi, Samsung, LG, Novartis,
Bayer, Nestle, Coca Cola and McDonalds.
• FII investment increased by almost ten times in 2003 reaching
a record US$ 7.59 billion, as against a mere 739 million dollars
in 2002. FII investment in the first quarter of 2004 stood at $ 4
billion. Cumulative FII investment since the equity market was
opened in the early 1990s is $ 25 billion. The number of
registered FIIs in India is 540.

› CALPERS (California Public Employees Retirement System ),

the world's biggest pension fund with a base of US$ 165 billion
has recently decided to include India in their list of countries
for investment.

-› US$ 6.5 billion of the FII funds in 2003 went into equities FIIs
have 50 percent stake in one third of the 30 companies which
make up the BSE-30 Index and hold about 10 percent of the
stakes in public sector undertakings.
• The other major investor countries are Mauritius,
UK, Japan, South Korea, Germany, Netherlands, Australia,
France, Malaysia, Singapore and Italy in that order.
 Challenges faced by FDI in INDIA

• Resource challenge

• Equity challenge

• Political Challenge

• Federal Challenge

• India must also focus on areas of poverty reduction, trade

liberalization, and banking and insurance liberalization. Challenges
facing larger FDI are not just restricted to the ones mentioned
above, because trade relations with foreign investors will always
bring in new challenges in investments.
 Conclusion

FDI is beneficial to India’s growth and India’s growth is beneficial for FDI. India
needs to create a talent pool suitable for the investors and it needs to
develop infrastructure that will encourage the investors. These steps taken by
India to bring FDI will also help India to grow on its own. FDI if monitored and
nurtured in such a way that it will bring more skills and resources to India will
be mutually beneficial.
Thank You….