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Foreign direct investment in india



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  • 1. Foreign Direct Investments in India
    Bharani Ramakrishnan.S
    I-Year, MBA
    Bharathiar University
  • 2. Introduction
    World is perceived as a global village
    Globalization is the integration of economies of world through uninhibited trade and financial flows, as also through mutual exchange of technology and knowledge
    Globalisation has made markets highly competitive and there is remarkable growth of new service products
  • 3. In context to India,
    Globalization implies opening up of the economy to Foreign Direct Investment by providing facilities to foreign companies to invest in different fields of economic activity
  • 4. Foreign Direct Investments
    India offers greater incentives to encourage the foreign direct investments (FDI) inflows into its economy
    FDI has become a significant part of capital formation in the country
    FDI usually flows as a bundle of resources and skills into the economy
    These skills tend to spill over to domestic enterprises in the host country
  • 5. Therefore,
    FDI can be expected to contribute to growth more than proportionately compared to domestic investments in the host country.
  • 6. Benefits of Foreign Direct Investment
    FDI ensures a huge amount of domestic capital, production level, and employment opportunities which is a major step towards the economic growth of the country
    FDI has been a booming factor that has bolstered the economic life of India
  • 7. FDI policy in India
    FDI is not allowed in the sectors of arms and ammunitions, atomic energy, railway system, extraction of coal and lignite and mining industry
    In infra-structure development, FDI is allowed up to 100% equity participation, with the capping amount as Rs.1500 crores
    In finance sector, FDI is allowed up to 40%
    In telecom industry, FDI is allowed up to 49%
  • 8. Table-1 Cumulative FDI equity Inflows (Equity Capital Components only)
    Trends in India since 1991
    Note: FDI inflows include amount received on account of advances pending for issue of shares for the years 1999-04.
  • 9.
  • 10.
  • 11. Regional disparities in FDI equity inflows
  • 12.
  • 13. It should be noted that, Mauritius is the top investor in India. These investments are nothing but U.S. based investments
    They are routed through Mauritius because of the double taxation treaty advantage
    The tax advantage emanates from double tax avoidance agreement that India has with Mauritius
    It means that, any foreign investor has the option of paying tax either in India or in Mauritius
  • 14. Advantages of FDI
    FDI usually flows as a bundle of resources including, besides capital, production technology, organisational and managerial skills
    These skills tend to spill over to domestic enterprises in the host country
    FDI contributes more to the growth of the economy than that of the domestic investments
  • 15. Disadvantages of FDI
    Loss of ownership rights to a foreign company makes it a cautious decision
    The increased liquidity and the consequent inflation is due to the excessive FDI inflow
    It is being blamed for ousting the domestic inflows
    It is also claimed to have lowered few regulatory standards in terms of investment patterns
  • 16. The effects of globalization on Indian industry through FDI has proved to be positive as well as negative
    The government of India must try to make economic policies with regard to Indian Industries globalization that are beneficial and not harmful