F D I

2. INDEX :
 What is FDI
 Why FDI
 Drawbacks of FDI
 Impact of FDI on host economy
 Studies on FDI in India
 FDI policy in India
 Year wise FDI inflow in the post reforms era
(1990-2010)
 Top Investors in India
 Telecommunications sector
 Retail Sector in India

3. • Foreign direct investment (FDI) is a direct investment
into production or business in a country by an
individual or company of another country, either by
buying a company in the target country or by expanding
operations of an existing business in that country.
•
• Foreign direct investment is in contrast to portfolio
investment which is a passive investment in the
securities of another country such as stocks and bonds..

4.  No debt creation on the part of the government.
 Triggers technology transfer.
 Assists Human capital formation.
 Contributes to international integration by
promoting exports.
 Increases productivity and competitiveness.
 Improves efficiency of resources.
 Promotes innovation

5.  Local firms may loose business because of the
oligopolistic power of foreign firms.
 The repatriation of profit may drain out the
capital of the host country.
 Local population may be displaced out of their
jobs if they are unable to cope with the
technologically advanced foreign firms.

6.  FDI may have a negative impact on the growth of
the developing countries (Singer,1950; Griffin,
1970).
 Hanson (2001) argues that evidence that FDI
generates positive spillovers for host countries is
weak.
 FDI could have a favorable short-term effect on
growth as it expands the economic activity.
However, in the long run it reduces the growth
rate due to dependency, particularly due to
“decapitalization” (Bornschier, 1980).

7.  Banga (2005) demonstrates that FDI, trade and
technological progress have differential impact on
wages and employment.
 Higher extent of FDI in an industry leads to higher
wage rate, it has no impact on its employment.
 Higher export intensity of an industry increases
employment in the industry but has no effect on its
wage rate.
 Import of technology has unfavorably affected
employment in India. The study by Sharma (2000)
concluded that FDI does not have a statistically
significant role in the export promotion in Indian
Economy.

8.  Study by Sahoo and Mathiyazhagan (2003)
support the view that FDI in India is not able to
enhance the growth of the economy.
 Pailwar (2001) argues that the foreign firms are
more interested in the large Indian market rather
than aiming for the global market.
 Export oriented sectors should be opened up for
FDI so that a higher growth of the economy could
be achieved through the growth of these sectors.

9.  Currently FDI is permitted:
a) Through financial collaborations.
b) Through Joint Ventures and technical
collaborations.
c) Through capital markets via Euro issues.
d) Through preferential allotments.
 India had opened up its economy and allowed
MNCs in the core sectors such as Power and Fuels,
Electrical Equipments, Transport, Chemicals, Food
Processing, Metallurgical, Drugs and
Pharmaceuticals, Textiles, and Industrial Machinery.

10.  Telecommunications, Banking, Insurance,
Hotel & Tourism, IT.
 Mining of titanium keeping India's civilian
nuclear ambitions in mind upto100%,a mineral
which is abundant in India.
 single Brand product retailing where Foreign
Investment up to 51% is permitted with prior
Government approval. Major debate going on
about approving FDI in India’s Retail sector.

11. 2439
0 1000 2000 3000 4000
1992-1993
1993-1994
1994-1995
1995-1996
1996-1997
1997-1998
1998-1999
1999-2000
US $ MILLIONS
FDI

12. 0 10000 20000 30000 40000
2000-2001
2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
US $ MILLIONS
FDI
37763
Year wise revised FDI
Inflow since 2000-2001 with
expended coverage to
approach International
Best Practices.

13.  The growth of FDI inflows in India was not
significant until 1991 due to the regulatory policy
framework.
 There has been a steady build up in the actual FDI
inflows in the post-liberalization period. Actual
inflows have steadily increased from US $ 143.6
million in 1991 to US $ 37,763 million in 2010.

The pace of FDI inflows to India has definitely
been slower than some of the smaller developing
countries like Indonesia, Thailand, Malaysia and
Vietnam.

14.  India had registered a declining trend of FDI
inflows and the FDI- GDP ratio especially in 1998
and 2003 could be attributed to many factors,
including the US sanctions imposed in the
aftermath of the nuclear tests and Swadeshi
movements.
 But since 2006 India has seen a remarkably higher
growth of FDI in accordance with the general
trends of the global economy with a slight dip in
the year 2009-2010.

15.  Capital goods sector has more or less been
bypassed by FDI. This clearly points out the
tendency of foreign investment to exploit the pent
up domestic demand for consumer durable goods.
 A gradual increase in the mergers and acquisitions
during the 1990s which show a tendency of FDI
inflows to acquire existing industrial assets and
managerial control without actually engaging in
new productive activities (Nagraj, 2006).

16. 42
9
7
5
4 4 4
2 2
19
0
5
10
15
20
25
30
35
40
45
M
auritius
Singapore
U
.S.A
.
U
.K
N
etherlands
Japan
C
yprus
G
erm
any
France
O
thers
%agetototalInflows(intermsofUS$)
%

17.  Large number of private operators started
operating in the basic/mobile telephony and
Internet domains after several series of reforms in
the telecom sector. FDI is permitted up to 74% with
FDI, beyond 49% requiring Government approval.
 As a result of the New Telecom Policy 1999
(NTP99) Total FDI in telecom is currently over US
$ 15 billion.
 Tremendous improvement in infrastructure,
lowest tariff rates in the world and over 250
million users.
 In 2007-2008 Vodafone took over Hutch for about
US $ 11 billion.

18.  Retail industry in India is one of the fastest growing.
 Contributes 14% to the national GDP and employs 7%
of the total workforce.
 The retail industry is divided into organised and
unorganised sectors.
 Organised trade employs roughly 5 lakh people
whereas the unorganized retail trade employs nearly
3.95 crores.
 Growth in Retail as a result of economic expansion as
well as jobless growth.

19.  FDI driven modern retailing is labour displacing.
 It can only expand by destroying the traditional
retail sector.
 Foreign retail firms have deep pockets and can
cause even the organized retail sector to go out of
business.
 Will buy big from India and abroad and be able to
sell low. When monopoly situation is created will
will buy low and sell high.

20.  It is true that it is in the consumer’s best
interest to obtain his goods and services at the
lowest possible price. But collective well being
should take precedence.

21.  FDI should be aggressively promoted in R&D,
Manufacturing, Entertainment to accommodate
the people who have lost their jobs.
 Import duty should be imposed to protect
domestic production units.
 Labour laws should be imposed to ensure that no
management jobs are outsourced.
 Jobs should be reserved for the poor people.

22.  Hindi and local languages as a mode of operation
should be encouraged.
 Cooperative societies should be formed for the
farmers and other agricultural suppliers to take
care of their rights.
 The foreign retail units should be made to divest a
certain percentage of their equity in the Indian
financial markets.
 Social infrastructure like schools, colleges and
hospitals should be developed to promote human
capital formation

23.  http://en.wikipedia.org/wiki/Foreign_direct_
investment
 http://www.sharetipsinfo.com/fdi-retail.html
 http://en.wikipedia.org/wiki/Retailing_in_In
dia
 http://toostep.com/debate/what-is-impact-of-
fdi-in-indian-market

24. THANK
YOU !