FDI in India
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Transcript of FDI in India
By CA Anupam Petkar
Foreign Direct Investment – Primary Look
The Foreign Direct Investment means “cross border investment madeby a resident in one economy in an enterprise in another economy,with the objective of establishing a lasting interest in the investeeeconomy.economy.
FDI is also described as “investment into the business of a country bya company in another country”. Mostly the investment is intoproduction by either buying a company in the target country or byexpanding operations of an existing business in that country”. Suchinvestments can take place for many reasons, including to takeadvantage of cheaper wages, special investment privileges (e.g. taxexemptions) offered by the country.
FDI – Benefits
Improvement in Foreign Exchange Position of Country
Additional capital formation by bringing in fresh capital
Introduction of new technologies, management skills, intellectualproperty
Improvement in efficiency in local market because of increasedcompetition
Helps in increasing Exports
FDI - Historical Overview – India
Pre 1991 Hardly any foreign equity inflows, reliance on foreign debt
1991- 92 1991- 92 Balance of payments crisis lead to IMF induced liberalization
1996-97 Setting up FIPB - facilitation of expeditious approvals throughnodal agency
1999FEMA- fundamental shift in philosophy and liberalization
Scope of FDI in India
Sectors which has benefited from FDI Telecommunication Insurance Financial Sector Pharmaceuticals Software and Information Technology Software and Information Technology
Major economic sectors where India can attract Investment – Auto parts Chemicals Jewellery Pharmacy Apparels
Recent Developments – FDI Cap revised
FDI cap in telecom raised to 100 percent from 74 percent; up to 49percent through automatic route and beyond via FIPB.
No change in 49 percent FDI limit in civil aviation.
FDI cap in defence production to stay at 26 percent, higher investmentmay be considered in state-of-the-art technology production by CabinetCommittee on Security (CCS).
100 percent FDI allowed in single brand retail; 49 percent through 100 percent FDI allowed in single brand retail; 49 percent throughautomatic, 49-100 percent through FIPB.
FDI limit in insurance sector raised to 49 percent from present 26percent, subject to Parliament approval.
FDI up to 49 percent in petroleum refining allowed under automaticroute, from earlier approval route.
In power exchanges 49 percent FDI allowed through automatic route,from earlier PIPB route.
Raised FDI in asset reconstruction companies to 100 percent from 74 percent; of this up to 49 percent will be under automatic route.
FDI limit increased in credit information companies to 74 percentfrom 49 percent.
FDI up to 49 percent in stock exchanges, depositories allowed under
Recent Developments – FDI Cap revised... cont
FDI up to 49 percent in stock exchanges, depositories allowed underautomatic route.
FDI up to 100 percent through automatic route allowed in courierservices.
FDI in tea plantation up to 49 percent through automatic route; 49-100 percent through FIPB route.
No decision taken on FDI cap in airports, media, brown field
pharmacy and multi-brand retail.
Need FDI in Manufacturing to push Jobs & Growth
Unprecedented level of interest from International Investors
Primary Sector – Agriculture – can provide jobs not growth
Tertiary Sector – IT – can provide growth but not enough jobs
Manufacturing Sector – if we want to provide jobs as well as growth
Thank You !!!Thank You !!!