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Foreign Direct Investment in India (FDI)

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FDI in various sectors in India explained in brief.

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Foreign Direct Investment in India (FDI)

  1. 1.  GROUP MEMBERS-  Ameya Gandhi (13)  Pratik Jain(16)  Priy Chheda(46)  Pranali Bavkar(2)  Rohit Maingi(19)  Rushil Gupta(65)  Sunmeet Matta(22) Gurpreet kaur(15) Vikramjeet Singh Solar(48) Hardik Gala(12) Harshal Panchal(29) Arshad Ck(54) Jagjit Kaur Wasan(44) 1 22/9/2013
  2. 2. What is FDI..?  Foreign direct investment (FDI)-  It is a direct investment into production or business in a country by an individual or company in another country.  It can be either by buying a company in the target country or by expanding operations of an existing buisness in that country. 2 22/9/2013
  3. 3. 0 1000 2000 3000 4000 5000 6000 US$million 3 22/9/2013
  4. 4. 31% 13% 12% 11% 10% 6% 6% 4% 4% 3% Services Sector Computer Software & hardware Telecommunications Housing & real Estate Construction Activities Power Automobile Industry Metallurgical Industries Petroleum & Natural Gas Chemicals 4 22/9/2013
  5. 5. 53% 11% 9% 7% 5% 4% 4% 3% 2% 2% Mauritius Singapore USA UK Netherlands Japan Cyprus Germany UAE France 5 22/9/2013
  6. 6. Economic Growth Trade Employment and skill levels Technology diffusion and knowledge transfer Linkages and spillover to domestic firms 6 22/9/2013
  7. 7. 7 22/9/2013
  8. 8. MANUFACTURING SECTOR 8 22/9/2013
  9. 9.  Ranked 2nd most favored destination for foreign investments after China  India ranks among the top 12 producers of manufacturing value added (MVA).  In textiles, the country is ranked 4th after China, USA and Italy.  In electrical machinery and apparatus, it is ranked 5th. 9 22/9/2013
  10. 10.  6th position in the basic metals category  7th in chemicals and chemical products  10th in leather, leather products, refined petroleum products and nuclear fuel  12th in machinery and equipment and motor vehicles. 10 22/9/2013
  11. 11. Foreign Direct Investment (FDI) up to 100% is permitted in all manufacturing activities except:- Defense Industry Cigars & Cigarette manufacturi ng Where the foreign investor has an existing joint venture in India in the same field. Where more than 24% foreign equity is proposed to be inducted for manufactur e of items reserv ed for Small Scale sector 11 22/9/2013
  12. 12. 12 22/9/2013
  13. 13. 13 22/9/2013
  14. 14. 14 22/9/2013
  15. 15. Attracted only $3.4 billion of FDI in manufacturing on an average every year from 2000 to 2008 67% of China’s total FDI comes in the manufacturing sector compared to 37% in case of India. Acc to FICCI Action plan, India can attract $12billion of FDI in the manufacturing sector per annum. 15 22/9/2013
  16. 16.  India’s share in outward FDI stock is negligible (Chemicals, Automobiles, Food Processing, Electrical & Electronic Equipment, Metals and Machinery Equipment)  Sectors like Industrial Machinery, Agricultural Machinery, Ship Building, Medical & Surgical Devices and Computer Hardware  Rather India imports these items. 16 22/9/2013
  17. 17. FDI Inflows for SelectedSectorsin India(Jan 2000 to September 2008) Sector FDI Inflows ($ million) Ship Building 59.15 Industrial Machinery 283.77 Agricultural Machinery 148.37 Earth Moving Machinery 134.51 Medical and Surgical Appliances 140.77 Computer hardware 99.7 Defence 0.15 17 22/9/2013
  18. 18. A concrete and comprehensive Action plan FDI Policy should aim at incentivizing maximum value addition . Encourage technology transfer by adopting ‘Swap Technology for Market’ policy Cut ting down the complex regulatory procedures and reducing delays in the project approvals. 18 22/9/2013
  19. 19. FDI IN SERVICE SECTOR 19 22/9/2013
  20. 20.  India's large service industry accounts for more than 50% of the country's GDP.  It makes up more than 25% Employment  Service sectors like telecommunication, IT enabled services, insurance, air transport are becoming prominent 20 22/9/2013
  21. 21.  Introduction of ‘Manmohanomics’ in 1991  Growing presence of transnational corporations and the technological progress.  Liberalization of many service sectors activities (telecom, transport, finance etc.) 21 22/9/2013
