It is all about FDI & FDI investment in INDIA

1. PRESENTED BY-ABHISHEK KUMAR AGRAHARI
ACCMAN INSTITUTE OF MANAGEMENT
PGDM (2014-2016) 1

2. WHAT IS FDI ?
Foreign direct investment (FDI) in its classic form is defined
as a company from one country making a physical
investment into building a factory in another country.
Include investments made to acquire lasting interest in
enterprises operating outside of the economy of the
investor.
Generally speaking FDI refers to capital inflows from abroad
that invest in the production capacity of the economy and
are Usually preferred over other forms of external finance
FDI also facilitates international trade and transfer of
knowledge, skills and technology.
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3. WHY FDI ?
1. Gain a foothold in a new geographic market.
2. Increase a firm’s global competitiveness and
positioning.
3. Fill gaps in a company’s product lines in a
global industry.
4. Reduce costs in areas such as R&D,
production, and distribution.
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4. METHODS
The foreign direct investor may acquire voting
power of an enterprise in an economy through
any of the following methods:
by incorporating a wholly owned subsidiary or
company anywhere
by acquiring shares in an associated enterprise
through a merger or an acquisition of an
unrelated enterprise
participating in an equity joint venture with
another investor or enterprise
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5. F D I - APPROVAL
Foreign direct investments in India are
approved through three routes:
Automatic approval by RBI.
The FIPB Route.
CCFI Route
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6. AUTOMATIC ROUTE
No need of Prior Approval From FIPB,RBI,GOI.
BUT
The investors are only required to notify the Regional Office
concerned of the Reserve Bank of India within 30 days of receipt
of inward remittances.
AND
File the required documents along with form FC-GPR with that
Office within 30 days of issue of shares to the non-resident
investors.
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7. AUTOMATIC ROUTE
The Reserve Bank of India accords automatic approval
within a period of two weeks (provided certain
parameters are met) to all proposals involving:
foreign equity up to 50% in 3 categories relating
to mining activities .
foreign equity up to 51% in 48 specified industries.
foreign equity up to 74% in 9 categories .
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8. FIPB ROUTE
FDI in activities not covered under the
automatic route require prior government
approval.
Approvals of all such proposals including
composite proposals involving foreign
investment/foreign technical collaboration is
granted on the recommendations of FIPB.
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9. Application for all FDI cases, except NRI
investments and 100% EOUs, should be submitted
to the FIPB Unit , DEA, Ministry of Finance.
Application for NRI and 100% EOU cases should be
presented to SIA in Department of Industrial Policy
and Promotion (DIPP).
Application can be made in Form FC-IL. Plain paper
applications carrying all relevant details are also
accepted.
No fee is payable.
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10. CCFI ROUTE
Investment proposals falling outside the
automatic route.
And
Having a project cost of Rs. 6,000 million or
more would require prior approval of Cabinet
Committee of Foreign Investment (“CCFI”).
Decision of CCFI usually conveyed in 8-10
weeks. Thereafter, filings have to be made by
the Indian company with the RBI.
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11. MAJOR BODIES CONSTITUTED FOR FDI
1991- Foreign Investment Promotion Board FIPB
1996- Foreign Investment Promotion Council FIPC
1999- Foreign Investment Implementation Authority FIIA
2004- Investment Commission
Secretariat for Industrial Assistance (SIA)
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12. FORBIDDEN TERRITORIES
FDI is not permitted in the following industrial
sectors:
Arms and ammunition.
Atomic Energy.
Railway Transport.
Coal and lignite.
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13. Mining of iron, manganese, chrome, gypsum,
sulphur, gold, diamonds, copper, zinc.
Lottery Business
Agricultural or plantation activities
Housing and Real Estate Business (except
development of townships, construction of
residential/commercial premises, roads or bridges
to the extent specified in Notification No. FEMA
136/2005-RB dated July 19, 2005).
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14. FDI ADVANTAGES
Increase in Domestic Employment/Drop in unemployment
Investment in Needed Infrastructure.
Positive Influence on the Balance of Payments.
New Technology and “Know How” Transfer.
