Assignment FDI

8/3/2019 Assignment FDI

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Raghav Gupta – 61Sanjay Kumar - 62Sanjay Rautela- 63Saumya Mishra-64Swati Sharma - 65Vikrant Garg - 66

Global Financial Management 17-Aug-2010

Should India Liberalize FDI?



Table of contents 2

TABLE OF CONTENTS

TABLE OF CONTENTS ..................................................................................................................... 2

INTRODUCTION................................................................................................................................ 3

FOREIGN DIRECT INVESTMENT (FDI) ...................................................................................... 5

FDI V/S FII .......................................................................................................................................... 6

DETERMINANTS OF FDI IN DEVELOPING COUNTRIES........................................................ 7

PRESS NOTES .................................................................................................................................... 8

FOREIGN INVESTMENT PROMOTION BOARD (FIPB) .......................................................... 9

TYPES OF INSTRUMENTS ............................................................................................................ 11

BENEFITS OF FOREIGN DIRECT INVESTMENT .................................................................... 12

ENTRY ROUTES FOR INVESTMENT ......................................................................................... 13

SECTORS PROHIBITED ................................................................................................................ 14

SECTORS IN DISCUSSION ............................................................................................................. 15

Defence ......................................................................................................................................................... 15

Retail ............................................................................................................................................................. 16

CONCLUSION ................................................................................................................................... 18

REFERENCES .................................................................................................................................... 19



Introduction 3

INTRODUCTION

India’s economic policy reforms have played a critical role in the performance of the

Indian economy since 1991. The Government of India in 1991 embarked onliberalisation and economic reforms with a view to bringing about rapid and substantial

economic growth and move towards globalisation of the economy. As a part of the

reforms process, the Government under its New Industrial Policy revamped its foreign

investment policy recognising the growing importance of foreign direct investment as

an instrument of technology transfer, augmentation of foreign exchange reserves and

globalisation of the Indian economy. Simultaneously, the Government, for the first time,

permitted portfolio investments from abroad by foreign institutional investors in the

Indian capital market.

Basically, foreign direct investment relates to direct investment in an Indian companyeither through a joint venture agreement or as a wholly owned subsidiary with

management interest. Foreign direct investment is also permitted through the route of

Global Depository Receipt/Euro issue/FCCB.

Among other things, the reforms have involved opening the economy, making it more

competitive, getting the government out of the huge morass of regulation, empowering

the states to take more responsibility for economic management and thereby creating a

kind of competition between the states for foreign investors. The GDP growth rate

which had collapsed to 0.8% in 1991-92 rebounded to a near normal 5.3% in 1992-93,and then accelerated to 6.2% in 1993-94. Subsequently, the GDP grew at an average

rate of 7.5% in the three years 1994-95 to 1996-97, before slowing down to 5.1% in

1997-98 and then again grew at around 9% in 2008.

In the backdrop of the East Asian crisis, growth did slow down a little bit, but India has

kept growing and has avoided the worst of the crisis. From the narrow financial point of

view two things that India did were quite helpful. One, it did keep some limit on the

short-term capital inflows and did not go overboard in borrowing short term from

abroad. This helped India to avoid the financial reversals of some of its neighbours.

Second, it kept the rupee flexible and the depreciation of the rupee definitely helpedkeep the Indian economy more competitive and kept economic growth going during this

period. In the context of the East Asian crisis, certain kinds of money fled while other

kinds did not. The hottest money was short-term loans from international banks.

Indeed, the reversal of short-term bank lending constituted a very large proportion of

the overall $105 billion reversal in capital flows. The banks put in $56 billion in net

lending in 1996, and then withdrew an estimated $21 billion in net loans in 1997, for a

swing of $77 billion (or 73 percent of the overall reversal). Portfolio equity investors

(e.g. country equity funds) also reversed gear, to the extent of $24 billion. Foreign direct

investors, by contrast, were very stable. It is estimated that net foreign direct



Introduction 4

investment remained roughly unchanged between 1996 and 1997, at around $7 billion

in net flows each year.

