FDI Foreign Direct Investment ppt
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Transcript of FDI Foreign Direct Investment ppt
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.
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.
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...
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.
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
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%
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
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
Country-wise FDI inflow in India
Sector-Wise FDI inflow in India
Factors affecting FDI
Rate of Interest
Speculation
Profitability
Costs of production Economic Conditions Government policies Political factors
.