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Foreign direct investment in india


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Foreign direct investment in india

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