It is significant to point out here that India went through a near disaster in 1991 that

was, among others causes, based on short-term borrowing. Of course, at that time it was

short-term borrowing from the non-resident Indians, (NRIs) but it was the same kind of

phenomenon - lots of short-term capital had come in and lots had moved out and

created a severe payments crisis. In terms of foreign investment, it is the direct

investment that should be actively sought for and doors should be thrown wide open to

foreign direct investment. FDI brings huge advantages (new capital, technology,

managerial expertise, and access to foreign markets) with little or no downside. But,

they are put off by the fact that they cannot get reliable power or that the road system is

so dreadful that even if they are producing effectively, they will not be able to get the

goods to the market or back to the port for exports. Continuing fiscal difficulties that are

often linked to the chronic infrastructure difficulties remain a major challenge for India.

A few of the Indian States have been more reform-oriented, such as Andhra Pradesh,

Gujarat, Karnataka, Maharashtra, and Tamil Nadu, but states, such as Haryana, Kerala,

Orissa, Madhya Pradesh, Punjab, Rajasthan and West Bengal have a lot to catch-up with.

Of course, Bihar and Uttar Pradesh are even further behind. States that are ahead in the

reform efforts right now are going to find that if they move against the populist policies

and set up regular markets for services, such as power and water then they are going to

be ahead of the rest in the game.

There are rather significant differences in reform interest and economic performancebetween a large part of northern India and southern India where Karnataka, Tamil

Nadu and Andhra Pradesh are quite dynamic now in trying to get the infrastructure, and

the policy regime right to attract large-scale foreign investment. In the north, in Bihar,

Uttar Pradesh one does not see the same kind of reform dynamism and the results are

therefore poor in terms of economic growth. These differences will be noticed politically

sooner rather than later, (as inequalities will become glaring) and the states that are

ahead will be rewarded with better performance and the states that are behind will find

that there is the demand to catch up with the states that are growing. That will spur a

kind of competition among the Indian states and make the reform process go muchfaster.

All over the world, FDI is seen as an important source of non-debt inflows, and is

increasingly being sought as a vehicle for technology flows, and as a means of building

inter-firm linkages in a world in which multinational corporations (MNCs) are primarily

operating on the basis of a network of global interconnections. In the current global

scenario, it is possible for India to achieve very dynamic growth based upon labour

intensive manufacturing that combines the vast supply of Indian labour, including

skilled managerial and engineering labour, with foreign capital, technology, and

markets.



Foreign Direct Investment (FDI) 5

FOREIGN DIRECT INVESTMENT (FDI)

FDI eludes definition owing to the presence of many authorities:

Organization for Economic Co-operation and Development (OCED), International Monetary

Fund (IMF), International Bank for Reconstruction and Development (IBRD) and United

Nations Conference on Trade and Development (UNCTAD), all these bodies attempt to

illustrate the nature of FDI with certain measuring methodologies.

“Generally speaking FDI refers to capital inflows from abroad that invest in the production

capacity of the economy and are “usually preferred over other forms of external finance

because they are non-debt creating, non-volatile and their returns depend on the

performance of the projects financed by the investors. FDI also facilitates international trade

and transfer of knowledge, skills and technology.”

It is furthermore described as a source of economic development, modernization, and

employment generation, whereby the overall benefits (dependant on the policies of the

host government)

…triggers technology spillovers, assists human capital formation, contributes to

international trade integration and particularly exports, helps create a more competitive

business environment, enhances enterprise development, increases total factor productivity

and, more generally, improves the efficiency of resource use.

FDI in India is allowed through four routes –

Financial Collaborations

Technical Collaborations & Joint Ventures

Capital Market (Euro issues)

Private placement or Preferential allotments



FDI v/s FII 6

FDI V/S FII

Both FDI and FII are related to investment in a foreign country.

