foreign direct investment in India

1. Presented By :
Saksham Pandit (73)
Kartik Gupta (182)

2. Advantages :
I. It can stimulate the economic
development of the country in
which the investment is made,
creating both benefits for local
industry and a more conducive
environment for the investor.
II. It will usually create jobs and
increase employment in the target
country.
III. It will enable resource transfer,
and other exchanges of
knowledge whereby different
countries are given access to new
skills and technologies.
IV. The equipment and facilities
provided by the investor can
Disadvantages :
 Foreign direct investment can sometimes
hinder domestic investment, as it focuses
resources elsewhere.
 Occasionally as a result of foreign direct
investment exchange rates will be affected, to
the advantage of one country and the
detriment of the other.
 Foreign direct investment may be capital-
intensive from the investor’s point of view,
and therefore sometimes high-risk or
economically non-viable.
 The rules governing foreign direct investment
and exchange rates may negatively affect the
investing country.
 Investment in certain areas is banned
in foreign markets, meaning that an inviting
opportunity may be impossible to pursue.
country, into a company or entity based in another country.
Foreign direct investments differ substantially from indirect
investments such as portfolio flows, wherein overseas
institutions invest in equities listed on a nation's stock
exchange. Entities making direct investments typically have
a significant degree of influence and control over the
company into which the investment is made. Open
economies with skilled workforces and good growth
prospects tend to attract larger amounts of foreign direct
investment than closed, highly regulated economies.

4. The Phase of Cautious
and Selective Attitude
towards FDI (1948-1967);
This cautious approach lead
to low FDI investment in
INDIA but it is logical
considering years of
exploitation by such people.
The Phase of Restrictive
Attitude towards FDI (1968-
1979);
India went through the biggest
political turmoil in it’s history as
the then prime minister
announced Emergency. And
after that a new party emerged
called the JANTA DAL which
took over the politics of the
country for 2 years. FDI was not
even a part of dreams of INDIAN
economy.

5. The Phase of Semi-Liberalization (1980-1990);
The amount of FDI increased from US$ 79 million in 1980 to reach a peak
level US $ 252 million in 1989 thereafter it declined US $ 237 million in
1990.
The overall FDI inflow during 1980 to 1990 was fluctuating. FDI increased three
times during the period of 1980-1990 and the CAGR (actual) was 19.05%
during the same period of time.
 In the year 1981 the top five investing countries were Germany, USA, UK,
Japan and Switzerland and together they accounted for 86% of total FDI
inflows.
In 1990, the top five investing countries are USA, Switzerland, Germany,
UK and Italy and together, they accounted nearly 57% of FDI
inflows.
The top five sectors which have attracted the bulk of FDI were industrial
machinery, chemicals, mechanical, engineering, electrical and
electronics and metallurgy and together they accounted for 54.87% in the year
1981.
In 1990, the top five sectors were electrical and electronics, chemicals,
industrial machinery, mechanical, engineering and metallurgy and
together they accounted 68.14% of the total FDI inflows.

6. I. The high rate of inflation, fiscal
deficit and political instability
downgraded the international
credit of the country.
II. This resulted in the erosion of the
international community's
confidence on our economy.
III. The outflow of deposits especially
by NRIs, a virtual stoppage of
remittances from Indian workers in
the Gulf countries and a sudden
break out of Gulf war in January
1991 exacerbated the balance of
payments crisis.
IV. The foreign exchange became so
scanty that, it was insufficient to
pay even for one week imports
 support of IMF and the World Bank
Abolition of industrial licensing system
except for 18 industries
Ceiling of 40 percent foreign equity
under FERA was done away with
Removal of registration under MRTP
Act
Foreign investment promotion board
(FIPB) was established
Existing companies were allowed to
hike their foreign equity up to 51 percent
in priority sector
Removal of restrictions of FDI in low
technology sectors.
Automatic permission for technology
agreement in high priority industries.
Removal of condition for FDI with
necessary technology agreements etc

7. Besides these in August 1999 government of India set up Foreign Investment
Implementation Authority (FIIA) within the ministry of industry to facilitate
quick translation of FDI approvals into implementation by providing a pro-
active one step after care service to foreign investor like helping them obtain
necessary approvals and sorting their operational problems.
The steering committee on FDI was set up by the planning commission
2001
ban on FDI in retail trade
marketing, petroleum exploration,
banking and financial services and real estates was raised to limit of 100
percent.

