The document discusses foreign investment and trade regulation in India. It defines foreign direct investment and foreign institutional investment. It describes the advantages of FII. It provides an overview of the World Trade Organization, including its structure and role. The document also discusses India's regulation of foreign trade through acts and rules. Finally, it defines disinvestment in public sector units as the sale of government-owned enterprises and outlines its objectives in India.

1. 1
Business Environment
(Subject Code- MBT-105)
By
Dr. H. L. Bhaskar
(PhD, MBA-HRM & Marketing, UGC-NET/JRF)
Business Environment (MBA++ 1st Semester, Session- 2022-23)
Roorkee Institute of Technology, Uttarakhand

2. Unit 5
Foreign Investment and Trade Regulation
Contents/Topics
1. Foreign Direct Investment,
2. Foreign Institutional Investment,
3. WTO and India: an overview,
4. Regulation of Foreign Trade,
5. Disinvestment in Public Sector Units.

3. Foreign Investment and Trade Regulation
Brief Concept:
 Since the liberalisation policy of 1991, India has increasingly
focused on policy reforms and is now considered to be one of
the most favoured destinations for foreign investment.
 During the past year, in a bid to enhance India's global
competitiveness by creating a favourable investment climate,
the Government of India (central government or DPIIT) has
allowed foreign direct investment (FDI) up to 100 per cent
under the automatic route in the telecommunications sector in
line with previous efforts towards relaxing FDI caps in certain
sectors, such as defence and insurance, and up to 20 per cent
under the automatic route in the Life Insurance Corporation of
India (LIC).

4. Continue….
The foreign investment regime in India is primarily governed by:
 The foreign exchange management act, 1999 (FEMA) and the
rules and regulations issued under it, such as the foreign
exchange management (non-debt instruments) rules of 2019
(the NDI rules).
 The consolidated foreign direct investment policy, 2020 (the
FDI policy) dated 15 october 2020, issued by the department
for promotion of industry and internal trade, ministry of
commerce and industry, read with the press notes issued by
the DPIIT to amend the FDI policy.
 Rules issued by central government and regulations issued by
the reserve bank of india (RBI) under FEMA (collectively known
as the FDI Regulations)

5. Foreign Direct Investment (FDI)
 In FDI, a company enters a foreign market by investing in that
country, either through the acquisition of a local entity or by
setting up a new entity.
 This mode of entry is subject to the local government’s
policies and regulations.
 For example: LG and SumSang entered India through FDI
route. Below table lists the favorable conditions, and
drawbacks of FDI

6. Table: Conditions, Benefits & Drawbacks of FDI

7. Figure: Types of Foreign Direct Investment

8. Source: https://blog.investyadnya.in/what-is-foreign-direct-investment-fdi/

9. Figure: Percentage of Sectors Attracting Highest FDI Equity Inflows

10. Foreign Institutional Investment
 A foreign institutional investor is an investor in a financial
market outside its official home country.
 Foreign institutional investors can include pension funds,
investment banks, hedge funds, and mutual funds.
 Some countries place restrictions on the size of investments
by foreign investors.

12. Advantages of FII

13. WTO
FACT FILE
Location: Geneva, Switzerland
Established: 1 January 1995
Created by: Uruguay Round negotiations (1986-94)
Membership: 164 members representing 98 per cent of world trade
Budget: 197 million Swiss francs for 2022
Secretariat staff: 623
Head: Ngozi Okonjo-Iweala (Director-General)
Functions:
1. Administering WTO trade agreements
2. Forum for trade negotiations
3. Handling trade disputes
4. Monitoring national trade policies
5. Technical assistance and training for developing countries
6. Cooperation with other international organizations

14. Who we are?
 It is an organization for trade opening.
 It is a forum for governments to negotiate trade agreements. It is a
place for them to settle trade disputes.
 It operates a system of trade rules. Essentially, the WTO is a place
where member governments try to sort out the trade problems they
face with each other.
 The goal is to help producers of goods and services, exporters, and
importers conduct their business.
What we do?
 The WTO is run by its member governments.
 All major decisions are made by the membership as a whole, either
by ministers (who usually meet at least once every two years) or by
their ambassadors or delegates (who meet regularly in Geneva).

15. Figure: Formation of
WTO

16. Structure of World Trade Organisation (WTO)
Figure: Structure of World Trade Organisation (WTO)

17. WTO and India: an overview

18. India and the World Trade Organization
– Latest Developments
There are 4 important recent developments related to India and
the World Trade Organisation (WTO).
These 4 are listed below:
1. Ban of Chinese Mobile Apps
2. Issues related to the Peace Clause
3. Information and Communication Technology (ICT) Tariff Case
4. Fisheries Subsidies
Source: https://byjus.com/free-ias-prep/india-in-the-wto/

22. The WTO and its role
The primary role of the WTO is as follows:
1. WTO trade agreement administration.
2. Providing a trade negotiation forum.
3. Resolving trade disputes.
4. Monitoring national trade policies.
5. Helping technical support and training to developing countries.
6. It allows open communication between its members regarding
trade.

23. Regulation of Foreign Trade
The Foreign Trade (Development and Regulation) Act, 1992: An Act to provide
for the development and regulation of foreign trade by facilitating imports into, and
augmenting exports from, India and for matters connected therewith or incidental thereto.
Be it enacted by Parliament in the Forty-third Year of the Republic of India as follows :-
There are 6 chapters in this act. CHAPTER I – PRELIMINARY - Short title and Definitions
Definitions. - In this Act, unless the context otherwise requires, -
1. "Adjudicating Authority" means the authority specified in, or under, section 13;
2. "Appellate Authority" means the authority specified in, or under, Subsection (1) of
section 15;
3. "conveyance" means any vehicle, vessel, aircraft or any other means of transport
including any animal;
4. "Director General" means the Director General of Foreign Trade appointed under
section 6;
5. "import" and "export" means respectively bringing into, or taking out of, India any
goods by land, sea or air;
6. "Importer-exporter Code Number" means the Code Number granted under section
7. "licence" means a licence to import or export and includes a customs clearance permit
and any other permission issued or granted under this Act;
8. "Order" means any Order made by the Central Government under section 3; and
9. "prescribed" means prescribed by rules made under this Act.