1. FDI or Foreign Direct Investment is an investment that a parent company makes in a

foreign country. On the contrary, FII or Foreign Institutional Investor is an investment

made by an investor in the markets of a foreign nation.

2. In case of FII, the companies only need to get registered in the stock exchange to

make investments. But FDI is quite different from it as they invest in a foreign nation.

3. The Foreign Institutional Investor is also known as hot money as the investors have

the liberty to sell it and take it back. But in Foreign Direct Investment, this is not

possible. In simple words, FII can enter the stock market easily and also withdraw

from it easily. But FDI cannot enter and exit that easily. This difference is what makesnations to choose FDI’s more than then FIIs.

4. FDI is more preferred to the FII as they are considered to be the most beneficial kind

of foreign investment for the whole economy. Foreign Direct Investment only targets

a specific enterprise. It aims to increase the enterprises capacity or productivity or

change its management control. In an FDI, the capital inflow is translated into

additional production. The FII investment flows only into the secondary market. It

helps in increasing capital availability in general rather than enhancing the capital of

a specific enterprise.

5. The Foreign Direct Investment is considered to be more stable than ForeignInstitutional Investor. FDI not only brings in capital but also helps in good governance

practices and better management skills and even technology transfer. Though the

Foreign Institutional Investor helps in promoting good governance and improving

accounting, it does not come out with any other benefits of the FDI.

6. While the FDI flows into the primary market, the FII flows into secondary market.

While FIIs are short-term investments, the FDI’s are long term.



Determinants of FDI in developing countries 7

DETERMINANTS OF FDI IN DEVELOPING COUNTRIES

1. Host countries with sizeable domestic markets, measured by gross domestic product

(GDP) per capita and sustained growth, measured by growth rates of GDP, attractrelatively large volumes of FDI.

2. Resource endowments of host countries, including natural resources and human

resources are a factor of importance in the investment decision process.

3. Infrastructure facilities (including transportation and communication networks) are

an important determinant of FDI.

4. Macroeconomic stability, signified by stable exchange rates and low rates of

inflation, is a significant factor in the FDI decisions.

5. Political stability in the host countries is a significant factor in the investment

decision process of TNCs.

6. A stable and transparent policy framework towards FDI is attractive to potential

investors.

7. TNCs place a premium on a distortion free economic and business environment. An

allied proposition here is that a distortion free foreign trade regime, which is neutral

in terms of the incentives it provides for import substituting and export industries,

attracts relatively large volumes of FDI than either an import substituting or an

export-promoting regime.

8. Fiscal and monetary incentives in the form of tax concessions do play a role in

attracting FDI, but these are of little significance in the absence of a stable economic

environment.

India fares well on the attributes relating to market size and growth. Its growth rate of

around 6% per annum since the 1990s is substantial if not dramatic. India's overall record on

macroeconomic stability, saves for the crisis years of the late 1980s and 2008s, is superior to

that of most other developing countries. And judged by the criterion of the stability of

policies it has displayed a relatively high degree of political stability.

It is, however, India's trade and FDI regimes that are major impediments to increased FDIinflows. Admittedly, the 1991 reforms considerably relaxed the regime, which prevailed for

more than four decades. Even so, the product and factor market distortions generated by

the earlier policy regime continue to persist. And liberalization of the economy has not

progressed much since the 1991 reforms. Also there seems to be a wide gap between intent

and practice of policies towards FDI. But in past few years India has made a significant move

towards liberalizing its FDI regime.



Press Notes 8

PRESS NOTES

FDI into India is regulated through "press notes" that publicly state the government's

position on FDI policy. Regulations made under the Foreign Exchange Management Act (FEMA), the only statute enabling such policy always play catch up with the press notes.

Often, the press notes and FEMA regulations are inconsistent.

FDI policy since India opened up in 1991 can be divided into two major eras –

Between 1991 and 1999, activities in which FDI was permitted were specifically spelt

out. Unless specifically permitted, FDI was prohibited. Where permitted, one needed

government's approval in most cases. Naturally, access to New Delhi mattered

immensely. Annual FDI into India struggled to match monthly FDI into China.

