FDI

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DETAILS ABOUT FDI

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FDI

  1. 1. ~ SANDESH GHOSAL IIPM AHMEDABAD 09-11 1
  2. 2. FDI - Meaning Factors Attracting FDI Advantages & Disadvantages Difference between FDI & FII Contribution of Countries – FDI FDI – INDIA Inflation Rate, GDP, Trade Balance, Forex Reserves IIPM AHMEDABAD 09-11 2
  3. 3.  Direct Investments in productive assets by company incorporated in foreign country  Investments in shares of local company by foreign entities  An important feature of an globalized economic system  Example: An Chinese company taking major stake in A m e r i c a n o r I n d i a n c o m p a n y. IIPM AHMEDABAD 09-11 3
  4. 4.  Av a i l a b i l i t y o f r a w m a t e r i a l s & r e s o u r c e s  Cheap labor  Large Domestic Market  Policy Liberalization – easy entry & exit  Rapid technical progress  Low transaction cost – interest rates, royalties & fees, f u n d t r a n s f e r, e t c .  Friendly political support  New Managerial & organizational techniques  Political Stability IIPM AHMEDABAD 09-11 4
  5. 5. A D VA N TA G E S  Helps in the improvement of economic development  Permits transfer of latest technology & knowledge transfer  Develop human capital resources  Creates jobs  Boosts wages & salaries of employees  Rise in productivity  Borrow finance at lesser rate of interest  Opportunities in trade of good & services IIPM AHMEDABAD 09-11 5
  6. 6. D I S - A D VA N TA G E S  Occur mostly in matters of operation & distribution of profits.  More expensive & risky than exporting and licensing  Te c h n o l o g y d e p e n d e n c e  Disturbance of Domestic Economic plans  Cultural Change  May entail high travel & communication expenses  Chances of loosing ownership to an overseas company  Instability in geographical region IIPM AHMEDABAD 09-11 6
  7. 7. FDI FII  Investment that parent company  Investment made by an investor makes in foreign country in the markets of foreign nation  Invest in foreign nation  Need to get register in the stock exchange to make investments  Cannot enter & exit easily  Enter the stock market easily & withdraw if easily  Aims to increase the enterprise  Investment flows into the capacity or productivity or its secondary market. Helps in management control increasing capital  Flows into primary market  Flows into secondary market  Brings capital as well as good  Does not come out with great governance & better management benefits in spite of good skills governance  Long term investments  Short term investments IIPM AHMEDABAD 09-11 7
  8. 8. CONTRIBUTION IN FDI (in %) MAURITIUS SINGAPORE U.S.A. U.K. JAPAN NETHERLANDS CYPRUS OTHERS 22% 44% 4% 4% 4% Source: IMF 5% 8% 9% IIPM AHMEDABAD 09-11 8
  9. 9.  FDI allows for investment in following ways: Through Financial Alliance Through Capital Markets J o i n t S c h e m e s & Te c h n i c a l A l l i a n c e Through Private Placements & preferential allotments IIPM AHMEDABAD 09-11 9
  10. 10. Automatic Route Government Control Requires prior Does not require Government any prior approval & approval from considered by RBI FIPB Required to notify Regional Decision within office of RBI 4-6 weeks within 30 days of receipt inward IIPM AHMEDABAD 09-11 10
  11. 11.  FDI in India is not allowed in following industrial sectors: 1. Arms & Ammunition 2. Atomic Energy 3. Coal & Lignite 4. Ra il Tr a n s p o rt 5. Mining of metals like iron, manganese, chrome, g y p s u m, s u l f u r, g o l d , d i a mo n d s , c o p p e r, z i n c . IIPM AHMEDABAD 09-11 11
  12. 12. FDI IN DIFFERENT SECTORS OF INDIA SECTOR FDI ALLOWED ROUTE H o t e l & To u r i s m 100% Automatic Insurance 26% (license from Automatic IRDA) Te l e c o m m u n i c a t i o n • Basic, Cellular, 49% Automatic VA S , communication through Satellite • ISPs, Radio paging 74% Automatic IIPM AHMEDABAD 09-11 12
  13. 13. FDI IN DIFFERENT SECTORS OF INDIA SECTOR FDI ALLOWED ROUTE Tr a d i n g – b u l k 100% Automatic imports, exports, cash & Carry whole sale trading Power (other than 100% Automatic atomic plants) Drugs & 100% Automatic Pharmaceuticals (Manufacture) Roads, Highways, 100% Automatic Ports & Harbours Pollution Control & 100% Automatic Management IIPM AHMEDABAD 09-11 13
  14. 14. FDI IN DIFFERENT SECTORS OF INDIA SECTOR FDI ALLOWED ROUTE BPO 100% Automatic C i v i l Av i a t i o n 74% Automatic Air Craft 100% Maintenance & repair operations Commodity 26% Exchanges IIPM AHMEDABAD 09-11 14
  15. 15. Ye a r Wi s e F D I I n f l o w s 4500 4222 4000 3754 3682 3500 3134 USD MILLIONS 3000 2908 2770 2634 2439 2500 2141 2083 2000 1500 1374 1000 654 500 393 165 0 Source: Department of Commerce IIPM AHMEDABAD 09-11 15
  16. 16. CURRENCY PRICES IIPM AHMEDABAD 09-11 16
  17. 17. Inflation Rate – Consumer Prices 9 8.3 8 7 6.7 6.4 6 5.4 5.4 5.4 5.3 5 4.2 4.2 4 3.8 Inflation Rate 3 2 1 Source: CIA World Fact Book 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 IIPM AHMEDABAD 09-11 17
  18. 18. Source: Reserve Bank of India IIPM AHMEDABAD 09-11 18
  19. 19. Ye a r Forex Reserves Amount ( in US $ million) December 2007 272,722 December 2008 254,052 December 2009 283,643 April 2010 279,476 Source: Reserve Bank of India IIPM AHMEDABAD 09-11 19
  20. 20. Amount in US $ Millions 0 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 -8201.79 -20000 -13276.75 -27981.5 -40000 -46075.19 -60000 -80000 -100000 -95418 -120000 -114721 -140000 Source: Department of Commerce IIPM AHMEDABAD 09-11 20
  21. 21. G D P G R O W T H R AT E 12 10 9.7 9.2 8 7.7 7.2 6 4 2 0 2010 2009 2008 2007 Source: India Central Statistical Organization IIPM AHMEDABAD 09-11 21
  22. 22. Country Total Trade Trade Balance China PRP 163,202 -92,676 USA 155,353 12,254 United Arab Emirates 152,668 -1934 Saudi Arabia 105,602 -64303 Germany 67,602 -19497 Singapore 63,280 2934 UK 50114 524 Hong Kong 50,129 1772 Belgium 41552 -5294 Netherland 33099 19049 Source: Federal Ministry of Commerce, Government of India IIPM AHMEDABAD 09-11 22
  23. 23. IIPM AHMEDABAD 09-11 23

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