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See all Premium member Presentation Transcript FOREIGN DIRECT INVESTMENT IN INDIA : FOREIGN DIRECT INVESTMENT IN INDIA By CHANNAVEER PAK9079 CONTENT : CONTENT Introduction Classification of FDI Regulatory Authorities India’s Policy Framework India’s FDI outlook Global comparison Benefits of FDI Problems with FDI 2 INTRODUCTION : 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. 3 CLASSIFICATION OF FDI : CLASSIFICATION OF FDI 4 NEED FOR FOREIGN CAPITAL: : 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 5 AUTHORITIES DEALING WITH FOREIGN INVESTMENT : 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 Secretariat for Industrial Assistance (SIA) Acts as gateway to industrial investment in India Assist entrepreneurs & investors in setting up projects Liaise with Govt. bodies to seek necessary clearance 6 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 Other authorities involved : Investment Commission Project Approval Board Reserve Bank of India AUTHORITIES DEALING WITH FOREIGN INVESTMENT 7 APPROVAL ROUTES FOR FOREIGN INVESTMENT : APPROVAL ROUTES FOR FOREIGN INVESTMENT Approval Routes Automatic Route Under delegated powers exercised by RBI FDI upto 100% for new and existing companies , JVs,firms is permitted under automatic route for all items except for those where approval from SEBI or FIPB is required. Approval by FIPB Under Foreign Investment Promotion Board. Required for the projects that do not qualify for automatic approval route. A proposal to be made to FIPB which studies the project and conveys it’s decision within 30 days of submitting application. Preference is given to projects in high priority industries. 8 GOVERNMENT POLICY : 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) 9 MOBILIZATION OF FUNDS – Different options for Indian Corporates : 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 10 FDI EQUITY INFLOW BY COUNTRIES : FDI EQUITY INFLOW BY COUNTRIES 11 SECTORAL DISTRIBUTION OF FDI : SECTORAL DISTRIBUTION OF FDI * All figures in billion $ 12 FDI EQUITY INFLOW BY SECTORS : FDI EQUITY INFLOW BY SECTORS 13 Slide 14: 14 FDI INFLOW FINANCIAL YEAR- WISE FDI INFLOW – FINANCIAL YEAR-WISE : FDI INFLOW – FINANCIAL YEAR-WISE 15 Slide 16: PRIMARY REASONS FOR FDI INVESTMENTS IN INDIA Local Market Demand -86% Low cost operations -29% Ease of making FDI -29% Labour Availability -29% Entry of other players -24% Political stability -24% Time zone advantage -14% 16 TOP FIVE DRIVERS & THE CONCERNS : TOP FIVE DRIVERS & THE CONCERNS 17 GLOBAL COMPARISONS : GLOBAL COMPARISONS 18 GLOBAL COMPARISONS : GLOBAL COMPARISONS 19 BENEFITS OF FDI : 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 20 PROBLEMS WITH FDI : PROBLEMS WITH 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 21 THANK YOU : THANK YOU 22 You do not have the permission to view this presentation. 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