  22. 22.  Attracted $3.12 billion FDI in the first seven months of 2009-10  22 per cent of the total FDI inflows of $17.64 billion in the April-October for service sector  In 2008-09, attracted the maximum FDI worth USD 6.11 billion. 22 22/9/2013
  23. 23. FDI Policy in Services Sector  100% FDI is permitted for many service sectors like- (Real estate, Construction, Hotels, tourism, films, IT - enabled services, Consultancy, Medical, Education, Advertising, etc) 23 22/9/2013
  24. 24. Restricted sectors in Services  Atomic Energy, Lottery Business, Gambling and Betting, Business of Chit Fund, and any activity/sector that is not opened to private sector investment.  Besides the above, FDI is not allowed in plantations. 24 22/9/2013
  25. 25. CurrentissueswithFDI in ServicesSector  Very weak linkages of service sector with the Indian economy (only few cities)  Requires highly skilled workers  Employee Welfare in time of crisis 25 22/9/2013
  26. 26. Allowed up to 100% Contributes 19% to the GDP Pilot programme for delivering subsidy directly to farmer 26 22/9/2013
  27. 27.  To connect 66,800 habitations  To construct 1,46,000Km of new rural roads  To Upgrade and modernize 1,94,000Km of existing rural roads  To provide corpus of Rs. 8000 crore RIDF(rural infrastructure development fund) 27 22/9/2013
  28. 28. FDIinRetail….WHYINDIA? Low share of organized retailing Increase in disposable income and customer aspiration or demand. Increase in expenditure for luxury items. 28 22/9/2013
  29. 29. FDIinRetail….Benefits  Generate huge employment  Increased investment in technology  The huge tax revenue generated.  The consumer gains from the wide variety of choices and a more diversified basket.  The indirect benefits like better roads, online marketing, expansion of telecom sector etc. Will give a ‘big push’ to other sectors like agriculture, small and medium size enterprises.29 22/9/2013
  30. 30. FDIinRealEstate  Second-most favoured destination for FDI in the world  Norms to allow 100% FDI in Mar 2005 .  100 acre criterion to 25 acre criterion. 30 22/9/2013
  31. 31. FDIinRealEstate….WhyInvest??  India produces an estimated 2 million new graduates  Presence in the list of top 500 sectors complied by US taking into consideration of the growth rate.  Real estate investments in India yield huge dividends. 31 22/9/2013
  32. 32. Tourism Raised to $120 million. Major source of employment. Third largest earner of foreign exchange. Private investments through public private partnership. 100% FDI permitted. 32 22/9/2013
  33. 33. NeedforFDIinTourism  Foreign tourist arrivals are expected to grow to 10 million by 2010-12 Estimated that tourism in India could contribute Rs.8,50,000 crores to the GDP by 2020 33 22/9/2013
  34. 34. ReasonsforlowFDI High Taxes Highest import duty on imported liquor used in hotels Service Tax on Tour Operators Inland Air Travel Tax 34 22/9/2013
  35. 35. FDI Policies in India(overview)  FDI Policy permits FDI up to 100 % from foreign/NRI investor without prior approval in most of the sectors. Known as the automatic route.  The FDI policies in INDIA are formulated on 4 parameters: -Increased capital flow. -Improved technology. -Management expertise. -Access to international markets.  Hence 100% inflow was allowed in sectors like Power, Renewable energy , Agriculture, mining etc.  Also sectors like insurance and defence have a cap of 26% and the banking sector has cap of 49%. 35 22/9/2013
  36. 36. Someof the MajorInvesting Countries 36 22/9/2013
  37. 37. Attract ‘Quality’ FDI Attract technology and localize production Focus on Export- oriented FDI Target specific sectors Increase ease of doing business 37 22/9/2013
  38. 38. FDI may provide better access to latest technologies for the local economy. FDI provides compitition to the local industries which intern make them compitant. Hence product quality improvement. The increased flow of FDI in a country has given a major boost to the country's economy . Hence measures must be taken in order to ensure that the flow of FDI in the country to continue to progess in all perspectives. 38 22/9/2013
  39. 39.  THANK YOU 39 22/9/2013

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