INTRODUCTION• Foreign direct investment (FDI) is adirect investment into production orbusiness in a country by a company inanother country, either by buying acompany in the target country or byexpanding operations of an existingbusiness in that country.• Foreign direct investment plays animportant role in the economicdevelopment of the country.
TYPES OF FDI’S1. By Direction Outward FDI Inward FDI Vertical FDI2. By Target3. By Motive Resource Seeking Market Seeking Efficiency Seeking
FDI IN INDIA• FDI have helped India to attain afinancial stability and economic growthwith the help of investments indifferent sectors.• Foreign direct investment in India hasgrown immensely in the last 5 years dueto strong support from the UnionGovernment. This growth has in turnhelped with the progress of thenational economy.• FDI inflows to India witnessedsignificant moderation in 2010-11 while
CONTINUED…• FDI brings better technology andmanagement, marketing networksand offers competition, the latterhelping Indian companies improve,quite apart from being good forconsumers.
VARIOUS ROUTESOF FDI1. Automatic Route: Automatic approvalis given by the Reserve Bank of Indiato the proposals for foreign directinvestment in India. The Reserve Bankof India gives approval within the timeperiod of two weeks. It gives approvalto the proposals for foreign directinvestment in India that involve FDI upto 74% in the nine categories that areincluded in List four, FDI up to 50% inthe three categories that are includedin List two, and FDI up to 51% in the
CONTINUED…2. Government Route: FDI in activitiesnot covered under the automatic routerequires prior approval of theGovernment which are considered bythe Foreign Investment Promotion Board(FIPB), Department of EconomicAffairs, Ministry of Finance. FDI isnot permitted in the industrial sectorssuch as-• Arms and ammunition.• Atomic Energy.
Trends in FDIInflows to India• With the tripling of the FDI flows toEMEs during the pre-crisis period ofthe 2000s, India also received largeFDI inflows in line with its robustdomestic economic performance.• The attractiveness of India as apreferred investment destination couldbe ascertained from the large increasein FDI inflows to India, which rosefrom around US$ 6 billion in 2001-02to almost US$ 38 billion in 2008-09.
CONTINUED…• During the recent global crisis, whenthere was a significant deceleration inglobal FDI flows during 2009-10, thedecline in FDI flows to India wasrelatively moderate reflecting robustequity flows on the back of strongrebound in domestic growth ahead ofglobal recovery and steady reinvestedearnings (with a share of almost 25 percent) reflecting better profitability offoreign companies in India.
• However, when there had been somerecovery in global FDI flows, especiallydriven by flows to Asian EMEs, during2010-11, gross FDI equity inflows toIndia witnessed significant moderation.• Gross equity FDI flows to Indiamoderated to US$ 20.3 billion during2010-11 from US$ 27.1 billion in thepreceding year.CONTINUED…
SECTORS ATTRACTINGHIGHEST FDI EQUITYINFLOWS IN INDIA
• This shows the favourite and leadingsectors for FDI in India. According toFDI report Service sector is thefavourite sector with highest FDI inflow20%.• After service sector Telecommunicationand Computer hardware & software isthe next favourite sector with 8% and7%.• There is a good future prospect forinvestors in other sectors also like