Gradually more and more activities moved into the "automatic approval" list. However,

in early 1999, a fundamental shift occurred. FDI in specific areas became prohibited or

regulated. Except for such areas, FDI in any activity became freely permitted.

Under this regime, which coincided with FEMA being legislated, the world was put on

notice that it was welcome to invest in any activity in India. If there were areas where

the government found a free run of FDI undesirable, the world would be transparently

told. Access to New Delhi ceased to be a key success factor. FDI inflows materially

improved.

FDI Policy

Between 1991-

1999After 1999



Foreign Investment Promotion Board (FIPB) 9

FOREIGN INVESTMENT PROMOTION BOARD (FIPB)

The Foreign Investment Promotion Board (FIPB) has been set up by Government to

enable expeditious disposal of proposals involving foreign investment in specifiedsectors. As per the FIPB guidelines and extant practice, the constant endeavour is to

ensure that Government decisions are communicated within a time frame of six weeks,

from receipt of the proposal. In order to adhere to the specified timelines the FIPB

normally meets twice a month to consider proposals that have been circulated in

advance to the consulting Ministries/Departments.

Main countries in terms of the number of investment proposals in 2009 were-

The important sectors covered, in terms of the number of proposals were as follows:

i. Industrial appliances

ii. Telecommunication

iii. Software development (though on automatic route, such proposals came to the

FIPB because of conversion, warrants, share swap, etc.)

iv. Information and Broadcasting sector (including publication and print media)

v. Trading

vi. Power

Mauritius

USA

Singapore

Germany

Japan

Neitherlands

UK

France

Italy



Foreign Investment Promotion Board (FIPB) 10

Advantage FIPB –

1. The voyage of foreign direct investment through the FIPB route is quite an

interesting one. It is not merely confined to giving approvals or rejecting

applications. It is also about amendments, both procedural and substantive. This

process entails discussion, debate, dialogue and interpretations within the

constituents of the Board, the administrative ministries, the FIPB secretariat, the

authorised representatives and, at times with the investor as well.

2. Needless to mention, such mass of thinking throws light on new ideas, leads to

re-visiting old schools of thought and offers a broad panoramic view on many

aspects of corporate governance - in an era of mergers and splits across

boundaries, upcoming areas of investments, the risks and the failures alike.

3. The Board is in a unique position to influence FDI Policy. During the year 2009, it made a very strong intervention about the treatment of contraventions of the

Policy. It adopted an approach that placed more faith in the investors and

ignored their bonafide acts of commissions and omissions.

4. It is a matter of satisfaction and pride that no decision of Board was reversed or

even modified in number of court cases in different High Courts of the country.

5. Overall the Board deserves credit for being fair, transparent, quick and objective

in its decision making process - by no means a small achievement.



Types of Instruments 11

TYPES OF INSTRUMENTS

1. Indian companies can issue equity shares, fully, compulsorily and mandatorily

convertible debentures and fully, compulsorily and mandatorily convertiblepreference shares subject to pricing guidelines/valuation norms prescribed

under FEMA Regulations. The pricing of the capital instruments should be

decided upfront at the time of issue of the instruments.

2. Other types of Preference shares/Debentures i.e. non-convertible, optionally

convertible or partially convertible for issue of which funds have been received

on or after May 1, 2007 are considered as debt. Accordingly all norms applicable

for ECBs relating to eligible borrowers, recognized lenders, amount and

maturity, end-use stipulations, etc. shall apply. Since these instruments would be

denominated in rupees, the rupee interest rate will be based on the swap

equivalent of London Interbank Offered Rate (LIBOR) plus the spread as

permissible for ECBs of corresponding maturity.

3. The inward remittances received by the Indian company vide issuance of DRs

and FCCBs are treated as FDI and counted towards FDI.

