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Foreign Direct Investments in
India1
1
RANAWAT DIVYA
SEAT NO:4652
TYBMS(B)
ROLL NO :116
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Definitions of FDI
2
2
Some key definitions:
Capital equity shares; fully, compulsory & mandatory convertiblepreference shares & debentures. Instruments like warrants, partly paid sharescannot be issued to person resident outside India.
Current Account Transactions Other than Capital Account transactions.Does not mean Revenue.
CapitalAccount Transactionalters assets or liabilities, including contingentliabilities. Also refer Sec. 6(3).
- Foreign Trade- Short Term banking facility
- Income on Investments
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Definitions of FDI
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FDI Investment by non-resident entity/person resident outside India in thecapital of the Indian Company.
NRI Individual resident outside India who is a citizen of India or person ofIndian origin.
PIOcitizen of any country other than Pakistan and Bangladesh, if
- he at any time held Indian Passport
- He or either of his parents or any of his grand parents was citizen of India or
- Is a spouse of Indian citizen or person referred to in above.
3
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Definitions of FDI
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Person Resident in India
Rules for Person Coming to India:
4
More than 182 days in Indiain preceding year?
NRI if purpose is other than
Employment, Business,Vocation or intention to stay
for uncertain period.
NRI
No
Yes
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Definitions of FDI
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Rules for person leaving India:
5
More than 182 days in India
in preceding year?
Still NRI, if purpose is Employment, Business,Vocation or intention to stay outside India for
uncertain period.
NRI
No
Yes
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Advantages of FDI6
FDI usually flows as a bundle of resources including,
besides capital, production technology, organisational and
managerial skills
These skills tend to spill over to domestic enterprises in the
host country
FDI contributes more to the growth of the economy than
that of the domestic investments
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Disadvantages of FDI7
Loss of ownership rights to a foreign company makes it a
cautious decision
The increased liquidity and the consequent inflation is due to
the excessive FDI inflow
It is being blamed for ousting the domestic inflows
It is also claimed to have lowered few regulatory standards in
terms of investment patterns
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FDI inflows in India
FDI Inflows in India (INR billions)
171246
707
987
1230 1231
885
FY05 FY06 FY07 FY08 FY09 FY10 FY11
billion
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M. V. Damania & CoChartered Accountants 8
31.5%
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Country-wise FDI Inflows in India
Ranks Country % of total
inflows
1 Mauritius 36%
2 Singapore 9%
3 Japan 8%
4 U.S. 6%
5 Netherlands 6%
6 Others 35%
Total FDI Inflows 100%
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9
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Origin of Investment
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A non-resident entity other than citizen of Pakistan or an entity incorporated in
Pakistan.
A citizen of Bangladesh or an entity incorporated in Bangladesh can invest only
under Government route. NRIs resident in Nepal/Bhutan can invest on repatriable basis only if the inward
remittance is in free foreign exchange.
FII may invest in capital of Indian company. 10% is individual limit and 24%
aggregate limit for FII investment.
No person other than registered FII/NRI can invest or trade in Indian Stock
Exchange ie. through brokers
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Types of Securities
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Equity shares
Fully, compulsory, mandatory convertible preference shares and debentures.
Other types of preference shares/debentures are considered as debt.
Inward remittance on issue of Depository Receipts (DRs) and Foreign Currency
Convertible Bonds (FCCBs) are treated as FDI.
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EligibilityIndian Companies
M. V. Damania & CoChartered Accountants
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Indian CompaniesCan issue capital against FDI.
Partnership Firms/Proprietor
o NRI or PIO
Non-repatriable basis if;
a) Amount is invested by inward remittance or out ofNRE/FCNR/NRO account.
b) Not engaged in agriculture, plantation, real estate business orprint media.
Repatriable basis only with prior permission of RBI.
o Other than NRI/PIO only with prior permission of RBI. TrustsFDI in Trust other than Venture Capital Funds is not permitted.
Any other entityNot permitted.
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Retail Trading (except single brand product retailing)
Atomic Energy
Lottery
Gambling and Betting
Chit fund
Nidhi Company
Trading in Transferable Development Right (TDR)
Real Estate Business or Construction of Farm House
Activities/Sectors not opened to private sector investment
Agriculture and plantations (excepts selected activities)
Manufacture of Cigars, cheroots, tobacco products etc.
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Prohibited Sectors
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Transactions where RBI prior approval is required.
Indian Company engaged in Financial sector
Attracts SEBI takeover code.
Activity is outside automatic route
Transaction price falls outside the pricing guidelines.
When non resident buyer proposes deferment of payment.
Companies engaged in sectors falling under Govt. route.
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RBI Approvals
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Considering foreign direct investment as an important measure of a
countrys economic growth and development through introduction of
foreign advance technology which is beneficial for both consumer and
seller ,it must be promoted . As it is generating employment opportunities it is dealing with one of
the most important issue of our country and in education sector
providing international standard of education within the country , it is
certainly a WIN-WIN situation for us .
16 Conclusion