Foreign direct investment

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A small presentation on foreign direct investment

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Foreign direct investment

  1. 1. FOREIGN DIRECT INVESTMENT Deepthy Sai Manikandan
  2. 2. FDI: Introduction <ul><li>FDI occurs when a firm invests directly in facilities to produce or market a product in a foreign country. </li></ul><ul><li>Once a firm undertakes FDI, it becomes a Multi National Company. </li></ul>
  3. 3. 2 main forms <ul><li>Establishment of a new operation in a foreign country – GREEN FIELD INVESTMENT. </li></ul><ul><li>Acquiring or merging with an existing firm in foreign country. </li></ul>
  4. 4. Flow of FDI <ul><li>Investment in the equity capital of an enterprise in a recipient country by an MNC or an individual. </li></ul><ul><li>Profits ploughed back by the subsidiary of an MNC. Such retained profits are assumed to be reinvested in the subsidiary. </li></ul><ul><li>Short term or long term borrowing and lending of funds between the MNC and its subsidiary. </li></ul>
  5. 5. FDI <ul><li>Allowed in the following </li></ul><ul><li>forms: </li></ul><ul><li>Financial collaboration </li></ul><ul><li>Joint venture </li></ul><ul><li>Capital market </li></ul><ul><li>Private placements </li></ul><ul><li>Forbidden territories </li></ul><ul><li>Arms & ammunition </li></ul><ul><li>Atomic energy </li></ul><ul><li>Railway transport </li></ul><ul><li>Coal & lignite </li></ul><ul><li>Mining </li></ul>
  6. 6. Important to India <ul><li>Induce an increase in overall investment which leads to faster economic growth. </li></ul><ul><li>To use unutilized natural resources. </li></ul><ul><li>Improves overall degree of investors confidence. </li></ul><ul><li>Earns foreign exchange there by creating positive impact on exchange rate. </li></ul><ul><li>Additional source of capital – bridge the gap between income and consumption. </li></ul>
  7. 7. Challenges and strategy to promote FDI <ul><li>Lack of quality infrastructural facilities in India is one of the main reasons for India’s inability to attract huge infrastructure. </li></ul><ul><li>Overall political instability at the centre is another deterrent for FDI. </li></ul>
  8. 8. Barriers in Indian market <ul><li>Tariffs and tax structure </li></ul><ul><li>- complicated tax structure </li></ul><ul><li>Bureaucracy </li></ul><ul><li>- attitude of bureaucrats </li></ul><ul><li>- not co-operative </li></ul><ul><li>Corruption </li></ul><ul><li>Infrastructure </li></ul><ul><li>- poor state </li></ul>
  9. 9. Effect of Recession <ul><li>Most of the FDI in India comes from the US, so the current financial & liquidity crisis in US affected the flow of FDI. </li></ul><ul><li>FDI in BFSI will not be possible due to the financial crunch but investments in other venues like retail, print, cinemas, infrastructure will boom. </li></ul><ul><li>Finance Minister is looking to allow 100% FDI for credit inflows in Arab countries which will strengthen our market. </li></ul>
  10. 10. Thank You......

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