4. Issue of shares by Indian Companies under FCCB/ADR/GDR

5. Two-way Fungibility Scheme: A limited two-way Fungibility scheme has been

put in place by the Government of India for ADRs / GDRs. Under this Scheme, a

stock broker in India, registered with SEBI, can purchase shares of an Indian

company from the market for conversion into ADRs/GDRs based on instructions

received from overseas investors. Re-issuance of ADRs / GDRs would be

permitted to the extent of ADRs / GDRs which have been redeemed into

underlying shares and sold in the Indian market.



Benefits of Foreign Direct Investment 12

BENEFITS OF FOREIGN DIRECT INVESTMENT

Attracting foreign direct investment has become an integral part of the economic

development strategies for India. FDI ensures a huge amount of domestic capital,production level, and employment opportunities in the developing countries, which is a

major step towards the economic growth of the country. FDI has been a booming factor

that has bolstered the economic life of India, but on the other hand it is also being

blamed for ousting domestic inflows. FDI is also claimed to have lowered few regulatory

standards in terms of investment patterns. The effects of FDI are by and large

transformative. The incorporation of a range of well-composed and relevant policies

will boost up the profit ratio from Foreign Direct Investment higher. Some of the biggest

advantages of FDI enjoyed by India have been listed as under:

1. Economic growth- This is one of the major sectors, which is enormouslybenefited from foreign direct investment. A remarkable inflow of FDI in various

industrial units in India has boosted the economic life of country.

2. Trade- Foreign Direct Investments have opened a wide spectrum of

opportunities in the trading of goods and services in India both in terms of

import and export production. Products of superior quality are manufactured by

various industries in India due to greater amount of FDI inflows in the country.

3. Employment and skill levels- Foreign Direct Investments have also ensured anumber of employment opportunities by aiding the setting up of industrial units

in various corners of India.

4. Technology diffusion and knowledge transfer- FDI apparently helps in the

outsourcing of knowledge from India especially in the Information Technology

sector. It helps in developing the know-how process in India in terms of

enhancing the technological advancement in India.

5. Linkages and spill over to domestic firms- Various foreign firms are nowoccupying a position in the Indian market through Joint Ventures and

collaboration concerns. The maximum amount of the profits gained by the

foreign firms through these joint ventures is spent on the Indian market.



Entry routes for investment 13

ENTRY ROUTES FOR INVESTMENT

Investments can be made by non-residents in the shares/fully, compulsorily and

mandatorily convertible debentures/ fully, compulsorily and mandatorily convertiblepreference shares of an Indian company, through two routes; the Automatic Route and

the Government Route. Under the Automatic Route, the foreign investor or the Indian

company does not require any approval from the RBI or Government of India for the

investment. Under the Government Route, prior approval of the Government of India

through Foreign Investment Promotion Board (FIPB) is required. Proposals for foreign

investment under Government route as laid down in the FDI policy from time to time

are considered by the Foreign Investment Promotion Board (FIPB) in Department of

Economic Affairs (DEA), Ministry of Finance.

Established under the Department of Industrial Policy and Promotion, the ForeignInvestment Promotion Board is the only agency in India that deals with all matters

relating to Foreign Direct Investment (FDI) and promotion of foreign investment in

India. The board is chaired by the Secretary Industry, Department of Industrial Policy

and Promotion, Government of India. The board, towards prompt clearance of the

proposals, presented to it through decisive negotiation and discussion with budding

investors. The primary functions of the Foreign Investment Promotion Board are

mentioned below:

1.

To ensure quick clearing of proposals for foreign investment

2. Periodically review the implementation of the cleared proposals

3. Regular review the policies pertaining to FDI with concerned agencies including

government bodies and private bodies in various sectors.

