Foreign direct investment(fdi)

21
WHAT IS FDI? Foreign direct investment (FDI) is an investment made by a company or individual in one country in business interests in another country, in the form of either establishing 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.

Transcript of Foreign direct investment(fdi)

WHAT IS FDI?

• Foreign direct investment (FDI) is an investment made by a company or individual in one country in business interests in another country, in the form of either establishing 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.

ROLE OF FDI IN INDIAROLE OF FDI IN INDIA

FDI IN INDIA• FDI refers to capital inflows from abroad that

are invested in or to enhance the production capacity of the economy. ... The main purpose of the study is to investigate the impact of of the study is to investigate the impact of FDI on economic growth in India, from the period of 1990 to 2011.

governmental support, FDI has helped the Indian economy grow tremendously. But with $34 billion in FDI in 2007, India gets only about 25% of the FDI in China.

Foreign direct investment (FDI) in India has played an important role in the development of the Indian economy.

FDI in India has in a lot of ways enabled India to achieve a FDI in India has in a lot of ways enabled India to achieve a certain degree of financial stability, growth anddevelopment.

This money has allowed India to focus on the areas that needed a boost and economic attention, and address the various problems that continue to challenge the country.

India has continually sought to attract FDI from the world’s major investors.

FOREIGN DIRECT INVESTMENT

ADVANTAGES

• Economic growth

• Trade

• To increase

DISADVANTAGES

• Crowing of local industry

• Conflict of laws

• Loss of control• To increase employment and skill level

• Technology diffusion and knowledge transfer

• Linkages and spillover to domestic firms

• Loss of control

• Effect on national environment

• Effect on culture

FDI inflow in India

• Foreign Direct Investment (FDI) inflows into India

increased by 29 % to a record $40 billion during in the financial year ended March.

• If re-invested earnings ($10 billion), other capital • If re-invested earnings ($10 billion), other capital ($4.4 billion) and equity capital of unincorporated bodies ($1 billion) are taken into account along with $40 billion worth equity inflows, the total FDI flows in FY'16 is the highest-ever at $55.4 billion.

Maximum inflows (equity) were from Singapore ($13.69 billion), followed by Mauritius ($8.35 billion), the US ($4.19 billion), the Netherlands ($2.64 billion) and Japan ($2.61 billion).

The previous highest FDI inflow was in FY12 when the

country received $46.55 billion, which was a 34 % $34.8

$46.55 34 % increase over $34.8 billion it got in FY11.

However, India recorded its largest-ever percentage

increase in FDI when it received $22.8 billion in

FY07, representing a 155% increase over the $8.9

billion in FY06.

FDI INFLOW CHART

$40.00

$50.00

Series 1

$0.00

$10.00

$20.00

$30.00

FY06FY07

FY11FY12

Series 1

FDI IN DIFFERENT SECTOR

• During 2014–15, India received most of its FDI from Mauritius, Singapore, Netherlands, Japan and the US. On 25 September 2014, Government of India launched Make in India initiative in which policy statement on 25 sectors were released policy statement on 25 sectors were released with relaxed norms on each sector.

• Following are some of major sectors for Foreign Direct Investment.

Infrastructure10% of India's GDP is based on construction activity. Indian government has plans to invest $1 trillion on infrastructure from 2012–2017. 40% of this $1 trillion is to be funded by private sector. 100% FDI under automatic route is permitted in construction sector for cities and townships.

AutomotiveFDI in automotive sector was increased by 89% between April 2014 to February 2015. India is 7th largest producer of vehicles in the world with 17.5 million vehicles annually. 100% FDI is permitted in this sector via automatic route. Automobiles shares 7% of the India's GDP.

AirlinesForeigner investment in a scheduled or regional air transport service or domestic scheduled passenger airline is permitted to 100,with FDI up to 49% permitted under automatic route and beyond 49% through government approval.For airport modernization, 100% FDI will be allowed for existing airport under automatic route.

TextileTextile is one major contributor to India's export. Nearly 11% of India's total export is textile. This sector has attracted about $1647 million from April 2000 to May 2015. 100% FDI is allowed under automatic route. During year 2013–14, FDI in textile sector was increased by 91%. Indian textile industry is expected reach up to $141 billion till 2021.

FDI IN DIFFERENT SECTOR THROUGH CHART

INFRASTRUCTUREINFRASTRUCTURE

AUTOMOBILE

AIRLINES

TEXTILE

TOP 10 COUNTRIES HAVING HIGHEST FDI INFLOW

1. MAURICIAS2. SINGAPOUR3. U.K4. JAPAN4. JAPAN5. U.S.A6. NETHERLAND7. CRPRUS8. GERMANY9. FRANCE 10.U.A.E

HOW FDI IS HELPFUL FOR

INDIA?

Will be used for infrastructural development. (DMIC)

Will be helpful in capital development in various sectors.

Will build efficient supply chains.

Will provide jobs for millions through industrial investment.

Will bring in state-of-the-art foreign technology.

Many sectors allow only 49% so the effective control is still in India's hands.

Will bring in state-of-the-art foreign technology.

Many sectors allow only 49% so the effective control is still in India's hands.

The regulations are strict too so there wont be any exploitation.

Many leftists are worried about FDI because they think the colonialism will repeat again. After all, the britishers were also a kind of FDIs.

But, the difference is that the British took capital out of India, but the FDIs in this case will bring capital into India.

IMPORTANCE OF FDI• FDI is often seen as a catalyst for a country`s

development and economic growth.

• Foreign direct investment allows company to accomplish several tasks.accomplish several tasks.

1. Integration into global economy

2. Technology advancement

3. Increased competition

4. Improvement in human resource

Reason for importance of FDI is not only the fact that foreign investor finances the

“hardware” such as investment in new plants and equipment ,but FDI can be a major

transfer of technology , knowledge and capital for the host industries.

With FDI comes financial and managerial resource, access to larger markets, technical assistance and strategic assets, for instance; Brand name, which can give the host firms , domestic and international , comparative

advantages.

Steps taken by government to promote FDI

• The Indian Government has taken a number of steps to show its willingness to allow more foreign direct investment in the country.

• In the infrastructure development sector, it has relaxed the norms pertaining to area restriction, the laws regarding gaining a comfortable exit from a particular project and the gaining a comfortable exit from a particular project and the requirements relating to minimum capitalization.

• If companies are ready to commit 30 percent of their investments for affordable housing, then the rules for minimum capitalization and area restriction will be waived off.

• It is expected that this will benefit the construction sector a lot, especially in the form of greater investment inflow.