1
Foreign
Direct
Investment
PRESENTED BY :-
CHINMAYA RANJAN RAY
PRIYANSH ACHARYA
SHIMONA SIWATCH
MAYANK SINHA
ISHA GUPTA
A...
2
An Overview
• What is FDI ????
• Why we need FDI ????
• What is the process of the
Inflow of FDI ????
• What are the ben...
3
Defination of FDI
Foreign direct investment (FDI)
occurs when an investor based
in one country (the home
country) acquir...
4
Types of FDI
• FDI Types
– Purchase of existing assets
• Quick entry, local market know-how, local financing
may be poss...
5
Which factors
encourages FDI?
• Financial incentives (Funds from local
Government)
• Fiscal incentives (Exemption from
i...
6
Which factors
encourages FDI?
•Political stability
•Market potential & accessibility
•Large economy
•Market size
•Extern...
7
Don’t Be Confused Between
FDI & FII
• FII - is Foreign Institutional Investors, i.e, foreign
Investment Bankers like Gol...
8
The Direction of FDI
• Historically, most FDI has been directed at the
developed nations of the world as firms based in
...
9
Modes of FDI
• 1) By Direction
• * Inward
• *Outward
• 2) By Target
• * Mergers and Acquisitions
• * Horizontal FDI
• * ...
10
BY TARGET
• Mergers and Acquisitions
• Transfers of existing assets from local firms to
foreign firms takes place;
• Ho...
11
BY MOTIVE
Resource-Seeking
This typifies FDI into developing countries, for example seeking natural
resources in the Mi...
12
INDIA
AN IDEAL INVESTMENT DESTINATION
 World’s largest democracy
 Second largest emerging market (US$ 2.4
trillion)
...
13
FDI Approval Procedure
Government Route for few
sectors
Automatic Route in most
Sector
RBI FIPB
No permission required,...
14
FDI Inflows….Robust GrowthFDI Inflows….Robust Growth
4029
4322
74047722
60515035
6130
0
1000
2000
3000
4000
5000
6000
7...
15
0
500
1000
1500
2000
2500
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006 April Nov
US$m
Electrical Equipment (inc...
16
17
FDI Policy …. Prohibited activitiesFDI Policy …. Prohibited activities
• Retail except single brand retailing allowed u...
18
Manufacturing
• 100% FDI permitted in all activities under automatic route
except:
– Cigar and cigarettes of tobacco - ...
19
FDI Policy for Industry Sector…. Fully permittedFDI Policy for Industry Sector…. Fully permitted
Mining
• Coal – FDI up...
20
FDI Policy for Service Sector…. Largely
permitted
FDI Policy for Service Sector…. Largely
permitted
• FM Broadcasting (...
21
FDI Policy for Service Sector…. Largely
permitted
FDI Policy for Service Sector…. Largely
permitted
• Telecommunication...
22
Political Ideology & FDI
23
Advantages of FDI
• Infrastructure and
technology transfer
• Increased Productive
efficiency due to
competition from
mu...
24
Advantages of FDI
• Faster growth of output
and employment
• Consumer Benefits
Price
Quality
Varieties
25
Advantages of FDI
• Increase in Exports
• Increase in savings and
Investment
26
Costs of FDI
• Detriment of the growth
of domestic producer and
the national economy
27
Costs of FDI
• Enviroment and natural
resource costs
• Abuse of local culture and
traditions Ex
FDI Tourism Abuse
28
Costs of FDI
• Facilitate hegemony by the
dominant US and the
western cultures.
• Political Influence (News)
Print Ente...
29
Wish u a merry x-mas and a
happy new year!!!
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  • Table 8.1, p. 268
  • Copy of fdi modi-1208079237594134-8

    1. 1. 1 Foreign Direct Investment PRESENTED BY :- CHINMAYA RANJAN RAY PRIYANSH ACHARYA SHIMONA SIWATCH MAYANK SINHA ISHA GUPTA ACHAL DUGAR
    2. 2. 2 An Overview • What is FDI ???? • Why we need FDI ???? • What is the process of the Inflow of FDI ???? • What are the benefits and costs????
    3. 3. 3 Defination of FDI Foreign direct investment (FDI) occurs when an investor based in one country (the home country) acquires an asset in another country ( the host country) with the intent to manage the asset.
    4. 4. 4 Types of FDI • FDI Types – Purchase of existing assets • Quick entry, local market know-how, local financing may be possible, eliminate competitor, buying problems – New investment • No local entity exists or is available for sale, local financial incentives may encourage, no inherited problems, long lead time to generation of sales or other desired outcome – Participation in an international joint-venture • Shared ownership with local and/or other non-local partner
    5. 5. 5 Which factors encourages FDI? • Financial incentives (Funds from local Government) • Fiscal incentives (Exemption from import duties) • Indirect incentives (Provides land and infrastructures at less commercial prices)
    6. 6. 6 Which factors encourages FDI? •Political stability •Market potential & accessibility •Large economy •Market size •External debt discourages FDI
    7. 7. 7 Don’t Be Confused Between FDI & FII • FII - is Foreign Institutional Investors, i.e, foreign Investment Bankers like Goldman sachs, Merrill lynch, Lehman bros etc...investing in indian markets......in other words buying indian stocks.....FII's generally buy in large volumes which has an impact on the stock markets... FDI - is Foreign Direct Investments i.e. a foreign company having a stake in a public sector undertaking in a country for a long period and that company is called Multinational Enterprise.
