contains the meaning of FDI , Scope, advantages, and disadvantages of FDI and Classification of FDI

1. Foreign Direct Investment
(FDI)
Presented by-
Dr. Jyoti Khare
Associate Professor
Govt. P. G.College
Maldevta, Raipur
Dehradun, Uttarakhand

2. What is FDI?
 FDI is when an investor from another country (foreign country) makes an
investment in a business situated in the country. Now such an investor can
be an individual, firm, company, et
 IN OTHER WORD, Foreign direct investment (FDI) is an investment made by a
company or individual in one country, in the form of either establishing
business operations or acquiring business assets in the other country, such
as ownership or controlling interest in a foreign company.
 This means they aren’t just bringing money with them, but also knowledge,
skills and technology.
 FDI is when an organization or an individual owns a participation in the
shares of a minimum of ten percent of a foreign company.
 (https://www.wallstreetmojo.com/foreign-direct-investment/)

3. Current Facts Related FDI in
India
 FDI is an important monetary source for India's economic development.
 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- Index) and globally ranks number 1 in the greenfield FDI ranking.
 Singapore was the largest source of FDI in India in the April-June 2019-20
period with $ 5.33 billion investments followed by FDI from Mauritius worth $
4.67 billion, the US worth $ 1.45 billion, the Netherlands worth $ 1.35 billion
and Japan worth $ 472 million
 In India, foreign direct investment policy is regulated under the Foreign
Exchange Management Act, 2000 governed by the Reserve Bank of India.

4. Routes to get FDI in India
 Two routes
 AUTOMATIC ROUTE: where no approval or authority is required by the
private foreign investor. He can invest in any company it wishes with no
need for government approval.
 GOVT ROUTE: in this route, there is no investment without the prior approval
of the Government of India.

5. Percentage of FDI
Foreign Direct Investment in India does not have a uniform rate. Some
industries allow 100% FDI, i.e. the entire funds of the business can be
from foreign direct investment. The percentages vary from 26% to 49%
to 51%. There are a few industries where FDI is strictly prohibited
under any route.
source: https://www.investindia.gov.in/foreign-direct-investment

6. Prohibited sector
 There are a few industries where FDI is strictly prohibited under any route. These
industries are
 Atomic Energy Generation
 Any Gambling or Betting businesses
 Lotteries (online, private, government, etc)
 Investment in Chit Funds
 Nidhi Company
 Agricultural or Plantation Activities (although there are many exceptions like
horticulture, fisheries, tea plantations, Pisciculture, animal husbandry, etc)
 Housing and Real Estate (except townships, commercial projects, etc)
 Trading in TDR’s
 Cigars, Cigarettes, or any related tobacco industry

7. Prohibited sectors
source: https://www.investindia.gov.in/foreign-direct-
investment

8. Some specific sectors are mentioned that have
specific condition for FDI
Automatic Govt.

9. Some specific sectors are mentioned that have specific
condition for FDI
Specific Sectors Automatic Government
Broadcast content service(uplinking) 100% -
Broadcast content service --- 49%
Broadcast carriage service 100% ---
Defense upto49% Above 49%
Digital Media ---- Upto 26%
Infrustucture co. in the securities market 49% ---
Healthcare (brownfield) Upto 74% Above 74%
Mining ---- 100%
Insurance Upto 49% ---
Multi brand retail trading -- 51%
Pension 49% ----
Petrolium (refining by PSUs) 49% ---
Pharmaceuticals (Brownfield) Upto 74% Above 74%
source: https://www.investindia.gov.in/foreign-direct-investment

10. Advantages of FDI
Increased
Employmen
t and
Economic
Growth. Human
Resource
Development.
...
Development
of Backward
Areas.
Provision of
Finance &
Technology.
Increase in
Exports.
Exchange Rate
Stability.
Stimulation of
Economic
Development.
Improved
Capital
Flow.
BENEFITS
of FDI

11. Disadvantages of FDI
Disappearance of
cottage and small scale
industries:
Contribution to
the pollution:
Exchange crisis:
Cultural erosion:
Political corruption:
Inflation in the
Economy:
Trade Deficit:
World Bank and lMF
Aid:
DRAWBACKS
of FDI

12. TYPES OF FDI
DIRECTION
•INWARD FDI
•OUTWARD FDI
TARGET
•GREENFIELD INVESTMENT
•MERGER & ACQUISITION
•HORIZONTAL FDI
•VERTICAL FDI
MOTIVE
•RESOURCE SEEKING
•MARKET SEEKING
•EFFICIENCY SEEKING
•STRATEGIC ASSET SEEKING

13. •An inward investment consists of foreign entities investing in
local economies bringing in foreign capital.
•Inward investments overall improve local economies by
bringing wealth, job creation and infrastructure development.
INWARD
FDI
•An outward direct investment (ODI) is a business strategy in
which a domestic firm expands its operations to a foreign
country. This can take form as a green field investment, a
merger/acquisition, or expansion of an existing foreign facility.
OUTWARD
FDI
FDI- On The Basis of Direction

14. •A greenfield investment is a form of market entry commonly used when a
company wants to achieve the highest degree of control over foreign activities.
•According to the Bureau of Economic Analysis (BEA), a greenfield investment is a
project “where foreign investors establish a new business or expand an existing
business on U.S. soil.”
Greenfield
investment
• Mergers and acquisitions (M&A) are defined as consolidation of companies.
Differentiating the two terms, Mergers is the combination of two companies
to form one, while Acquisitions is one company taken over by the other.
Merger &
Acquisition
• Horizontal FDI occurs when the multinational undertakes the same
production activities in multiple countries
Horizontal FDI
FDI- On The Basis of Target
•Vertical FDI takes place when the multinational fragments the
production process internationally, locating each stage of
production in the country where it can be done at the least cost.
Vertical FDI

15. •Investment which seeks to acquire factors of production that is more
efficient than obtainable in the home economy of the firm.
•Motivated by investor interest in accessing and exploiting natural
resources.
Resource seeking
FDI
•Motivated by investor interest in serving domestic or regional markets.
•Investment which aims either penetrating new market or
manufacturing one.
Market seeking
FDI
•FDI that comes into a country seeking to benefit from factors that
enable it to compete in international markets.
Efficiency
seeking FDI
FDI- On The Basis of Motive
•Motivated by investor interest in acquiring strategic assets
(brands, human capital, distribution networks, etc.) that will
enable a firm to compete in a given market. Takes place through
mergers and acquisitions.
Strategic asset
seeking FDI

16. THANK YOU