10. Starting from a baseline of less than USD 1 billion in 1990, a recent UNCTAD
survey projected India as the second most important FDI destination (after
China) for transnational corporations during 2010-2012.
As per the data, the sectors which attracted higher inflows were services,
telecommunication, construction activities and computer software and
hardware.
Mauritius, Singapore, the US and the UK were among the leading sources
of FDI to the country.
In 2013, the government relaxed FDI norms in several sectors, including
telecom, defence, PSU oil refineries, power exchanges and stock exchanges,
among others.
In retail, UK-based Tesco submitted its application to initially invest US$ 110
million to start a supermarket chain in collaboration with Tata Group's Trent
In civil aviation, Malaysia-based Air Asia and Singapore Airlines teamed up
with Tata Group to launch two new airline services.
 Also, Abu Dhabi-based Etihad picked up a 24 per cent stake in Jet Airways
that was worth over Rs 2, 000 crore (US$ 319.39 million).
 During FY 2012–13, India attracted FDI worth US$ 22.42 billion. Tourism,
pharmaceuticals, services, chemicals and construction were among the
biggest beneficiaries.

11.  New Zealand is looking to establish an office in
Mumbai to broaden its education footprint in India.
It plans to set up an education promotion and
market development role within the New Zealand
Consulate General, Mumbai. There was an increase
of more than 10 per cent in student visas issued to
Indian nationals in 2013, making India among the
fastest growing student markets for New Zealand.
 Korean South-East Power Company (KOSEP), part of
South Korean state-owned power generator Korea
Electric Power Corporation, has signed an initial
agreement with Jinbhuvish Group, Mumbai, for
technical support for its Rs 3, 450-crore (US$ 549.31
million) project in Maharashtra. The 600 megawatt
(mw) power plant, which will be set up in Yavatmal
district, is expected to be commissioned in 2016.

12.  India and UAE have agreed to promote
collaboration in renewable energy, focusing in the
areas of wind power and solar energy. A
Memorandum of Understanding (MoU) was signed
by Dr Farooq Abdullah, Minister of New and
Renewable Energy of India and Dr Sultan Ahmed
Al Jaber, Minister of State of UAE in Abu Dhabi on
January 18, 2014.
 Luxury watch brand Jaeger-LeCoultre from
Switzerland has filed for a 100 per cent single
brand application to enter the Indian retail market.
It thus became the first luxury company to apply
for FDI through this route. Geneva-based
Richemont SA that owns the luxury brand filed the
application with the Department of Industrial
Policy and Promotion (DIPP).
 France’s Lactalis, the biggest dairy products group in
the world, will most likely buy out Hyderabad-based
Tirumala Milk Products for US $275–300 million.
Lactalis has a yearly turnover of about US $21 billion.
Tirumala had a turnover of Rs 1, 424 crore (US$
226.71 million) for FY 2012–13. The Hyderabad-based
company, which was founded in 1998, makes dairy
products such as sweets, flavoured milk, curd,

13. Resource challenge: India is known to
have huge amounts of resources. There is
manpower and significant availability of fixed
and working capital. At the same time, there are
some underexploited or unexploited resources.
resources are well available in the rural as well
as the urban areas. The focus is to increase
infrastructure 10 years down the line, for which
the requirement will be an amount of about US$
150 billion. This is the first step to overcome
challenges facing larger FDI.
Equity challenge: India is
definitely developing in a much faster
pace now than before but in spite of that
it can be identified that developments
have taken place unevenly. This means
that while the more urban areas have
been tapped, the poorer sections are
inadequately exploited. To get the
complete picture of growth, it is essential
to make sure that the rural section has
more or less the same amount of
development as the urbanized ones.
Thus, fostering social equality and at the
same time, a balanced economic growth.

14. Political Challenge: The
support of the political structure has
to be there towards the investing
countries abroad. This can be worked
out when foreign investors put
forward their persuasion for
increasing FDI capital in various
sectors like banking, and insurance.
So, there has to be a common ground
between the Parliament and the
Foreign countries investing in India.
This would increase the reforms in
the FDI area of the country.
India must also focus on areas of poverty
reduction, trade liberalization,
and banking and insurance liberalization.
Challenges facing larger FDI are not
just restricted to the ones mentioned
above, because trade relations with
foreign investors will always bring in new
challenges in investments.
Taxation Challenge : India’s
taxation system is one of the most
complicated system in the world
and adding to that India tax
corporate more than any other
country. This challenge is to be
taken care of.
Clearances: Presently there are lot of
regulations one has to comply to for
starting a business in India. These
regulations make investors loose precious
time and therefore these need to be
reduced by giving one window clearances.

