This document discusses foreign direct investment (FDI) in India. It defines FDI as cross-border investment by a company in one country made to establish a business in another country. FDI can benefit countries by improving their foreign exchange position, increasing capital formation and competition, and introducing new technologies. Historically, India liberalized its FDI policies in 1991 and 1999 to allow more foreign equity inflows. Key sectors that have benefited from FDI in India include telecommunications, insurance, software, and pharmaceuticals. The document also summarizes recent changes to FDI caps and policies in various sectors in India.

1. By CA Anupam Petkar

2. Foreign Direct Investment – Primary Look
The Foreign Direct Investment means “cross border investment made
by a resident in one economy in an enterprise in another economy,
with the objective of establishing a lasting interest in the investee
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FDI is also described as “investment into the business of a country by
a company in another country”. Mostly the investment is into
production by either buying a company in the target country or by
expanding operations of an existing business in that country”. Such
investments can take place for many reasons, including to take
advantage of cheaper wages, special investment privileges (e.g. tax
exemptions) offered by the country.

3. FDI – Benefits
 Improvement in Foreign Exchange Position of Country
 Additional capital formation by bringing in fresh capital
 Introduction of new technologies, management skills, intellectual
property
 Improvement in efficiency in local market because of increased
competition
 Helps in increasing Exports

4. FDI - Historical Overview – India
 Pre 1991
 Hardly any foreign equity inflows, reliance on foreign debt
 11999911-- 9922
 Balance of payments crisis lead to IMF induced liberalization
 1996-97
 Setting up FIPB - facilitation of expeditious approvals through
nodal agency
1999
FEMA- fundamental shift in philosophy and liberalization

5. Scope of FDI in India
 Sectors which has benefited from FDI
 Telecommunication
 Insurance
 Financial Sector
 Pharmaceuticals
 SSooffttwwaarree aanndd IInnffoorrmmaattiioonn TTeecchhnnoollooggyy
 Major economic sectors where India can attract Investment –
 Auto parts
 Chemicals
 Jewellery
 Pharmacy
 Apparels

6. Recent Developments – FDI Cap revised
 FDI cap in telecom raised to 100 percent from 74 percent; up to 49
percent through automatic route and beyond via FIPB.
 No change in 49 percent FDI limit in civil aviation.
 FDI cap in defence production to stay at 26 percent, higher investment
may be considered in state-of-the-art technology production by Cabinet
Committee on Security (CCS).
100 percent FDI allowed in single  bbrraanndd rreettaaiill;; 4499 ppeerrcceenntt tthhrroouugghh
automatic, 49-100 percent through FIPB.
 FDI limit in insurance sector raised to 49 percent from present 26
percent, subject to Parliament approval.
 FDI up to 49 percent in petroleum refining allowed under automatic
route, from earlier approval route.
 In power exchanges 49 percent FDI allowed through automatic route,
from earlier PIPB route.

7. Recent Developments – FDI Cap revised... cont
 Raised FDI in asset reconstruction companies to 100 percent from 74
percent; of this up to 49 percent will be under automatic route.
 FDI limit increased in credit information companies to 74 percent
from 49 percent.
 FDI up to 49 percent in stock exchanges, depositories allowed under
automatic route.
 FDI up to 100 percent through automatic route allowed in courier
services.
 FDI in tea plantation up to 49 percent through automatic route; 49-
100 percent through FIPB route.
 No decision taken on FDI cap in airports, media, brown field
pharmacy and multi-brand retail.

9. Need FDI in Manufacturing to push Jobs & Growth
 Unprecedented level of interest from International Investors
 Primary Sector – Agriculture – can provide jobs not growth
Tertiary Sector – IT – can provide growth but not enough jobs
 Manufacturing Sector – if we want to provide jobs as well as growth

10. TThhaannkk YYoouu !!!!!!