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FDI Foreign Direct Investment ppt
1.
2. What is FDI?
FDI refers to investment in a foreign country
where the investor retains control over the
investment. It typically takes the form of
starting a subsidiary , acquiring a stake in an
existing firm or starting a joint venture in the
foreign country. Direct investment and
management of the firm concerned normally
go together.
3. CONT…
Foreign direct investment(FDI) is a direct
investment into production or business in a
country by an individual or company of another
country, either by buying a company in the target
country or by expanding operations of an existing
business in that country.
4. FDI IN INDIA
Foreign investment was introduced in 1991
under Foreign Exchange Management Act
(FEMA), driven by then finance
minister Manmohan Singh. As Singh
subsequently became the prime minister, this has
been one of his top political problems, even in the
current times. India disallowed overseas corporate
bodies (OCB) to invest in India. India imposes
cap on equity holding by foreign investors in
various sectors, current FDI limit in aviation
sector is maximum 49% till 2012 BUT...
5. CONT..
Finally, after all that waiting & patience, the
Indian government has rolled out the red
carpet for international corporations to enter
India. On 14 September 2012, the
Government of India allowed FDI up to 100%
in various sectors.
6. 100% FDI permitted Sectors in
India
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
7. Main Sectors with FDI Equity/Route Limit in
India
Insurance- 26%
Telecommunication- FDI is permitted up to
74% with FDI, beyond 49% requiring
Government approval
Domestic airlines- 49%
Mining (Mining of Diamonds and precious
stones)- 74%
Airports- 74%
8. Advantages of FDI
Increase investment level and thereby income &
employment
Increase tax revenue of government
Facilitates transfer of technology
Increase exports and reduce import requirements
Increase competition and break domestic monopolies
Improves quality and reduces cost of inputs
9. Limitations of FDI
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
12. Factors affecting FDI
Rate of Interest
Speculation
Profitability
Costs of production
Economic Conditions
Government policies
Political factors