Indias Fdi Policies(1)

8/13/2019 Indias Fdi Policies(1)

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INDIAS FDI POLICIES

VS

OTHER COUNTRIES


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FDI POLICY FRAMEWORK

-

INDIA

Policy regime is one of the key factors driving investment flows to a country.

Ability of a nation to attract foreign investment essentially depends upon its

policy regime - whether it promotes or restrains the foreign investment flows.

There has been a sea change in Indias approach to foreign investment from the

early 1990s when it began structural economic reforms encompassing almost all

the sectors of the economy.


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PRE

-

LIBRELISATION PERIOD & POST

LIBERLIZATION PERIOD

India had followed an extremely cautious and selective approach while formulating

FDI policy in view of the dominance of import-substitution strategy ofindustrialization.

ObjectiveTo self reliant

Dual nature of policy intention:

FDI through foreign collaboration was welcomed in the areas of high technology and

high priorities to build national capability

idea was discouraged in low technology areas to protect and nurture domestic

industries.

The regulatory framework was consolidated through the enactment of Foreign

Exchange Regulation Act (FERA), 1973

under this policy foreign equity holding in a joint venture was allowed only up to 40

per cent exemptions were extended to foreign companies engaged in export

oriented businesses

Govt established special economic zones (SEZs) & designed liberal

policy and provided incentives for promoting FDI in these zones with aview to promote exports


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POST LIB FDI POLICIES

A series of measures that were directed towards liberalizing foreign investment

included:

Introduction of dual route of approval of FDIRBIs automatic route and

Governments approval (SIA/FIPB) route

F DI Policy under Automatic Route

Sectors working under automatic route do not require any prior approval of the

Central Government of RBI to attract Foreign Direct Investment.

Investment proposals falling under the automatic route and matters related to FEMA are

dealt with by RBI,

FDI Policy under Government Approval

The proposals which involve foreign investment or foreign technical collaboration is

grantedpermission by the Foreign Investment Promotion Board (FIPB)

Automatic permission for technology agreements in high priority industries

Removal of restriction of FDI in low technology areas as well as liberalization of

technology imports

Permission to Non-resident Indians (NRIs) and Overseas Corporate Bodies (OCBs)

to invest up to 100 per cent in high priorities sectors

Liberalization of the use of foreign brands name

Signing the Convention of Multilateral Investment Guarantee Agency (MIGA) for

protection of foreign investments.


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Sector Specific Limits of Foreign Investment in India

SECTOR FDI CAP ENTRY ROUTE

AGRICULTURE

TEA SECTOR (PLANTATIONJ)

100% AUTOMATIC

FIBP

Manufacturing1. Alcohol- Distillation & Brewing 100% AUTOMATIC

2. Coffee & Rubber processing & Warehousing. 100%AUTOMATIC

3. Defence production 26% FIBP

4. Hazardous chemicals and isocyanates100% AUTOMATIC

5. Industrial explosives -Manufacture 100% AUTOMATIC

6. Drugs and Pharmaceuticals100% AUTOMATIC

INDUSTRY

mining of diamonds & precious stones; gold, silver

and minerals.

Coal and lignite mining for captive consumption by

power projects, and iron & steel, cement

production

100% AUTOMATIC

SERVICES

BANKING(PVT) 79%(FDI+FII) FII NOT MORE THAN 49%AUTOMATIC

INSURANCE 26% AUTOMATIC

Telecommunications

RETAIL

74% (including FDI, FII, NRI, FCCBs, ADRs/GDRs,

convertible preference shares, etc.

51%

Automatic up to 49% and FIPB beyond 49%.

FIBP


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0.32

1.481.37

1.57

1.18

0.910.79

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2005 2006 2007 2008 2009 2010 2011

Foreign direct investment, net outflows (% ofGDP)

Foreign direct investment, netoutflows (% of GDP)

-0.5

0

0.5

1

1.5

2

2.5

3

3.5

4

Foreign direct investment, net inflows (% ofGDP)

Foreign direct investment, netinflows (% of GDP)


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FDI POLICY FRAMEWORK-

INDIAFDI CONTRIBUTION (INDIA)

Policy regime is one of the key factors driving investment flows to a country.

Ability of a nation to attract foreign investment essentially depends upon its

policy regime - whether it promotes or restrains the foreign investment flows.

There has been a sea change in Indias approach to foreign investmentfrom the early 1990s when it began structural economic reforms

encompassing almost all the sectors of the economy.


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INDIAFDI POLICY FRAMEWORK- BRAZIL

The Brazilian FDI regime has remained liberal and has been plausible in itssum financial output for its economy.

FDI inflows into Brazil favored the capital intensive or technology intensive

industrial production sectors of the economy.

FDI regulatory regime was substantially liberal. It may be noted that, majority of

the Brazilian politicians view FDI as an employment generating avenue and also as

a modernizing vehicle for the Brazilian economy.

In the year 1991 the Brazilian information-technology sector opened its doors to

foreign companies. They were free to enter and operate in the Brazilian IT sector.

They also put an end to the state monopoly in oil, gas and telecommunications.


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INDIA

FDI POLICY FRAMEWORK- SRILANKA

There are basically two distinctive phases in Sri Lankas FDI policy.

The first phase was from 1948-1977, when the public sector was the dominantentity and controlled the countrys resources.

The second distinctive phase is of course the post 1977 period, when Sri Lankalaunched its economic reform which favored private-sector led, export-orienteddevelopment including a greater role for FDI.

Many barriers were dismantled, including trade and payment barriers, theexchange rate was unified, agricultural and export taxes were restructured,

administered prices were adjusted, and restrictions on pricing and investment bythe private sector were reduced.

The most important feature of FDI policy measure in Sri Lanka was theestablishment in 1992 of the Board of Investment (BOI), with wide powers of taxrelief and administrative discretion in all matters related to FDI.


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INWARD FDI POLICY FRAMEWORK- CHINA

Encouragement to FDI has been an integral part of the Chinas economic reform process.

It has gradually opened up its economy for foreign businesses and has attracted large amountof direct foreign investment.

new regulations permitted joint ventures using foreign capital and setting up Special EconomicZones (SEZs)

The concept of SEZs was extended to fourteen more coastal cities in 1984.

Foreign joint ventures were provided with preferential tax treatment, the freedom to importinputs such as materials and equipment, the right to retain and swap foreign exchange witheach other,

Simpler licensing procedures in 1986.

Additional tax benefits were offered to export-oriented joint ventures and those employingadvanced technology.

Priority was given to FDI in the agriculture, energy, transportation, telecommunications, basicraw materials, and high-technology industries, and FDI projects which could take advantage ofthe rich natural resources and relatively low labour costs in the central and northwest regions.

Chinas policies toward FDI have experienced roughly three stages:gradual and limited opening

active promoting through preferential treatment,promoting FDI in accordance with domestic industrial objectives.


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FDI) used in China by industry /

sector for the year 2011FDI Used in China by industry/sector

for the year 2011


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FDI Used in China by industry/sector for theyear 2011(excluding manufacturing & real

estate)


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FDI in Different Countries


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THANK YOU

Indias Fdi Policies(1)

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