16.  100% FDI allowed in the telecom sector.
 100% FDI in single-brand retail.
 FDI in commodity exchanges, stock exchanges & depositories, power exchanges,
petroleum refining by PSUs, courier services under the government route has now been
brought under the automatic route.
 Removal of restriction in tea plantation sector.
 FDI limit raised to 74% in credit information & 100% in asset reconstruction companies.
 FDI limit of 26% in defence sector raised to 49% under Government approval route. Foreign
Portfolio Investment up to 24% permitted under automatic route. FDI beyond 49% is also
allowed on a case to case basis with the approval of Cabinet Committee on Security.
 Construction, operation and maintenance of specified activities of Railway sector opened
to 100% foreign direct investment under automatic route.

17. • SECTORS WHERE FOREIGN DIRECT INVESTMENT IS
PROHIBITED :
• Lottery Business including Government /private
lottery, online lotteries, etc.
• Gambling and Betting including casinos etc.
• Chit funds
• Nidhi company-(borrowing from members and lending
to members only).
• Trading in Transferable Development Rights (TDRs)
• Real Estate Business (other than construction
development) or Construction of Farm Houses
• Manufacturing of Cigars, cheroots, cigarillos and
cigarettes, of tobacco or of tobacco substitutes
• Activities / sectors not open to private sector
investment e.g. Atomic Energy and Railway Transport
(other than construction, operation and maintenance
of (i) Suburban corridor projects through PPP, (ii) High
speed train projects, (iii) Dedicated freight lines, (iv)
Rolling stock including train sets, and
locomotives/coaches manufacturing and maintenance

18. • Petroleum Refining by PSU (49%).
• Teleports (setting up of up-linking HUBs/Teleports),Direct to
Home (DTH), Cable Networks (Multi-system operators (MSOs)
operating at national, state or district level and undertaking
upgradation of networks towards digitalization and
addressability), Mobile TV and Headend-in-the-Sky
Broadcasting Service (HITS) – (74%).
• Cable Networks (49%).
• Broadcasting content services- FM Radio (26%), uplinking of
news and current affairs TV channels (26%).
• Print Media dealing with news and current affairs (26%).
• Air transport services- scheduled air transport (49%), non-
scheduled air transport (74%).
• Ground handling services – Civil Aviation (74%).
• Satellites- establishment and operation (74%).
• Private security agencies (49%).
• Private Sector Banking- Except branches or wholly owned
subsidiaries (74%).
• Public Sector Banking (20%).
• Commodity exchanges (49%).
• Credit information companies (74%).
• Infrastructure companies in securities market (49%).
• Insurance and sub-activities (26%).
• Power exchanges (49%).
• Defence (49% above 49% to CCS).

19. • Seventh-largest producer in the world
with an average annual production of
17.5 Million vehicles.
• 4th largest automotive market by
volume, by 2015.
• 4 large auto manufacturing hubs
across the country.
• 7% of the country’s GDP by volume.
• 6 Million-plus vehicles to be sold
annually, by 2020.
AUTOMOBILES
• 9th largest civil aviation market.
• 163 Million passengers in 2013.
• 60 Million international passengers by
2017.
• 85 international airlines connecting
over 40 countries.
• 3rd largest aviation market by 2020.
• 800 aircraft by 2020.
AVIATION
• 20-30 year mining leases.
• 302 Billion Tonnes of coal
reserves.
• 3108 operational mines.
• 6th largest bauxite
reserves.
• 5th largest iron ore
reserves.
MINING
• 4th largest rail freight carrier in the
world.
• USD 1,000 Billion worth of projects to
be awarded through Public Private
Partnership.
• 1.3 Million-Strong workforce.
• World’s largest passenger carrier.
RAILWAYS
• 5th largest power generation portfolio.
• 5th largest wind energy producer.
• 1,500 MW annual PV(photo volatics)
capacity by the end of 2014.
• 243 GW of installed capacity as of
March 2014.
• 20,000 MW of solar power by 2022.
RENEWABLE
ENERGY
• 1st in global jute production.
• 7 Million Tonnes of FBP in 2013-14.
• 63% of the world’s market share in
textiles and garments.
• 2nd largest textile manufacturer in the
world.
• 2nd largest producer of silk and cotton.
• 24% of the world’s spindles.
• 8% of the world’s rotors.
TEXTILES