INDIAN INVESTMENT IN
CLASSIFICATION OF FDI
INDIAN POLICY FRAMEWOR
BENEFITS OF FDI
PROBLEMS WITH FDI
WHAT IS FDI?
Foreign direct investment (FDI) refers to
cross –border investment made by a
resident in one economy (the direct
investor) with the objective of establishing
a lasting interest in an enterprise (the direct
investment enterprise) that is resident in a
country than that of the direct investor
CLASSIFICATION OF FDI
TYPES OF FDI
BY DIRECTION BY TARGET
INWARD GREENFIELD INVEST
Horizontal and Vertical
MKT & Efficiency
NEED FOR FOREIGN
Domestic capital is inadequate for purpose
of economic growth
During the period in which the capital
market is in the process of development ,
foreign capital is essential as a temporary
Foreign capital brings with it other scare
productive factors; technical know how,
business experience and knowledge.
Authorities dealing with FI
Foreign investment promotion board
Expedite clearance process.
Periodically review implementation of
Review general and sectoral policy
Undertake investment promotion activities.
Secretariat for industrial assistance (sia)
Acts of gateway to industrial investment in
Assist entrepreneurs and investors in
setting up projects
Liaise with govt. bodies seek necessary
Foreign investment implementation
Quick implementation of FDI approval.
Resolution of operational difficulties faced
by foreign investors.
Gather feedback from foreign investors
Other authorities involved:
Project approval board
RBI OF INDIA
Foreign investment is allowed in all areas
except following sectors where foreign
investment is prohibited.
Agriculture (except floriculture, horticulture,
seed development etc.)
Lottery business/gambling and betting.
Plantations (except tea plantations)
MOBILIZATION OF FUNDS
Different options for Indian corporate,
Investment through GDRs and ADRs
Mobilization of funds through preference
Mobilization of funds through external
Foreign currency exchangeable bonds.
PRIMARY REASONSS FOR FDI
INVESTMENT IN INDIA
Local market demand – 68%
Low cost operations -29%
Ease of making FDI- 29%
Labour availability -29%
Entry of other players 24%
Political Stability 24%
Time zone advantage- 14%
Benefits of FDI
Play a complementary role in overall capital
Employment generation and productivity
Encourages the transfer of management skills,
intellectual property and technology.
Improves Forex position of the country.
Promotion of the competition within the local
Development of human capital resources.
Increase in exports
Increases tax revenues
Problem with FDI
A company may lose out on its ownership
to an overseas company.
Govt. has less control over the functioning
of the company that is functioning as the
wholly owned subsidiary of an overseas
FDI entering and taking the control of
already established market, where local
companies are meeting the requirement of
Invest in machinery and intellectual
property, not in wages
Large giants can set up monopolies in
highly profitable sector.