Fdi Of India

7,503 views

Published on

Published in: Business, Economy & Finance
0 Comments
5 Likes
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
7,503
On SlideShare
0
From Embeds
0
Number of Embeds
39
Actions
Shares
0
Downloads
722
Comments
0
Likes
5
Embeds 0
No embeds

No notes for slide
  • <number>My brief presentation this morning is going to focus on the resurgence of India in the emerging World economic order and the attractiveness of India as an investment destination.
  • <number>
  • China was rated as the most preferred destination. India was followed by USA at 3rd placeThe experts rated India at 3rd place after China and USAATKearney 2004- China and USA were at first two placesChina and USA were the other two hotspots in UNCTAD and Corporate Location SurveyIn Global Services Location Index the gap between India and China at 2nd place is more than the gap between China at 2nd place and Brazil at 10th place.India was rated as the best off-shoring destination last year also.
  • <number>
  • As you see before you the reform measures have resulted in a sustained growth rate of over 6%. Both industry and services have registered a turnaround and the agriculture performance has attained stability. <number>
  • Our foreign exchange reserves have been growing steadily and we now have comfortable reserve balance of around US $ 35 billion. Similarly, the Rupee has also remained fairly stable, especially when compared with the steep devaluation in most of the Asian currencies. This is because we have been able to largely avoid the Asian crisis. <number>
  • Accordingly licensing has been virtually abolished, investment procedures have been simplified, capacity controls removed, tariff structure rationalized, exchange controls eased out, and the role of public sector has been redefined.
  • FDI up to 35% allowed under the automatic route in 35 priority areas in 1991The list of priority sectors expanded to 112 activities in 1997
  • Automatic route requiresInformation to RBI within 30 days of receipt of FDI, andInformation to RBI within 30 days of issue of shares to foreign investorFIPB comprises of Secretary DEA, Secretary IPP, Secretary NRI, Secretary Commerce, Secretary Economic Relations, MEA and Secretary of concerned Ministries
  • <number>
  • FDI has been growing. Cumulative approvals are of the order of USD 60b and inflows USD 19.35b. US has been the major investor. Others are Japan, Germany, UK, etc. Energy and power have been the major recipients.
  • Prior Government approval required in the six sectors under compulsory licensing, purchase of shares in an existing Company and having previous joint venture require Government approval. In addition sectors where investment is not under automatic route would require prior Government approval.The list of FDI equity caps and the route of entry is available in the Manual circulated among the participants.
  • Latest AT KEARNEY Business Confidence Index ranks India as 6th best investment destination.ATKEARNEY have also ranked India among the top 10 tourist destinations.India is rated as the best destination for Business Process Outsourcing.India is also a major destination for venture capital<number>
  • <number>
  • <number>
  • Fdi Of India

    1. 1. F.D.I. In India Business Environment Suneel Gupta 1
    2. 2. INDIAN Reforms-The Philosophy Plug into the Global Economy FDI recognised as a Growth Driver Large scale economic reforms 2
    3. 3. India – A Good Place to Put Your Money Fourth largest Largest Economy democracy – (PPP) - A safe political stability place & consensus on to do business reforms Largest Liberal & reservoir of transparent skilled investment manpower policies Long-term sustainable Second Largest Competitive Emerging Market advantage - High growth rate economy 3
    4. 4. Attracting long-term Creating skilled employment foreign capital to Opportunities and Import supplement domestic of world Class managerial investment efforts, practices particularly in infrastructure and export competitive sectors FDI Developing attractive Promoting technology Configurations of and other linkages to locational advantages enhance domestic industry at global level competitiveness 4
    5. 5. Global FDI trends 2000 s Record FDI flows of US$ 1.3 trillion in 2000 Developed world still favourite (over 75% of global share; mainly cross-border M&A) d US$ 240 billion to developing countries t Developing Asia gets US$ 143 billion, of which China and Hong Kong-China alone account for US$ 105 billion 1 Latin America gets US$ 86 billion t WHAT WE ARE REALLY LOOKING AT IS A SIGNIFICANT SHARE OF WHAT COMES TO ASIA 5 Source: UNCTAD WIR01
