FOREIGN DIRECT INVESTMENT
IN INDIA
By
Kartik Vuppuluri
C H Vijay
Somashekhar
Ram Mohan Rao
Pranav Srivastava
CONTENTS
• Introduction
• Classification of FDI
• Regulatory Authorities
• India’s Policy Framework
• India’s FDI outlook
• Benefits of FDI
• Problems with FDI
INTRODUCTION
• Foreign direct investment (FDI) refers to Cross-border
investment made by a resident in one economy (the direct
investor) With the objective of establishing a lasting interest in
an enterprise (the direct investment enterprise) that is Resident
in a country other than that of the direct investor.
CLASSIFICATION OF FDI
NEED FOR FOREIGN CAPITAL
• Domestic capital is inadequate for purpose of
economic growth.
• During the period in which the capital market
is in the process of development, foreign
capital is essential as a temporary measure.
• Foreign capital brings with it other scarce
productive factors; technical know how,
business experience and knowledge.
AUTHORITIES DEALING WITH
FOREIGN INVESTMENT
• Foreign Investment Promotion Board
(FIPB)
- Expedite clearance process.
- Periodically review implementation of
cleared proposals.
- Review general and sectoral policy
guidelines.
- Undertake investment promotion activities
AUTHORITIES DEALING WITH
FOREIGN INVESTMENT
• Secretariat for Industrial Assistance
(SIA)
- Acts as gateway to industrial investment
in India.
- Assist entrepreneurs & investors in
setting up projects.
- Liaise with government bodies to seek
necessary clearance.
AUTHORITIES DEALING WITH
FOREIGN INVESTMENT
• Foreign Investment Implementation
Authority (FIIA)
- Quick implementation of FDI approvals.
- Resolution of operational difficulties
faced by foreign investors.
- Gather feedback from foreign investors
AUTHORITIES DEALING WITH
FOREIGN INVESTMENT
• Other authorities involved :
- Investment Commission.
- Project Approval Board.
- Reserve Bank of India
APPROVAL ROUTES FOR FOREIGN
INVESTMENT
GOVERNMENT POLICY
• Foreign investment is allowed in all areas
except following sectors where foreign
investment is prohibited :
- Atomic energy
- Agriculture (except floriculture ,
horticulture , seed development etc).
- Lottery business / Gambling and betting.
- Plantations (except tea plantations)
MOBILIZATION OF FUNDS –
Different options for Indian Corporates
• Investments through GDRs and ADRs.
• Mobilization of funds through
preference shares.
• Mobilization of funds through external
commercial borrowings.
• Foreign currency exchangeable bonds
FDI INFLOW BY COUNTRIES
FDI EQUITY INFLOW BY
SECTORS
PRIMARY REASONS FOR
FDI INVESTMENTS IN INDIA
• Local Market Demand -86%
• Low cost operations -29%
• Ease of making FDI -29%
• Labor Availability -29%
• Entry of other players -24%
• Political stability -24%
• Time zone advantage -14%
TOP FIVE DRIVERS AND CONCERNS
BENEFITS OF FDI
• Play a complementary role in overall capital
formation.
• Employment generation and productivity
enhancement.
• Encourages the transfer of management skills,
intellectual property, and technology.
• Improves Forex position of the country.
• Promotion of the competition within the local input
market.
• Development of the human capital resources.
• Increase in exports Increases tax revenues
LIMITATIONS OF FDI
• A company may lose out on its ownership to an
overseas company.
• Government has less control over the functioning
of the company that is functioning as the wholly
owned subsidiary of an overseas company.
• FDI entering and taking the control of already
established market, where local companies are
meeting the requirements of the market.
• Invest in machinery and intellectual property, not
in wages.
• Large giants can set up monopolies in highly
profitable sector
THANK YOU
