This document discusses foreign direct investment (FDI) and portfolio investment in India. It outlines the automatic and prior permission routes for investing in India, and provides examples of sectors that fall under each route. It also lists benefits and risks of FDI, historical FDI amounts in India from 2001-2007, key FDI equity limits, sectors encouraged for FDI, and factors influencing FDI decisions. Finally, it discusses foreign institutional investors (FIIs) and their role in investing in primary and secondary capital markets in India.

1. PRESENTED BY
RADHEY SHAYAM KUMAWAT

2. Foreign Direct Investment
Purchase of physical assets or a significant amount of the ownership
(stock) of a company in another country to gain a measure of
management control
Portfolio investment
Investment that does not involve obtaining a degree of control
in a company

3. Automatic Route
Prior Permission
(FIPB)
Investing in India
General Rule
No prior permission
required
Inform Reserve Bank
within 30 days of
inflow/issue of shares
By Exception
Prior Government
Approval needed.
Decision generally
within 4-6 weeks
Automatic Route
General Rule
No prior permission
required
Inform Reserve Bank
within 30 days of
inflow/issue of shares
Prior Permission
(FIPB)Automatic Route
General Rule
No prior permission
required
Inform Reserve Bank
within 30 days of
inflow/issue of shares
By Exception
Prior Government
Approval needed.
Decision generally
within 4-6 weeks
Prior Permission
(FIPB)
Automatic Route
General Rule
No prior permission
required
Inform Reserve Bank
within 30 days of
inflow/issue of shares

4.  Increase investment level and thereby income & employment
 Increase tax revenue of government
 Facilitates transfer of technology
 Encourage managerial revolution through professional
management
 Increase exports and reduce import requirements
 Increase competition and break domestic monopolies
 Improves quality and reduces cost of inputs

5.  Flow to high profit areas rather than main concern areas
 Through their power and flexibility, MNC can undermine
economic autonomy and control
 Sometimes interferes in the national politics
 Sometimes engage in unfair and unethical trade practices
 Sometimes result in minimizing / eliminating competition and
create monopolies or oligopolistic structures

6. Year India(Amount US $ Billion)
2001 4.02
2002 6.13
2003 5.03
2004 4.32
2005 6.05
2006 8.961
2007* 17.59
*Jan.- Nov.*Jan.- Nov.
Source- 1.Source- 1. http://siteresources.worldbank.org/CHINAEXTN/Resources/chinaei.pdfhttp://siteresources.worldbank.org/CHINAEXTN/Resources/chinaei.pdf
2. www.rbi.org.in2. www.rbi.org.in

7. FDI equity limit-
Automatic route
 Insurance – 26%
 Domestic airlines – 49%
 Telecom services- Foreign
equity 74%
 Private sector banks- 74%
 Mining of diamonds and
precious stones- 74%
 Exploration and mining of coal
and lignite for captive
consumption- 74%
FDI requiring
prior approval
 Defense production – 26%
 FM Broadcasting - 20%
 News and current affairs- 26%
 Broadcasting- cable, up-
linking – 49%
 Trading- wholesale cash and
carry, export trading, etc.,
100%
 Tea plantation – 100%
 Development of airports-
100%
 Courier services- 100%

8.  Engineering & Manufacturing sectors
 Roads & Highways, Ports and Harbors
 Industrial model towns/industrial parks
 Hotels & Tourism
 Pollution Control and Management
 Advertising & Film industry
 Power generation (hydro-electric, coal/lignite, oil or gas based)
 Information Technology including E-Commerce

9.  Profitability: Attract where return on investment is higher
 Costs of production: Encouraged by lower costs of production like
raw materials, labor .
 Economic Conditions: Market potential, infrastructure, size of
population, income level etc
 Government policies: Policies like foreign investment, foreign
collaboration, remittances, profits, taxation, foreign exchange
control, tariffs etc.
 Political factors: Political stability, nature of important political
parties and relations with other countries.

11.  Foreign Institutional Investors (FIIs) are allowed to invest in the primary
and secondary capital markets in India through the portfolio investment
scheme (PIS). Under this scheme, FIIs/NRIs can acquire shares/debentures
of Indian companies through the stock exchanges in India

12. List of companies in which FII investment is allowed
upto limits fixed by companies as indicated against their
names
1 Amtek Auto Ltd (74%)
2 Advanta India Limited 49%
3 Amtek India Ltd (74%)
4 Ahmednagar Forgings Ltd (74%)
5 Anant Raj Industries Ltd. (40%)
6 ANG Auto Ltd (49%)
7 Apollo Hospitals (74%)
8 Aptech Ltd (74%)
9 Arshiya International Limited (49%)
10 Bombay Rayon Fashions Ltd (40%)

13. Year 1995-96 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07(P)
FIIs*
(US $ Milloin)
2009 1926 979 -390 2,135 1847 1505 377 10,918 8,686 9,926 3,225
Foreign Institutional Investors(FIIs) in India
*Represents inflow of funds (net) by Foreign Institutional Investors (FIIs).
Source:-RBI Bulletin of 13th Feb 2008.
Net inflows by foreign institutional investors (FIIs) aggregated to US $ 26.8 billion during the current financial year so far (up to
January 11, 2008). The number of FIIs registered with the SEBI increased from 997 at end-March 2007 to 1,219 at end-December
2007.

14.  The main objective of the study is to know about in which sector the
industries are invest our money FDI or FII.
 To identify factors which inhibit higher FDI or FII flows and suggest
remedial steps.
 To examine policy reforms towards mergers and acquisition for attracting
FDI or FII
 To suggest changes in institutional apparatus and organizations, both in
Centre and States, for attracting the FDI or FII flows.