    6. 6. The “confidence” called India One of the fastest grow econom ing ies, second only after China Fourth-largest econom on purchasing pow parity basis y er 3rd in investor confidence for FDI investments India  offers the best return on investm am ent ong emerging markets “ Tim is now be in India. This is perhaps the m optim The e ..to ost istic I’ felt about ve India in the last 10-15 years that I’ been com here.” Jeffrey Im elt ve ing – m
    7. 7. Global Business Leaders on India “India is a developed country as far as “India can be the test intellectual capital is bed for developing concerned” solutions for the poorest nations. ” JACK WELCH, GE GERARD KLEISTERLEE , PHILIPS “India is handling the “India has evolved into most sophisticated one of the world’s projects in the world. I leading technology am impressed with the centres. ” quality of work” CRAIG BARRET, INTEL BILL GATES, MICROSOFT 7
    8. 8. Advantage India – the growth factor  Indian Econom –The 4th largest & 2nd fastest grow econom in the y ing y w orld (based on PPP adjusted GDP ~ USD 3.3 tri)  Estim ated GDP grow (2005-06) is 8,1 % th  GDP com position is w diversified across sectors w robust grow ell ith th. Agriculture 22.1%, Industry 21.7% & Services 56.2% 10 8.6 10 ye ar GDP g ro wth CAGR % 9 8 7 6.2 6 5.0 5.0 4.8 4.6 % 5 4.2 4 3.5 3.1 2.8 3 2 1 Gro wth o f 0 o sia ap re Phillip s Ec o no my alaysia Thailand China ng an o a ia K ng ine K re Sing o Ind Ind ne Taiw Ho o M
    9. 9. India: FDI Outlook • 2nd most attractive investment destination among the Transnational Corporations (TNCs) – UNCTAD’s World Investment Report, 2005 • 2nd most attractive investment destination – AT Kearney Business Confidence Index, 2005 – Up from 3rd place in 2004, 6th place in 2003 and 15th place in 2002 • Among the top 3 investment ‘hot spots’ for 2004-07 – UNCTAD & Corporate Location – April 2004 • Most preferred destination for services - AT Kearney’s 2005 Global Services Location Index (previously Offshore Location Attractiveness Index) 9
    10. 10. Sectoral Targets for Achieving 8% GDP Growth ( $7-8 Bn) Sector FDI Target (US$ Bn) Telecom 2.5 Power 1.2 Financial Services 0.8 LNG & Oil Exploration 1.0 Food & beverage 0.4 Transportation 0.4 Textiles 0.3 Ports 0.3 Chemicals & Petrochemicals 0.2 Hotels & Tourism 0.2 Real Estate 0.2 Roads 0.2 Civil Aviation 0.2 Dis-investment 0.5 Total 8.9 10
    11. 11. Glo bal Le ade rs fro m India 3rd largest producer of Largest producer One of the top IT optical storage media in the of motorbikes in Services com pany in w orld the world the world W orld’ largest tube s W orld’ largest s based television refinery plant manufacturer Amongst top 3 truck manufacturers in the world W orld leader in viscose W orld’ largest s staple fibre and 3rd largest W orld’ 2nd largest forging s producer of terry- producer of insulator com pany w outsourcing ith towels to m ajor car m anufacturers
    12. 12. 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  Independent judiciary 12
    13. 13. Key Economic Indicators: GDP Growth Rate (1993-94 as base year) 9% 7.6% 7.8% 8% 7% 6.8% 6.40% Growth Rate (%) 6% 5.1% 5% 5.40% 4.0% 4% 3% 2% 1% 0% 6 1 7 8 9 0 E) -9 -0 -9 -9 -9 -0 (A 95 97 98 99 00 96 2 19 20 19 19 19 19 -0 01 20 13
    14. 14. Key Economic Indicators: External sector Foreign Exchange Reserves (US$ billion) 80 56 48.8 48.33 70 46.64 49 42.5 43.6 63.93 Exchange Rate (Rs/US$) 60 37.2 42 35.5 54.15 50 33.5 35 42.26 40 38 28 30 30 26 21 22 20 17 14 10 7 0 0 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03(as on 11-10-02) 14
    15. 15. INDIA: TRACING FIRST GENERATION REFORMS • Industrial delicensing • Liberal FDI regime • Freedom to invest & expand • Simplification of investment procedures • Tax rationalisation • Current Account convertibility • Public sector divestment • WTO compatibility – Patents, etc. 15
    16. 16. The Reforms Process Ahead e Public sector divestment v Cutting fiscal deficit e Amendments to crucial economic legislations u Financial sector reforms Labour reforms Corporate governance a Meeting all multilateral commitments in terms of GATT, GATS, TRIPS, etc. 16
    17. 17. Some Independent Studies • JBIC Survey 2002 ranks India as the 5th most promising investment destination • EIU’s ‘World Investment Prospects 2002’ projects steep growth in FDI inflows to India 17
