FOREIGN DIRECT INVESTMENT

वि�देशी प्रत्यक्ष वि��ेश M.VINITH KUMAR

II BBA BSRIMAD ANDAVAN ARTS AND SCIENCE COLLEGE

(AUTONOMOUS) TRICHY-5

Foreign investment was introduced in 1991 under Foreign Exchange Management Act (FEMA), driven by then finance minister Manmohan Singh.

WHAT IS

FDI ?

Foreign direct investment (FDI) is a direct investment into production or business in a country by an individual or company in another country, either by buying a company in the target country or by expanding operations of an existing business in that country.

“

in regard to the GDP equation

Y=C+I+G+(X-M)Where Y = income C = household(or private) consumption demand I = investment plus foreign investment G = government demand for goods & services X = exports M= imports

WHY INVEST IN INDIA ?• India is the 7th largest and 2nd most populous country in the world• 4th largest economy in the world in terms of PPP(Purchasing power

parity)• Skilled managerial and technical manpower that matches the best

available in the world.• transparent environment that guarantees the security of their long

term investments.• Availability of highly competitive private sector that provides

considerable scope for foreign direct investment, joint ventures and collaborations.

India has been ranked at the second place in global foreign direct investments in 2010 and will continue to remain among the top five attractive destinations for international investors during 2010-12 period, according to United Nations Conference on Trade and Development (UNCTAD) in a report on world investment prospects titled, 'World Investment Prospects Survey 2009-2012'

Foreign Direct Investment (FDI) is permitted as under the following forms of investments –

Through financial collaborations.Through joint ventures and technical

collaborations.Through capital markets via Euro issues.Through private placements or preferential

allotments.

FDI is not permitted in the following industrial sectors:

arms and ammunition

Atomic Energy

Coal and lignite

Mining of iron, manganese, chrome, gypsum, sulphur, gold, diamonds, copper, zinc.

ENTRY ROUTES FOR FDI• Investments can be made by non-residents compulsorily/Mandatorily convertible in equity

shares and debentures, to preference shares of an Indian company, through two routes:

• (i) The Automatic Route: under the Automatic Route, the non-resident investor or the Indian company does not require any approval from the RBI or Government of India for the investment.

• (ii)The Government Route: 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

STATUS OF FDI IN INDIA

STATUS OF FDI IN INDIA

Current Indian FDI limit• Private Sector Banking - ……………………………………..………..49 %

• Non-Banking Financial Companies (NBFC) – ………………..100%

• Insurance –…………………………………………………………………….26%

• Telecommunications – …………………………………………………. 74%

• Petroleum Refining (Private Sector) –…………………………..100%

• Housing and Real Estate –……………………………………………100%

• Power –……………….……………………………………………………….100%

• Drugs & Pharmaceuticals – ………………………………………….100%

• Hotel & Tourism - ……………………………………………………….100%

• Advertising -……..………………………………………………………..100%

• Electricity –………….………………………………………………………100%

• Trading –……………..……………………………………………… ……….51%

• Single Brand Retail ……………………………………….................100%

Trends – Indian FDI 2012-13

Advantages• Raising the Level of Investment• Up gradation of Technology• Improvement in Export Competitiveness• Employment Generation• Benefits to Consumers• Revenue to Government• Resilience Factor• Low cost Products• Employment Opportunities• Economic growth• Better realization to farmers

Disadvantages• Fall in domestic savings• Contribution of foreign firms to public revenue through corporate taxes

is comparatively less because of liberal tax concessions • income inequalities • The technology is generally capital-intensive which does not suit the

needs of a labor-surplus economy • Foreign firms may influence political decisions

Unethical behaviours like

corruption, redtapism and selfishness is

increasing day by day because

of money matter for

example Wal-Mart issue.

What will happen if WALMART comes to INDIA ?

India has 35 towns each with a population over 1 million. If Wal-Mart were to open an average Wal-Mart store in each of these cities and they reached the average Wal-Mart performance per store – we are looking at a turnover of over Rs. 80,330 million with only 10,195 employees. Extrapolating this with the average trend in India, it would mean displacing about 4,32,000 persons

Anna Hazare makes a controversial statement saying

“Liberalizing trade will repeat history of British Rule in India. We cannot allow East India Company happen again”. Big companies in USA in organized retail sector are controversial for penetrating pricing or for misbehavior with employees. If you invite FDIs in Retail, you are going to kill small retailers.

Narendra modi makes a controversial statement saying

Narendra modi says that china recently invested on infrastructure sector. And modi advised we want more investments in infrastructure sector for Indians on 26 Jan 2015 after Barack Obama’s meet in India

CONCLUSIONAfter considering all the aspects related to FDI, we can conclude that, though there are slight disadvantages of it, but it is very important or we can say life blood for a developing country for there economic growth and stability and for developed country, to continue their stability.

ANYWAY,THAT’S PRETTY MUCHALL I HAVE TO SAYABOUT FDI.

* For now

THANK YOU !!