Foreign direct investment (FDI) is important for India's economic growth. It brings capital, technology, and business expertise to speed up development. FDI comes to India in various forms, including setting up subsidiaries, joint ventures, portfolio investments, and loans. Major sectors receiving FDI are infrastructure, automotive, pharmaceuticals, and defense. While FDI benefits India, it also faces challenges like inadequate infrastructure and complex regulations. The government is taking steps like liberalizing sectors and improving ease of business to promote greater FDI inflows under its Make in India initiative.

1. Foreign Direct Investment

2. Why India requires Foreign Capital
 To speed up economic growth
 To ensure investment and entrepreneurship
 To bring in foreign technology and business
experience

3. In what form foreign capital become available
 Foreign Direct Investment: Foreign companies
set up subsidiaries and branches in India
 Portfolio investment: Foreign subscribe to
shares and debentures of companies in India
 Foreign Collaboration: Foreign and Indian
firms jointly participate in business
 Inter Government Loans:- Foreign
Government grant loans to India
 Loans from International Institutions: like
world bank and IMF provides loans to India

4. Concept of FDI
 It means investment in a foreign country where the
investor retains control over the investment in terms
of actual power of management and effective
decision making.
 It typically occurs in the following ways:-
 Setting up a subsidiary
 Starting a joint venture
 Acquiring a stake in existing firm in a foreign country

5. FII- Foreign Institutional Investors
 When the investor makes only investment and does not retain
control over the enterprise, it is known as portfolio investment.
 Portfolio investment tales place through FII like mutual funds,
global depository receipts, foreign currency convertible bonds.

6. Advantage of FDI
 Increase the level of investment
 Helps in transfer of knowledge, machinery and
equipment
 Creates managerial revolution
 Helps to boost the employment and income
 Helps the host country to increase their exports
 Helps to increase competition and break domestic
monopolies in the host country.
 It improves standard of living

7. Disadvantages of Foreign Direct Investment
 FDI investment are made in the high profit sectors
rather in the priority sectors.
 FDI takes place through MNC’s and these MNC’s
become the threat for domestic players
 The technology brought by foreign investor may not
be appropriate to the market size, resource base,
stage of economic development.
 It involves risk and cost for home country

8. Determinants of FDI
 Natural Resources:
 Availability of natural resources is the major determinants of
FDI.
 FDI is attracted in those countries which have abandon
unexploited natural resources.
 Natural Markets:
 Market size of the host country in relation to size and income
of population and market growth also attract FDI
 Large market can adapt more firms and brings economies of
scale.

9.  Availability of cheap labour:- low cost labour and low
cost raw materials helps to minimize costs of
production and increase profits.
 Rate of Interest: foreign investment is also inspired by foreign
exchange rate.
 Foreign capital is attracted to countries where the return on
investment is higher.
 Socio economic conditions:- size of the population,
infrastructural facilities and income level of a
country influence direct foreign investment

10.  Political Situation: political stability, legal
framework, judicial system, relations with other
countries and other political factors influence
movements of capital from one country to another.
 Government Policies: policy towards foreign
investment, foreign collaborations, foreign exchange
control, remittance , and incentives offered to foreign
investors exercise a significant influence on FDI in a
country.

11. FDI In India
 FDI is an important monetary source for India's
economic development.
 Economic liberalisation started in India in the wake
of the 1991 crisis and since then, FDI has steadily
increased in the country.
 India, today is a part of top 100-club on Ease of
Doing Business (EoDB) and globally ranks number 1
in the greenfield FDI ranking.

12. Currently FDI is permitted in India;
•Through financial collaborations.
•Through joint ventures and technical collaborations.
•Through capital markets via Euro issues.
•Through private placements or preferential allotments.
Major Sector for FDI in India are:
•Infrastructure
•Automotive
•Pharmaceuticals
•Defense
•Retails
•Railways Infrastructure
•Chemicals
•Textiles
•Airlines
FDI in India

13. Major Bodies Constituted For F.D.I. in India
FDI in India
• Foreign Investment
Promotion
Board (FIPB)
1991
• Foreign Investment
Promotion Council (FIPC)1996
• Foreign Investment
Implementation Authority
(FIIA)
1999
• Secretariat for
Industrial Assistance
(SIA)
2004

14. Top Investors in
India:
FDI in India
4
2
9
7
5
4 4 4
2 2
1
9
0
5
1
0
1
5
2
0
4
0
3
5
3
0
2
5
4
5
%agetototalInflows(intermsofUS$)
%
Source :
https://www.rbi.org.i
n/

15. Current Status of F.D.I. in India
RECENT POLICY MEASURES UNDER MAKE IN INDIA
1
• Open new sectors for foreign direct investment,
2
• Increase the sectoral limit of existing sectors
3
• Simplifying rules and other conditions of the FDI policy
4
• 49% FDI under automatic route permitted in Insurance and Pension & Defense Sectors
5
• FDI up to 100% under automatic route permitted in Teleports, Direct to Home, Cable
Networks, Mobile TV, Headend-in- the Sky Broadcasting Service
6
• 74% FDI under automatic route permitted in brownfield pharmaceuticals. FDI beyond
74% will be allowed through government approval route
7
• 100% FDI under automatic route permitted in Brownfield Airport projects
8
• Defense, Telecom, Private Security or Information and Broadcasting need approval of
Reserve Bank of India for their offices
Source :
ttp://www.makeinindi
a.com/fdi

16. Factors affecting F.D.I. in India
Problems For Low FDI Flow To India:
Lack of adequate Infrastructure
Stringent Labor Laws
Corruption
Lack of decision making authority with the state governments
Limited scale of export processing zones
High corporate tax rates
Indecisive government and political instability
Determinants of FDI :
Stable policies
Economic factors
Cheap and Skilled Labour
Basic infrastructure
Unexplored markets
Availability of natural resources

17. Needs and Challenges of F.D.I. in India
Needs:
Sustaining a high level of investment
Technological gap
Exploitation of natural resources
Understanding the initial risk
Development of basic economic infrastructure
Improvement in the balance of payments position
Foreign firm’s helps in increasing the competition
Challenges:

18. Advantages and Disadvantages of F.D.I. in
India
ADVANTAGES:
Increase in Domestic Employment/Drop in unemployment.
Investment in Needed Infrastructure.
Positive Influence on the Balance of Payments.
New Technology and “Know How” Transfer.
Increased Capital Investment.
Targeted Regional and Sectoral Development.
DISADVANTEGS:
Local firms may loose business because of the attained power of foreign
firms.
The repatriation of profit may drain out the capital of the host country.
Local population may be displaced out of their jobs if they are unable to cope
with the technologically advanced foreign firms.
Technological Dependence on Foreign Technology Sources.

19. FDI should be aggressively promoted in R&D, Manufacturing
Import duty should be imposed to protect domestic production units.
Flexible labour laws is needed
Promote Greenfield projects
Geographical disparities of FDI should be removed
Education sector should be opened to FDI
Cooperative societies should be formed for the farmers and other agricultural
suppliers to take care of their rights.
Recommendations for Promoting F.D.I. in India

20. 1) Discuss the recent trends in India’s foreign direct
investment.
2) What are the various forms in which foreign capital
is flowing in India?
Mail it on sugandhaagarwal@ndimdelhi.in