4. Doing investment promotion activities consisting of establishing contacts and

inviting overseas companies to do business in India

5. Identifying sectors while keeping the national internet in mind where

investments from aboard can be sought

6. Taking up activities for the promotion and facilitation of foreign direct

investment as and when required



Sectors Prohibited 14

SECTORS PROHIBITED

FDI is prohibited in the following activities/sectors:

a) Retail Trading (except single brand product retailing)

b) Atomic Energy

c) Lottery Business including Government /private lottery, online lotteries, etc.

d) Gambling and Betting including casinos etc.

e) Business of chit fund

f) Nidhi company

g) Trading in Transferable Development Rights (TDRs)

h) Real Estate Business or Construction of Farm Houses

i) Activities / sectors not opened to private sector investment.

Besides foreign investment in any form, foreign technology collaboration in any form

including licensing for franchise, trademark, brand name, management contract is also

completely prohibited for Lottery Business and Gambling and Betting activities



Sectors in Discussion 15

SECTORS IN DISCUSSION

DEFENCE Present Scenario

The policy for Foreign Direct Investment (FDI) in the Defence Sector was first notified

vide Press Note 4 of 2001, wherein the Defence Industry Sector was opened up to 100%

for Indian private sector participation, with FDI permissible up to 26%, both subject to

licensing and Government approval. Subsequently, guidelines for production of Defence

equipment were notified, vide Press Note 2 of 2002. The extant FDI sectoral cap for the

Defence Sector is, accordingly, 26%.

Other than the FDI policy, two other policy regimes govern the defence sector. These are

the Defence Procurement Policy and the Industrial License regime.

Concerns related to liberalising the FDI regime for the defence sector

1. The major reason for reluctance in encouraging the Private Sector into defence

production and welcome FDI in the sector is on account of concern for the

Defence PSUs and the Ordinance Factories. However, it is clear that if the import

continues at the present level, the role of the Defence PSUs and the Ordinance

Factories would only be further marginalised. If on the other hand, the major

arms and weapon manufacturer companies set up their manufacturing units inIndia, there is strong possibility that they will collaborate with Defence PSUs and

Ordinance Factories.

2. Another concern is that FDI could lead to ownership and control of firms

operating in a critical and highly sensitive industry being passed on to foreign

hands. Even if ownership or control does not pass on fully to the foreign

investors, raising of the cap could lead to their enhanced influence and say in

affairs of the company’s management. A related concern is that this could lead to

an increased dependence on foreign investment, for meeting our defence needs.

3. There can also be concern relating to availability or reliability of supplies in

times of war. The availability of maintenance and repair capability, spare parts,

material and other support to keep critical systems functioning in all

circumstances is a vital concern

4. The other concern is related to the issue of passing on of the critical equipment,

design or source code to other players-particularly, countries inimical to Indian

interests. Such an apprehension will exist even in the case of imported

equipment. In fact, in the case of indigenous equipment, the Government can



Sectors in Discussion 16

exercise greater and more effective control on the production mechanism of a

company located in India and subject to Indian laws compared to a company

located overseas. Government can reserve the right to inspect or control the

production and dispatches in these facilities through deployment of necessary

security agencies/ personnel.

5. There is a general concern about the internal security aspect of manufacture of

defence equipment especially small arms and ammunition. This concern can be

met by devising a strong surveillance system in each factory/unit. This could

include posting of defence/security personnel on a whole time basis to these

locations

RETAIL Present Scenario

1. FDI in Multi-Brand retailing is prohibited in India. FDI in Single- Brand Retailing

was, however, permitted in 2006, to the extent of 51%. Since then, a total of 94

proposals have been received till May, 2010. Of this, 57 proposals were

approved. An FDI inflow of US $ 194.69 million (Rs. 901.64 crore) was received

between April, 2006 and March, 2010, comprising 0.21% of the total FDI inflows

during the period, under the category of single brand retailing. The proposals

received and approved related to retail trading of sportswear, luxury goods,apparel, fashion clothing, jewellery, hand bags, lifestyle products etc., covering

high-end items. Single brand retail outlets with FDI generally pertain to high-end

products and cater to the needs of a brand conscious segment of the population,

mainly attracting a brand loyal clientele, which often has a pre-set positive

disposition towards the specific brand. This segment of customers is distinctly

different from one that is catered by the small retailers/ kirana shops.