24. Continue.
CHAPTER II - POWER OF CENTRAL GOVERNMENT TO MAKE ORDERS
AND ANNOUNCE EXPORT AND IMPORT POLICY
CHAPTER III - IMPORTER-EXPORTER CODE NUMBER AND LICENCE
CHAPTER IV - SEARCH, SEIZURE, PENALTY AND CONFISCATION
CHAPTER V - APPEAL AND REVISION
CHAPTER VI - MISCELLANEOUS
 Protection of action taken in good faith
 Power to make rules.
 The repeal of the Imports and Exports

25. Foreign Trade (Regulation) Rules, 1993:
In exercise of the powers discussed by Section 19 of the Foreign Trade
(Development and Regulation) Act, 1992 (22 of 1992), the Central
Government hereby makes the following rules, namely:-
1. Short title and commencement.-
a) These rules may be called the Foreign Trade (Regulation) Rules,
1993.
b) They shall come into force on the date of their publication in the
Official Gazette.
2. Definitions.-
In these rules unless the context otherwise requires, -
a) "Act" means the Foreign Trade (Development and Regulation) Act, 1992
(22 of 1992);
b) "charitable purpose" includes relief of the poor, education, medical relief
and the advancement of any other object of general public utility;
c) "importer" or "exporter" means a person who imports or exports goods
and holds a valid Importer-exporter Code Number granted under section
7;
d) "licensing authority" means an authority authorised by the Director
General under sub-section (2) of section 9 to grant or renew a licence
under these rules;

26. e) "Policy" means the export and import policy formulated and announced by the
central government under section 5;
f) "Schedule" means a schedule appended to these rules;
g) "Section" means a section of the act;
h) "Special licence" means a licence granted under sub-section (2) of section 8;
i) "Value" has the meaning assigned to it in clause (41) of section 2 of the
Customs Act, 1962 (52 of 1962);
j) Words and expression used in these rules and not defined but defined in the
Act shall have the meanings respectively assigned to them in the Act.
3. Grant of special licence.-
 The special licence granted to any person under sub-rule (1) shall be non-
transferable.
 Where the Importer-exporter Code Number granted to any person has been
suspended or cancelled under sub-section (1) of section 8, the Director General
may, having regard to the following factors, grant to him a special licence,
namely:-(1) that the denial of a special licence is likely to affect the foreign trade
of India adversely; or
 that the suspension or cancellation of the Importer-exporter Code Number is
likely to lead to non-fulfilment of any obligation by India under any international
agreement.
 The special licence granted to any person under sub-rule (1) shall be non-
transferable.

27. 4. Application for grant of licence.-
5. Fee.-
6. Conditions of licence.-
7. Refusal of licence.-
8. Amendment of licence. -
9. Suspension of a licence.-
10. Cancellation of a licence.-
11. Declaration as to value and quality of imported goods. -
12. Declaration as to Importer-exporter Code Number. -
13. Utilisation of imported goods.-
14. Prohibition regarding making, signing of any declaration,
statement or documents.-
15. Power to enter premises and inspect, search and seize goods,
documents, things and conveyances.-
16. Settlement.-
17. Confiscation and redemption.-
18. Confiscation of conveyance.-

28. Disinvestment in Public Sector Units
• Disinvestment can also be defined as the action of an
organisation (or government) selling or liquidating an asset or
subsidiary.
• It is also referred to as 'divestment' or 'divestiture.'
• In most contexts, disinvestment typically refers to sale from
the government, partly or fully, of a government-owned
enterprise.
• Disinvestment in Public sector undertakings in India, is a
process of public asset sales done by the President of India
on behalf of the Government of India.
• It can be directly offered for sale to the private sector or
indirectly done through a bidding process.

29. Objectives of Disinvestment of PSUs in India
1. Reducing the financial burden on the government
2. Improving public finances
3. Encouraging an open share of ownership
4. Introduction, competition, and market discipline
5. Depoliticizing essential services
6. Upgrading the technology used by public enterprises to
become competitive
7. Rationalising and retraining the workforce
8. Building competence and strength in R&D
9. Initiating the diversification and expansion programmes

30. 1. What are the modes of payment allowed for receiving Foreign
Direct Investment in an Indian company? What are the
instruments for receiving foreign investment in an Indian
company? Which are the sectors where foreign investment is
prohibited? Explain in details.
2. What are the links between economic activity, trade and the
environment?
3. Do WTO commitments prevent governments from protecting the
environment? If WTO rules do not prevent environmental action,
what do they say?
4. Can governments provide green support? Explain in details.
5. What is the role of the WTO in furthering members’
environmental policies? Describe in details.
Assignment - 5

31. Summary
Conclusion
 In FDI, a company enters a foreign market by investing in that
country, either through the acquisition of a local entity or by
setting up a new entity.
 A foreign institutional investor is an investor in a financial
market outside its official home country.
 World Trade Organization (WTO) is the only global international
organization dealing with the rules of trade between nations.
Goal is to help producers of goods and services, exporters, and
importers conduct their business.
 disinvestment typically refers to sale from the government,
partly or fully, of a government-owned enterprise.