    18. 18. INVESTMENT OPPORTUNITIES INFRASTRUCTURE 10 year tax holiday for developers of SEZs/ Industrial Parks s 100% tax Exemption for 5 Years and 50% thereafter for two years for SEZ Units w 100% Tax holiday for 10 years for infrastructure undertakings 100% tax deduction for 10 consecutive assessment years to undertakings providing Telecom services 18
    19. 19. INVESTMENT OPPORTUNITIES INFRASTRUCTURE INVESTMENT REQUIREMENT: US $ 347 Bn Sector Present Capacity Investment By Capacity Addition By 2006 2006 (US $ Bn) Power 1.1 7Lakh MW 1,11,500 MW 178 Telecom 37 M Lines 52 M Lines 55 Ports 344 MT 350 MT 7 Roads a. National Highways 58, 112 Kms 23,000 Kms 27 b. State Highways 1,37,119 Kms 60,000 Kms c. Super N. H. 4,000 Kms Urban Infrastructure 80 Service 19 Source: Rakesh Mohan Committee Report (1996-2006)
    20. 20. Integrated Townships • FDI policy 100% FDI for development of integrated townships, including housing, commercial premises, hotels, resorts, city and regional level urban infrastructure facilities such as roads and bridges, mass rapid transit systems and manufacture of building materials • Incentives Ten years tax holiday to undertaking developing or operating and maintaining or developing, operating and maintaining infrastructure facilities such as; water supply project, water treatment system, sanitation and sewerage system or solid waste management system 20
    21. 21. Recent Initiatives on FDI • FDI up to 100% allowed in Tea sector, including tea plantations with prior Government approval • 100% FDI permitted on automatic route in Advertising & Films • Royalty on brand name/trademark payable as percentage of net sales • Guidelines for licensing production of Arms & Ammunition notified 26% FDI permitted 3 year lock-in period for transfer of equity from one investor to another Import of equipment/prototype allowed • Guidelines for development of integrated Townships including housing & building material notified 100% FDI permitted minimum capitalisation norm - US$10 million for WoS & US$ 5 million for JVs 3 year lock-in period 21
    22. 22. Rationalisation of FDI Policy Procedural further simplified New sectors opened Equity caps raised More sectors opened Equity caps raised Procedures simplified Up to 100% Under Automatic Route in all sectors except a small negative list up to 74/51/50% in 112 sectors under Automatic Route 100% in some sectors Up to 51% under Automatic Route for 35 Priority Sectors Allowed selectively up to 40% Pre 1991 1991 1997 2000 2000-05 2006 22
    23. 23. Investing in India – Entry Routes Investing in India Prior Permission Automatic Route (FIPB) General Rule By Exception No prior permission Prior Government required Approval needed. Inform Reserve Bank Decision generally within 30 days of within 4-6 weeks inflow/issue of shares 23
    24. 24. FDI Approval Procedure Automatic Route in most Government Route for few Sector sectors RBI FIPB No permission required, only Approval is to notify RBI within 30 days of granted generally issue of shares to foreign in 30 days investors 24
    25. 25. Main Sectors with FDI Equity/Route Limit FDI equity limit- FDI equity limit - prior Automatic route approval required • FM Broadcasting - foreign • Insurance – 26% equity 20% • Domestic airlines – • Defence production – 26% 49% • News and current affairs- 26% • Telecom services- • Broadcasting- cable, DTH, up- Foreign equity 74% linking – foreign equity 49% • Single Brand retailing – 51% • Private sector banks- 74% • Tea plantation – 100% • Courier services- 100% 25
    26. 26. Foreign Direct Investment Annual Inflow Cumulative FDI Approval 1991-2002(August): US$ 76.15 billion Cumulative FDI Inflow 1991-2002 (August): US$ 30.98 billion 6.00 4.7 4.8 5.00 4.6 4.0 US $ billion 4.00 3.4 3.0 3.00 2.2 2.00 1.0 1.00 0.6 0.3 0.1 0.00 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000-01 2001-02 26
    27. 27. Manufacturing Sectors with 100% FDI under ‘Automatic Route’ • Cars and motor vehicles • Construction Machinery • Refrigerator and fire fighting • Domestic air conditioners equipments • Electric motors, industrial electric furnaces • Food processing • Mining and Querying • Electronic Hardware Machinery • Iron and steel • Steam engines and turbines • Private Oil Refineries • Non-metallic mineral products • Agriculture tools and • Rice, oil mill machinery implements • Chemical machinery • Fertilizers and pesticides • Drugs and pharmaceuticals • Pollution control equipments except those requiring industrial licensing • Tyres and tubes • Medical equipments • Packaging products • Office computing and accounting machinery 27