Increased Capital Investment.
Targeted Regional and Sectoral Development.
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15. FDI DISADVANTAGE
Industrial Sector Dominance in the Domestic Market.
Technological Dependence on Foreign Technology
Sources.
Disturbance of Domestic Economic Plans in Favor of
FDI-Directed Activities.
“Cultural Change” Created by “Ethnocentric Staffing”
The Infusion of Foreign Culture , and Foreign
Business Practices
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16. INVESTMENTS
US-based Nike has made a proposal to the Department of
Industrial Policy and Promotion (DIPP) to set up fully-owned
stores in India. Nike is one of the world's largest suppliers of
athletic shoes and apparel globally, with a market capitalisation of
US$ 68 billion.
US-based Milacron LlC plans to invest US$ 30 million in the next
three years in its India operations – Ferromatik Milacron India Pvt
Ltd (FMI), as per president and CEO, Mr Thomas Goeke. FMI
manufactures plastic moulding machines at its plants in
Ahmadabad in Gujarat and Coimbatore in Tamil Nadu.
Bengal looks set for one of its biggest foreign investments. A
large private equity firm which has exposure in social
infrastructure and agriculture plans to invest over Rs 300 crore
(US$ 49.02 million) in the proposed Dankuni food park promoted
by Keventer Group.
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17. CONTINUES.....
The Foreign Investment Promotion Board (FIPB) has
approved a proposal from Inter Globe Aviation, the
company that runs Indigo, to reclassify shareholding of
promoter Rakesh Gangwal as Non-Resident Indian (NRI)
from FDI at present. This move enables the airline to
have access to fresh FDI.
Norway's Telenor Group plans to invest an additional Rs
780 crore (US$ 127.47 million) to increase its ownership
in Indian subsidiary Uninor to 100 per cent; Telenor
currently owns a 74 per cent stake in Uninor.
Chinese telecom equipment maker ZTE Corporation
plans to establish a Global Network Operating Centre
(GNOC) in India. The centre will seek to manage the
networks of multiple telecom carriers in Asia and Africa.
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18. CONTINUES.....
Japan's Suzuki Motor Corporation (SMC), the parent
company of Maruti Suzuki, will spend Rs 18,500
crore (US$ 3.02 billion) to establish a new factory in
Gujarat. SMC plans to establish a 100 per cent
subsidiary, Suzuki Motor Gujarat (SMG), to
manufacture cars on a strictly no-loss, no-profit basis
for Maruti Suzuki.
US-based Leapfrog Investment has bought a minority
stake in Chennai-based financial services provider
IFMR Capital Finance for US$ 29 million. This marks
Leapfrog's third investment in India, after having
earlier backed insurance distribution firm Mahindra
Insurance Brokers and Shriram CCL.
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19. GOVERNMENT INITIATIVES
India’s cabinet has cleared a proposal which allows 100
per cent FDI in railway infrastructure, excluding
operations. Though the move does not allow foreign firms
to operate trains, it allows them to do other things such as
create the network and supply trains for bullet trains etc.
Based on the recommendations of the FIPB in its 207th
meeting held on July 4, 2014, the government approved
14 proposals of FDI amounting to about Rs 1,528.38
crore (US$ 249.78 million).
Additionally, based on the recommendations of the FIPB
in its meeting held on June 11, 2014, the government
approved 19 proposals of FDI amounting to about Rs
2,326.72 crore (US$ 380.25 million).
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20. CONTINUES.....
The Union Cabinet has cleared a bill to raise the foreign
investment ceiling in private insurance companies from 26 per
cent to 49 per cent, with the proviso that the management and
control of the companies must be with Indians.
The Reserve Bank of India (RBI) has allowed a number of foreign
investors to invest, on repatriation basis, in non-convertible/
redeemable preference shares or debentures which are issued by
Indian companies and are listed on established stock exchanges
in the country.
In an effort to bring in more investments into debt and equity
markets, the RBI has established a framework for investments
which allows foreign portfolio investors (FPIs) to take part in open
offers, buyback of securities and disinvestment of shares by the
Central or state governments.