    8. 8. 8 The Direction of FDI • Historically, most FDI has been directed at the developed nations of the world as firms based in advanced countries invested in other markets – The US has been the favorite target for FDI inflows • While developed nations still account for the largest share of FDI inflows, FDI into developing nations has increased – Most recent inflows into developing nations have been targeted at the emerging economies of South, East, and Southeast Asia
    9. 9. 9 Modes of FDI • 1) By Direction • * Inward • *Outward • 2) By Target • * Mergers and Acquisitions • * Horizontal FDI • * Vertical FDI • (a) Backward Vertical FDI • (b) Forward Vertical FDI • 3 )By Motive • * Resource-Seeking • * Market-Seeking • * Efficiency-Seeking • * Strategic-Asset-Seeking
    10. 10. 10 BY TARGET • Mergers and Acquisitions • Transfers of existing assets from local firms to foreign firms takes place; • Horizontal FDI • Investment in the same industry abroad as a firm operates in at home. • Vertical FDI • *Backward Vertical FDI • Where an industry abroad provides inputs for a firm's domestic production process. • *Forward Vertical FDI • Where an industry abroad sells the outputs of a firm's domestic production.
    11. 11. 11 BY MOTIVE Resource-Seeking This typifies FDI into developing countries, for example seeking natural resources in the Middle East and Africa, or cheap labor in Southeast Asia and Eastern Europe. Market-Seeking Investments which aim at either penetrating new markets or maintaining existing ones.. Efficiency-Seeking It is suggested that this type of FDI comes with the expectation that it further increases the profitability of the firm. Typically, this type of FDI is mostly widely practiced between developed economies; especially those within closely integrated markets (e.g. the EU).. Strategic-Asset-Seeking A tactical investment to prevent the loss of resource to a competitor. Easily compared to that of the oil producers, whom may not need the oil at present, but look to prevent their competitors from having it.
    12. 12. 12 INDIA AN IDEAL INVESTMENT DESTINATION  World’s largest democracy  Second largest emerging market (US$ 2.4 trillion)  Liberal Foreign Investment Regime  Skilled and competitive labour force  Amongst the highest rates of return on investment  Large domestic market
    13. 13. 13 FDI Approval Procedure Government Route for few sectors Automatic Route in most Sector RBI FIPB No permission required, only to notify RBI within 30 days of issue of shares to foreign investors Approval is granted generally in 30 days
    14. 14. 14 FDI Inflows….Robust GrowthFDI Inflows….Robust Growth 4029 4322 74047722 60515035 6130 0 1000 2000 3000 4000 5000 6000 7000 8000 9000 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006 Apr - Nov US$m (Only Equity)
    15. 15. 15 0 500 1000 1500 2000 2500 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006 April Nov US$m Electrical Equipment (including Software) Telecommunications Transportation Chemicals (other than Fert.) Services Sector Fuels (Power & Oil Refinery) Construction Activities FDI Inflows- Sector -wise Electrical equipment including software moves to over all 2nd position in Nov 2006. Services sector shows spurt in growth and the top sector attracting FDI – moving up from the third position. Spurt in FDI in Real Estate causes the construction sector to the third position in Nov 2006.
    16. 16. 16
    17. 17. 17 FDI Policy …. Prohibited activitiesFDI Policy …. Prohibited activities • Retail except single brand retailing allowed upto 51% with FIPB approval • Atomic energy • Lottery business • Betting and Gambling
    18. 18. 18 Manufacturing • 100% FDI permitted in all activities under automatic route except: – Cigar and cigarettes of tobacco - FIPB – Products reserved for Small Scale Sector • FDI less than 24% under automatic route • FDI beyond 24% - FIPB subject to export obligation – Defence products • FDI upto 26% - FIPB subject to licensing of Arms and Ammunitions FDI Policy for Industry Sector…Fully permittedFDI Policy for Industry Sector…Fully permitted
    19. 19. 19 FDI Policy for Industry Sector…. Fully permittedFDI Policy for Industry Sector…. Fully permitted Mining • Coal – FDI upto 100% as per Coal Mines (Nationalization) Act 1977 • Diamond, Gold, Silver , Minerals – upto 100% under automatic route as MMRD Act • Atomic minerals – upto 74% in JV with PSUs – FIPB Electricity • FDI upto 100% under automatic route in Generation, Transmission, Distribution and Power Trading as per Electricity Act 2003
    20. 20. 20 FDI Policy for Service Sector…. Largely permitted FDI Policy for Service Sector…. Largely permitted • FM Broadcasting (20%) - FIPB • Uplinking News and CATV Channel - FIPB • Print Media – News Papers & Periodicals - FIPB • Insurance - Automatic Upto 26% Upto 49% • Broadcasting - Cable Network, DTH, Setting up hardware - FIPB • Stock Exchanges - FIPB • Air Transport Services - Automatic
    21. 21. 21 FDI Policy for Service Sector…. Largely permitted FDI Policy for Service Sector…. Largely permitted • Telecommunication - FIPB (Beyond 49%) • Private sector banks - Automatic • Development of existing airports - FIPB (Beyond 74%) • Publishing scientific magazines - FIPB • Courier services - FIPB Upto 74% Upto 100%
    22. 22. 22 Political Ideology & FDI
    23. 23. 23 Advantages of FDI • Infrastructure and technology transfer • Increased Productive efficiency due to competition from multinational subsidiaries
    24. 24. 24 Advantages of FDI • Faster growth of output and employment • Consumer Benefits Price Quality Varieties
    25. 25. 25 Advantages of FDI • Increase in Exports • Increase in savings and Investment
    26. 26. 26 Costs of FDI • Detriment of the growth of domestic producer and the national economy
    27. 27. 27 Costs of FDI • Enviroment and natural resource costs • Abuse of local culture and traditions Ex FDI Tourism Abuse
    28. 28. 28 Costs of FDI • Facilitate hegemony by the dominant US and the western cultures. • Political Influence (News) Print EntertainmentsTV
    29. 29. 29 Wish u a merry x-mas and a happy new year!!!

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