fdi is any form of investment that

8/14/2019 FDI is Any Form of Investment That

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FDI is anyFDI is any formform of Investment that earns interest inof Investment that earns interest in

enterprises which function outside of the domestic territory ofenterprises which function outside of the domestic territory of

the Investor. It is defined as a form of investment made inthe Investor. It is defined as a form of investment made in

order to gain steady, constraint & long lasting interest inorder to gain steady, constraint & long lasting interest in

enterprises that are operated outside of the economy of theenterprises that are operated outside of the economy of the

shareholder/depositor.shareholder/depositor.


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FDI IN INDIAFDI IN INDIA

The policy related to FDI in India came in july1991 when the new industrial policy agreed

upon & provided automatic approval for theprojects which included foreign equityparticipation up to 51%.

It allows freedom of location, choice of any

technology , repatriation of capital &dividends of any kind.


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JUSTIFICATIONJUSTIFICATION

FDI inflow in India increased to us $27.31 billion infinancial year 2008-09.

Despite of economic slow down growth rate is 11% overprevious financial year.

FDI as potential to enhancing economic activity andemployment in country.

According to world investment report 2007-08 India isthe second most attractive location for FDI for 2007-09.


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RoutesRoutes

Automatic Route FDI up to 100 % permitted except some sectors

No prior approval required by investor

Investment by NRIs


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FIPB Route

The proposal for foreign investment is decidedon a case to case basis depending on themerits of the case and in accordance with theprescribed sectoral policy

Preference given to projects in high priorityindustries


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Government PolicyGovernment Policy

on FDIon FDI

Automatic approval

Government approval Hiring of foreign technicians

Investment by way of acquisition of shares

Investment by Foreign Institutional Investors


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Authorities Dealing withAuthorities Dealing with

Foreign InvestmentForeign Investment

Foreign Investment PromotionBoard( FIPB )

Ensures expeditious clearance of proposals forFDI

Periodically reviewing the implementation of

proposals cleared earlier.


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Secretary for Industrial Assistance ( SIA )

Acts as a gateway to industrial investments in India

Foreign Investment Implementation Authority (FIIA )

For quick implementation of FDI approvals andresolution of operational difficulties faced by foreigninvestors


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FDI Allowed upto 100%

Advertising and Films Agriculture (Including

Plantation)

Broadcasting

Cigarettes

Drugs and Pharmaceuticals

Mining

Real Estate

FDI Allowed upto 74%

Atomic Energy Banking

Coal and Lignite


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FDI Allowed uptoFDI Allowed upto

26%26%

Civil Aviation Defense

Insurance

Refining


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Source: http://www.investinginindia.in/sectoral.htm
http://www.investinginindia.in/sectoral.htmhttp://www.investinginindia.in/sectoral.htm


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CORELATION COEFF can be calculated-Using KARL PEARSON method:

Rk = (nXY) - (X*Y)

(n X2 (X)2 * n Y2 (Y)2

Substituting values from the above table:

We get Correlation coeff as,

Rk

= (+)0.3646

+ve sign shows the favorable relationship betweenthe two. That means both are increasing


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Investments throughInvestments through

GDRs/ ADRs/ FCCBsGDRs/ ADRs/ FCCBs

Now a days Indian companies are allowed toraise capital in the international market

through the issues of GDRs/ ADRs/ FCCBs,subject to certain restrictions.

Foreign investment thorough these is alsotreated as FDI.


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through preferencesthrough preferences

sharesshares Companies registered in India can mobilize foreign

investment through issue of preferences shares forfinancing their projects/ industries.

Foreign investment through preferences shares istreated as FDI.

Issue of preference shares should conform to

guidelines prescribed by SEBI (in case of listed Indiancompanies), RBI and other statutory requirements.


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Mobilization of fundsMobilization of funds

through (ECBs)through (ECBs)

Companies registered in India are allowed to raiseECBs from any internationally recognized source suchas banks, financial institutions, export credit agencies,suppliers of equipment, foreign collaborators, foreignequity holders.

NGOs engaged in micro finance activities are eligibleto avail ECB subject to prescribed conditions


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ENTITY OPTION IN INDIAENTITY OPTION IN INDIA

Operating as Indian company

1. Wholly owned subsidiary

2. Joint venture

In case of wholly owned subsidiary joint venture

should be with an Indian partner preferably with

majority equity participation.

Company should be registered company with the

registrar of companies (RoC).

foreign company can operate in India through liaison,

project officer , branch office.


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Guidelines for consideration of FDI proposalGuidelines for consideration of FDI proposal

FIPB (foreign investment promotion board) givesguidelines to companies investing an India.

Govt. can also takes decision in case of FDI.

All the application should be put before the FIPBwithin 15 days before putting to administrativeministries.

FIPB should consider the sectoral requirements &

the sectoral policies while making of therecommendations.


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Issue/transfer/pricing of shares will be as per

SEBI/RBI guidelines.

The extent of foreign equity proposed to be held

(24% for SSI units ;49% for airtaxi/airlinesoperators,74%in basic/cellular in the telecom sector)

Extent of equity from the point of view whether the

proposed project would amount to a holding

companyor a company with dominant foreigninvestment(75% or more)joint venture


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Benefits of FDIBenefits of FDI

Foreign direct investment helps in the overall economicdevelopment of the nation.

FDI assists in the promotion of the competition within the local

input market of a country.

FDI helps create more job opportunities

FDI plays a crucial role in context of the rise of productivity of thehost nation.

The small and medium sized enterprises can borrow finance atlesser rates of interest

FDI is one of the major external sources of financing for most ofthe countries.

Di d t fDi d t

f


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Disadvantages ofDisadvantages of

FDIFDI

At times certain foreign policies are adopted that are notappreciated by the workers of the recipient country.

FDI, at times , is disadvantageous for the ones who are makingthe investment themselves.

FDI may entail high communication and traveling expenses.

Difference in language & culture between the country of investor

and the host nation could also pose a problem.

At times there has been adverse affect of FDI on the balancepayments of the country.

CONCLUSION


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CONCLUSIONCONCLUSION

Indian economy has reached in the orbit of highrate of economic growth.

It is being widely acclaimed and recognized as anemerging global economic power.

FDI inflows have been increased in the post-reformperiod and India now seems to be quite attractive

place for such kind of investments. In quantitative terms, Indias global share of FDI is

still very low.


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Conclusion.Conclusion.

FDI has come in the most capital intensivesectors, therefore, the desired employment

opportunities could not be created especiallyfor the manual and the semi skilled labor.High skilled labor gained substantially. That iswhy high growth is called urban centric andthus has created a wedge between the ruraland urban economy.


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fdi is any form of investment that

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