2. FDI in cash and carry wholesale trading was first permitted, to the extent of

100%, under the Government approval route, in 1997. It was brought under the

automatic route in 2006. Between April, 2000 to March, 2010, FDI inflows of US

$ 1.779 billion (Rs. 7799 crore) were received in the sector. This comprised 1.54

% of the total FDI inflows received during the period.

3. Trade is an important segment in India's Gross Domestic Product (GDP). As per

the National Accounts, released by the Central Statistical Organisation (CSO),

GDP from trade (inclusive of wholesale and retail in organised and unorganised

sector), at current prices, increased from Rs 4,33,963 crore in 2004-05 to Rs

7,91,470 crore, at an average annual rate of 16.2 per cent. The share of trade in

GDP, however, remained fairly stable at little over 15 per cent in last four years",



17

The share of the private organised sector in total GDP from trade was 23.2 per

cent in 2008-09 and it grew at 15.0% during the year. The share of the retail

trade in GDP remained stable at 8.1 per cent during this period.

Limitations of the present setup

1. There has been a lack of investment in the logistics of the retail chain, leading to

an inefficient market mechanism. Though India is the second largest producer of

fruits and vegetables (about 180 million MT), it has a very limited integrated

cold-chain infrastructure, with only 5386 stand-alone cold storages, having a

total capacity of 23.6 million MT. ,80% of this is used only for potatoes. The chain

is highly fragmented and hence, perishable horticultural commodities find it difficult to link to distant markets, including overseas markets, round the year.

2. Intermediaries dominate the value chain. They often flout mandi norms and

their pricing lacks transparency.

3. There is a big question mark on the efficacy of the public procurement and PDS

set-up and the bill on food subsidies is rising.

4. The MSME sector has also suffered due to lack of branding and lack of avenues toreach out to the vast world markets.

Need for Investments in Agriculture Infrastructure and linked Retail Sectors

It is estimated that India will need substantial investment to develop infrastructure for

supporting retail development. A significant portion of this will need to be earmarked

for up gradation of the supply chain for fruits & vegetables. A major portion of his

investment is expected to come from the private sector, for which an appropriate

regulatory and policy environment is necessary. An 11th Plan working group has

estimated a total investment of Rs. 64,312 crore in agricultural infrastructure. A storage

capacity gap of 35 million tonnes has been assessed, requiring an estimated investment

of Rs. 7,687 crore during the 11th Plan.



Conclusion 18

CONCLUSION

Given the engulfing resource and technological constraints that India is facing today,

India should liberalize it FDI policy but in calibrated and inclusive way so that small andmedium enterprises in India should also be able to grow.

The Indian middle class is large and growing; wages are low; many workers are well

educated and speak English; investors are optimistic and local stocks are up; despite

political turmoil, the country presses on with economic reforms. The rapid economic

growth of the last few years has put heavy stress on India's infrastructural facilities. The

projections of further expansion in key areas could snap the already strained lines of

transportation unless massive programs of expansion and modernization are put in

place. Problems include power demand shortfall, port traffic capacity mismatch, poor

road conditions (only half of the country's roads are surfaced), low telephonepenetration (1.4% of population). Although the Indian government is well aware of the

need for reform and is pushing ahead in this area, business still has to deal with

an inefficient and sometimes still slow-moving bureaucracy. The Indian market is

widely diverse. The country has 17 official languages, 6 major religions, and ethnic

diversity as wide as all of Europe. Thus, tastes and preferences differ greatly among

sections of consumers. The general economic direction in India is toward liberalization

and globalization.



References 19

REFERENCES

http://www.business-standard.com

http://www.fipbindia.com

http://finmin.nic.in/

http://business.mapsofindia.com

http://www.rediff.com

http://www.business-standard.com/


http://www.fipbindia.com/




http://business.mapsofindia.com/


http://www.rediff.com/







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