Factors affecting

International Investment in
India
Group-1
Jay meliwar - 20019
Kavya Thapar - 20023
Koushik Samudrala - 20025
Neha Roy - 20032
Raveendra Naik - 20051
Srishti Shekhar - 20052
Umang Gupta - 20234
Anshuman Misra- 20237
Flow of Presentation
01 Introduction

02 Factors affecting FDI in India

03 Conclusions &
Recommendations
Introduction
 Importance of FDI in India
 LPG Reforms
 Economic Opportunities post LPG

 Impact on Local Industries

 Competitive Environment to attract FDI -
Nations offering Incentives
 Prime Minister, who said, "FDI is a responsibility
for Indians & an opportunity for the world. My
definition of FDI for the people of India is 'First
Develop India“
Factors affecting FDI in India
 RBI sector – wise report on FDI shows that

• Manufacturing Sector – Make in India, Made in India

• Rapid Digitalization – significant FDI in communication services

• Improved FDI in E-commerce, Hospitality, Restaurant, Education etc.

 Factors

• Economic Growth & Per Capita Income • Geo-Politics

• Globalism • Bureaucracy
• Geographic Positioning • Ease of Doing Business
• Uncertainty in Foreign Exchange • Sovereign Ratings
• Demographic Dividend • Labour Laws
• Infrastructure • Environment
Economic Growth & Per capita Globalism

1. GDP – Most prominent measure for 1. Global Village

economic output 2. Decision made on needs of all Nations
2. Per capita – Indicator of Nations wellbeing 3. Globalism and Nationalism are odds in
3. Investors or Economists –Real GDP for certain cases
country’s performance 4. WTO Conference – Flak on India for
refusing Trade Facilitation Agreement
5. Objective of Globalism – To promote free
trade and development across the world
6. Formation of BRICS to mitigate the
biasness of World Bank & IMF
Geographic Positioning Uncertainty in Forex

1. Geo-positioning of India is Global trade 1. Economic Stability

route 2. RBI controls Inflation & Foreign Exchange
2. Investors look for - Global Supply chain, Rate Stability
Transportation, International Routes. 3. Change in rates affect imports and exports
3. Geopolitical tensions with two neighboring 4. Reforms lead to uncertain macro
countries environment but economic outlook
4. Air Space blockade by Pakistan to move remained positive
west increases logistics cost 5. RBI uses monetary policy to maintain
stability of rupee against dollar by injecting
dollars into circulation
Demographic Dividend Infrastructure

1. UN population fund – Economic growth 1. More robust infrastructure leads to more

potential is a result of shift in population
age structure
2. Systematic incompetence such as unskilled
workforce, lack of technology, Red tapism,
Language barrier, Corruption
3. China is able to attract more investors by
taking initiatives to upskill labor by
providing incentives
FDIs
2. Areas of improvement are transportation,
logistics, warehousing etc.
3. Leads to increase in productivity
4. Bharatmala project – to improve roadways
5. Sagarmala project to improve waterways
6. Dedicated policies to improve infrastructure
pipeline
7. Mckinsey report shows that china invests
8% of GDP and India invests 15% of GDP in
infrastructure Development
Geo-Politics Bureaucracy

1. A country’s destiny in the world is decided 1. Primary concern for investors

on its water and airspace 2. Rigid compartmentalized style of
2. Border Disputes management
3. Dramatic rise of china and world’s 3. Undertakings held by bureaucrats didn’t go
dependency on its exports, technology and well, ultimately led to LPG reforms
fiscal power 4. “Make in India”, “Digital India”, “Smart Cities”
4. Hambantota investments running into obstacles by bureaucracy
5. Scrutiny of Chinese investments – instead of increasing investment
impacting startup ecosystem 5. Communication Gap
6. Abrogation of article 370 – Trade disputes 6. German Trade and Investment Chief
with Malaysia & loss of investors
Ease of Doing Business Sovereign Ratings
1. Moody’s, Fitch, S&P Global rank the
countries based on per capita income, GDP
growth rate, rate of inflation, history of
defaults, economic development ETC
2. In 2020 all the three major rating (S&P, Fitch,
Moody’s) agencies have the lowest investment
1. India climbed 79 places reached 63rd
grade rating on India during the months of April
position out of 190 countries in World
Bank’s Ease of Doing Business 2020 survey to June. 

2. Measure like demonetization, GST are

reasons behind this jump.
3. These figure will develop interest in
investors globally
Labour Laws Environment
1. 200 Labour laws 1. Rapid Industrialization leads to CO2 & global
2. Quasi-federal type of arrangement warming
3. Foreign investors perspective on labour laws 2. Developed countries want emerging countries
in India are cumbersome and repetitive to adhere to standard emissions
4. Most disputed laws - The Trade Unions Act, 3. The current increase in pollution levels of
1926, The Industrial Disputes Act,1947 and emerging countries is due to industrialization
the Contract Labour Law,1970 process
5. Industrial Relations code – seeks to create 4. This leads to lack of clarification and possible
uniform social security – pensions, medical conflicts between nation’s and global interests
cover, death, disablement benefits to 5. Investors are more cautious towards
employees. environment and look for cleaner economies
to invest
Conclusions
 In depth exploration of factors show that
few factors impact more on FDI than others
 Four states Maharashtra(28%),
Karnataka(19%),Delhi(16%), Gujrat(10%)
attract more than 75% of FDIs which shows
a high disparity of FDIs among states
 India Requires better labour law and
uniformity in its codes
 Infrastructure has to be developed in the
north-eastern part as it has high potential
for growth
 Strategy to attract FDIs – Low skill labour
intensive sectors and make them part of
global value chains
Recommendations
 Encourage Light form of Industrial policy,
that aims to connect FDI to development
goals
 Evidence here indicates that concentrating
on quality FDIs will help developing
countries to progress without any
significant safeguard or large quantities of
direct assistance
Thanks!