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21. ROAD AHEAD
Foreign investment inflows are
expected to increase by more
than two times and cross the
US$ 60 billion mark in FY15 as
foreign investors start gaining
confidence in India’s new
government, as per an industry
study. "Riding on huge
expectations from the incoming
Modi government, global
investors are gung ho on the
Indian economy which is
expected to witness over 100
per cent increase in foreign
investment inflows – both FDI
and FIIs – to above US$ 60
billion in the current financial
year, as against US$ 29 billion
during 2013-14," according to
the study.
India will require around US $1
trillion in the 12th Five-Year Plan
(2012–17), to fund infrastructure
growth covering sectors such as
highways, ports and airways. This
requires support in terms of FDI.
The year 2013 saw foreign
investment pour into sectors such
as automobiles, computer
software and hardware,
construction development, power,
services, and
telecommunications, among
others.
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22. NEWS ON FDI
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23. SEE $8-9 BN CAP INFUSION IN 5 YEARS POST
INSURANCE BILL NOD
The Union Cabinet on Wednesday approved the insurance amendment Bill
with a composite foreign investment cap of 49 percent from current 26
percent for presenting it in Parliament, incorporating the changes suggested
by a House panel.
Amitabh Chaudhry, Managing Director and CEO of HDFC Life believes FDI
in insurance will be a catalyst for consolidation across the industry.
According to him, the Bill will not be a deterrent for foreign investors, as they
will either buy additional stake or infuse fresh capital.
On the flipside, large capital inflows may be delayed, as there is still some
ambiguity in terms of management control, Foreign Investment Promotion
Board (FIPB) approval and the route opted for foreign investment, he said in
an interview to CNBC-TV18. Once there is more clarity, new players may
enter market in 2015-16.
However, given the stricter norms and the extensive listing period, experts
anticipate only serious players to come into the sector.
Meanwhile, Hitesh Jain, Partner at ALMT Legal is confident of the hike in
overseas investment limit attracting USD 8-9 billion over the next 5 years.
Going ahead, Standard Life may increase stake in HDFC Life while ERGO
might also look to augment stake in HDFC ERGO. 23

24. ALL INDIA RAILWAYMEN'S FEDERATION TO
OPPOSE FDI IN RAILWAYS: 29 NOV 2014
LUCKNOW: All India Railwaymen's Federation today said it opposes 100 per
cent FDI in railways as it will "demolish the existing framework" of the
organisation.
"During the national convention of AIRF, 100 per cent FDI in railway was taken
as a challenge as it will demolish the existing frame work of the
organisation," National General Secretary AIRF Shiv Gopal Mishra told reporters
here.
"It is being said that FDI is needed for railways. But when the government can
invest in infrastructure, then why not in railways," he added.
"The railways is not in loss. The railways could have saved Rs 1,56,000 crore if
it was allowed to do fair pricing," he claimed.
"When in opposition BJP opposed FDI during UPA regime and now it has taken
a U-turn and is supporting it," he added.
Mishra said other issues of merging dearness allowance into basic salary, to
provide interim relief, abolish new pension scheme and to restore old one
and anti-labour provisions in the labour law were also taken up.
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25. FIPB TO CONSIDER 26 FDI PROPOSALS ON
OCTOBER 1
NEW DELHI: Inflows of foreign direct investment
(FDI) into India have increased significantly in the
current fiscal and the trend will continue in the coming
quarters on account the country's pro-growth policy
agenda, says a Moody's report.
According to the global credit rating agency, FDI
inflows are likely to remain buoyant in the coming
months of the current financial year and beyond.
"We believe that FDI will continue to perform well for
the remainder of fiscal 2015 and ..
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26. "We expect India's economic growth to pick up
materially next year. In contrast, China's economic
slowdown is set to continue, while the growth
outlooks for Brazil and Russia remain precarious,"
Moody's said.
Rising FDI inflows will therefore help to plug India's
current account shortfall, and such inflows are
typically less volatile than portfolio capital.
This in turn should help to reinforce the economy's
resilience to external headwinds, such as monetary
policy normalise .
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27. THE END
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