FDI PPT

Foreign direct investment (FDI) or foreign investment refers to long term participation by country A into country B.

Foreign direct investment

1.Helps in economic growth.The inflow of foreign direct investment helps in the economic growth of a

country.2. Brings employment opportunities.

FDI inflow results in an increase in the number of employment opportunities for people living in that country. New industrial units are set up affording employment to people from the top level to the working groups like factory workers.

3 . Aids in transfer of technology and knowledge. The inflow of FDI aids in the transfer of technology and knowledge from one country to another. For instance, the people of Asian countries like India had vast knowledge related to IT sector which was later used by many other non Asian countries of the world. Thus, FDI helps in the transfer of knowledge across the world.4. Benefits to the government.Foreign direct investment helps in increasing the sources of government income. With the increased flow of FDI the income generated through taxation increases thus, bringing higher revenues to the government.56. 5.Improves productivity.FDI plays an important role in enhancing the overall productivity in the host countries.6. Benefits for the investors.FDI is also quite beneficial for countries that make investments in other countries. Their companies get opportunities for exploring new global markets, thereby generating higher incomes and profits.7. Benefits to businesses.Business entities get easy loans at low rates of interest. These facilities are extremely beneficial for small and medium-sized businesses that otherwise face many problems in getting loans.

Benefits of Foreign Direct Investment-

A recent UNCTAD(United Nations Conference on Trade and Development) survey projected India as the second most important FDI destination (after China) for transnational corporations during 2010-2012. As per the data, the sectors which attracted higher inflows were services, telecommunication, construction activities and computer software and hardware. Mauritius, Singapore, the US and the UK were among the leading sources of FDI.

Foreign direct investment in India

FDI can enter India through two channels1. The automatic route under which companies receiving

foreign direct Investment need to inform the Reserve Bank of India within 30 days of receipt of funds and issuance of shares to the foreign investor.

2. For sectors that are not covered under the automatic route, prior approval is needed from the Foreign Investment Promotion Board (FIPB).

MODES OF FOREIGN DIRECT INVESTMENT

In India, Foreign Direct Investment Policy allows for investment only in case of the following form of investments:

Through financial allianceThrough joint schemes and technical allianceThrough capital markets, via Euro issuesThrough private placements or preferential allotments

Foreign Direct Investment in India

Arms and ammunitionAtomic EnergyCoal and ligniteRail TransportMining of metals like iron, manganese, chrome,

gypsum, sulfur, gold, diamonds, copper, zinc

Foreign Direct Investment in India is not allowed under the following industrial sectors:

34 High Priority Industry GroupsExport Trading CompaniesHotels and Tourism-related ProjectsHospitals, Diagnostic CentersShippingDeep Sea FishingOil ExplorationPowerHousing and Real Estate DevelopmentHighways, Bridges and PortsSick Industrial Units Industries Requiring Compulsory Licensing Industries Reserved for Small Scale Sector

Up to 100 per cent equity is allowed in the following sectors

Drugs & Pharmaceuticals - For the production of drugs and pharmaceutical a FDI of 100 per cent is allowed.

Private Banking - FDI of 49 per cent is allowed in the Banking sector through the automatic route provided the investment adheres to guidelines issued by RBI.

Insurance Sector - For the Insurance sector FDI allowed is 26 per cent through the automatic route on condition of getting license from Insurance Regulatory and Development Authority (IRDA).

Business Processing Outsourcing - FDI of 100 per cent is permitted provided such investments satisfy certain prerequisites.

Telecommunication - 49 per cent FDI is permitted for this sector

FDI In India Across Different Sectors

ACTUAL FDI INFLOWS IN INDIA (1991-2010).YEAR

FDI (US $ IN MILLION)including advance

1991-1992 (Aug.-Mar.) 165

1992-1993 393

1993-1994 654

1994-1995 1374

1995-1996 2141

1996-1997 2770

1997-1998 3682

1998-1999 3083

1999-2000 2439

2000-2001 2463

2001-2002 4065

2002-2003 2705

2003-2004 2188

2004-2005 3219

2005-2006 5540

2006-2007 12492

2007-2008 24575

2008-2009 27330

2009-2010 25834

2010-March-Nov. 14025

SECTOR ATTRACTING HIGHEST FDI EQUITY INFLOWS

(US $ in million) Sectors 2008-09 2009-2010 2010-11 (till Nov).

Service sector 6138 4353 2596 computer software &

hardware 1677 919 574 Telecommunications 2558 2554 1093 housing & real estate 2801 2844 999 construction activities 2028 2862 834 power 985 1437 984 Automobile Industry 1152 1208 533 Metallurgical Industries 961 407 960 petroleum & natural gas 412 272 529 Chemicals 749 362 271

SHARE OF TOP INVESTING COUNTRIES FDI EQUITY INFLOWS (FINANCIAL YEAR)

2008-09 2009-10 2010-11(Till Nov.)Mauritius 11229 10376 5158Singapore 3454 2379 1367

U.S.A. 1802 1943 926U.K. 864 657 385

Netherlands 883 899 802

Japan 405 1183 917Cyprus 1287 1627 598

Germany 629 626 104France 467 303 340U.A.E 257 629 278

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