    28. 28. Infrastructure Sectors with 100% FDI Under ‘Automatic Route’ • Electricity Generation (except Atomic energy) • Electricity Transmission • Electricity Distribution • Mass Rapid Transport System • Roads and Highways • Toll Roads • Vehicular Bridges • Ports and Harbors *Hotel and tourism 28
    29. 29. Services Sector with 100% FDI under Automatic Route • Advertising and films • Computer related services • Research and development services • Construction and related engineering services • Pollution control and Management services • Urban Planning and Landscape services • Architectural services • Health related and social services • Travel related services • Road transport services • Maritime transport services • Internal waterways transport services 29
    30. 30. Sectors with Restrictions on FDI • Sectors with limits on FDI Caps – Private Banking ( 49%) – Insurance (26%) – Domestic Airlines (40%) – Basic and mobile services (49%) – Print Media (26%) – Defence production (26%) • Sectors where FDI is prohibited – Gambling, betting, lottery – Retail Trade – Agriculture Plantation, except tea plantation 30
    31. 31. Foreign Investment Implementation Authority (FIIA) • Provides pro-active one-stop after care service to foreign investors • Facilitates quick translation of FDI approvals into implementation • Sorts out operational problems and finds solution Supporting mechanism • Fast Track Committees  review individual projects  review and suggest deletion of redundant procedures  simplify existing procedures • Nodal Officers for follow up of FDI cases in states 31
    32. 32. Important Features of Department’s Web Site  Web Site: www.indmin.nic.in  All the publications and forms for seeking License, FIPB approval, etc. available in downloadable format  Present Status of Application Submitted for FIPB and PAB Approvals are posted on the web site  Chat Facility during 1600 to 1700 Hrs on Every Working Day  Bulletin Board facility for Seeking Clarifications on Complicated Matters ( Replies sent just after one day) 32
    33. 33. ‘Dreaming with BRICs: The Path to 2050’- by Goldman Sachs • BRICs (Brazil, Russia, India & China) economies could be larger than G-6 in less than 40 years; – By 2025 over half of G-6 size against less than 15% at present; • India has potential to growth rate higher than 5% over the next 30 years and close to 5% as late as 2050; – Only India among BRICs to have growth rates significantly above 3% by 2050; • Indian economy can overtake Italy by around 2017, Germany by around 2027 and Japan by 2032; • India has the potential to raise its per capita income in US$ terms by 35 times by 2050. 33
    34. 34. India: FDI Outlook • Rated as the best BPO destination; AT KEARNEY • Best technology licensing regime - UNCTAD’s Global Competitiveness Report, 2003; • Rated among the most favourite investment destinations (UNCTAD, JETRO, JBIC, Deutsche Bank, EIU, etc.) • Major destination for foreign venture capital funds (Far Eastern Economic Review) • Sixth most attractive investment destination – ATKEARNEY Business Confidence Index, 2003 • Also among the top 10 Tourist Destinations. 34
    35. 35. Sectoral Distribution of FDI Inflows (1991-August 2002) Fuels 10% Electrical Equipment 13% Telecom 13% Chemicals (Other Others than Fert.) 34% 7% Services Sector 8% Food Processing Transportation Industries Industry 35 4% 11%
    36. 36. Major MNCs in INDIA Automobile Chemicals & Pharma Auto Components Telecom Fiat Auto AKZO NOBEL Denso Corporation AT&T Daewoo CIBA India Graziano Swiss Telecom Daimler Benz Sinco Engg. Robert Bosch Deutsche Telekom AG Ford Bayer Carraro Motorola General Motors EMS Inventa AG SIAP S.P.A STET International Honda Mining Toyota Telesystem International Hyundai Ashton Power Telstra Corp Suzuki American Exploration Power Gen SIET International Toyota Rio Tinto Siemens Consumer Goods Volvo Oil & Gas ST Power System Fosters Hardy Oil & Gas Miscellaneous AB Electrolux Trading Metro Cash & International Petroleum Asea Brown Boveri Kellogg Carry GMBH SHV Energy Buhler* Nestle SA FIDIA Unocal Schindler Perfetti Mitsubishi Van Ommeren Italcementi Coca Cola SHV Macro Cerestar Holding Pepsi 36
    37. 37. 37

    ×