3. INTRODUCTION
Foreign Direct Investment is a type of investment that involves the injection of
foreign funds into an enterprise that operates in a different country of origin
from the investor. FDI is a measure of foreign ownership of domestic
productive assets such as factories, land and organizations.
Foreign direct investments have become the major economic driver of
globalization, accounting for over had of all cross-border investments.
Investors are granted management and voting rights if the level of ownership is
greater than or equal to 10% of ordinary shares. Shares ownership amounting to
less that the stated amount is termed portfolio investment and is not categorized
as FDI.
4. CONT........
Pre-1991 FDI was allowed selectively up to 40% under FERA
This period was dominated by the Congress party
1991 35 high priority industry groups were placed on the Automatic Route for FDI up
to 51%
Minority Congress government: Initiated economic reforms in a big way
1997 Automatic Route expanded to 111 high priority industry groups up to 100%/ 74%/
51%/50%
United Front Government: Inclusive of ‘left parties’, was perceived as
traditionally opposed to FDI, but continued with the reforms.
2000 All sectors placed on the Automatic Route for FDI except for a small negative list
BJP coalition government:(coalition of Left and Right wing parties) was
traditionally seen as opposed to FDI, but continued with economic reforms.
Post 2000 Many new sectors opened to FDI; viz., insurance (26%), integrated townships
(100%), mass rapid transit systems (100%), defence industry (26%), tea
plantations (100%), print media (26%).
Sectoral caps in many other sectors relaxed;
BJP coalition government: pursued reforms vigorously and initiated second
5. FOREIGN DIRECT INVESTMENT AND THE
DEVELOPING WORLD
FDI provides an inflow of foreign capital and funds, in addition to an increase
in the transfer of skills, technology, and job opportunities.
The United States is the world’s largest recipient of FDI.
In the last 6 years, over 4000 new projects and 630,000 new jobs have been
created by foreign companies, resulting in close to $314 billion in investment.
Apporx $2.1 trillion stock of FDI in the United States at the end of 2008 is the
equivalent of approximately 16 percent of U.S. gross domestic product (GDP).
China is the second largest recipient of FDI globally. FDI into China fell by
over one-third in 2009 due the Global Financial Crisis (global macroeconomic
factors) but rebounded in 2010.
6. FOREIGN DIRECT INVESTMENT IN INDIA
India is the second most important destination
Telecommunication, construction activities and computer software and
hardware is the sector which is affected mostly
Foreign Direct Investment equity inflow into India in June this year rose by
more than 310 percent from the same month last year, according to data
released by the Indian Ministry of Industry Commerce on Monday.
7. FOREIGN DIRECT INVESTMENT IN INDIA IN
LAST SIX YEARS
Foreign Direct Investment in US$ Million
4000 3749
3500
3121
3000
2500 2339 2214
2000 Foreign Direct Investment
1551
1500 in US$ Million
1000 661
500
0
2006 2007 2008 2009 2010 2011
8. CURRENT ISSUE OF FDI IN RETAIL SECTOR
IN INDIA
Indian government is going to allow 51% FDI in multi brand retail sector
Will affect the Indian retail industry in negative way because of the entrance of
giant retail companies like Wal-Mart
The government's decision to permit FDI in multi-brand retail has created
political turmoil that has disrupted functioning of Parliament for 8 days.
9. ADVANTAGE & DISADVANTAGE OF FDI IN
INDIA
Economic growth
Trade
Employment and skill level
Technology diffusion and knowledge transfer
Linkages and spillover to domestic firm
Infrastructure Development
