fdi poilicy in india (1)

7/28/2019 FDI Poilicy in India (1)

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GROUP MEMBERS

POOJA MISHRA92

KHUSHBU MISTRY94

MAYUR MOHITE96

PRASAD MORYE

FDI POLICIES IN INDIA



Agenda Introduction

FDI in Retail

FDI in Pharma

FDI in Aviation FDI in Banking & Insurance

Conclusion



INTRODUCTION

Foreign direct investment (FDI) is a

direct investment into production or business in a

country

by a company in another country

by buying a company in the target country or

by expanding operations of an existing business in

that country.



Types of FDI

By direction By target By motive

•Inward

•Outward

•Horizontal

•Vertical

•Resource seeking

•Market seeking

•Efficiency seeking



• Sustaining a high level of investment

• Technological gap

•Exploitation of natural resources

•Understanding the initial risk

•Development of basic economic infrastructure

•Improvement in the balance of payments position

•Foreign firm’s helps in increasing the competition

NEED OF FDI



Pre-1991 FDI was allowed selectively up to 40% under FERA

This period was dominated by the Congress party

1991 35 high priority industry groups were placed on the Automatic Route for FDI up

to 51%

Minority Congress government: Initiated economic reforms in a big way

1997 Automatic Route expanded to 111 high priority industry groups up to 100%/ 74%/

51%/50%

United Front Government: Inclusive of ‘left parties’, was perceived as

traditionally opposed to FDI, but continued with the reforms.

2000 All sectors placed on the Automatic Route for FDI except for a small negative list

BJP coalition government:(coalition of Left and Right wing parties) was

traditionally seen as opposed to FDI, but continued with economic reforms.

Post 2000 Many new sectors opened to FDI; viz., insurance (26%), integrated townships

(100%), mass rapid transit systems (100%), defence industry (26%), tea

plantations (100%), print media (26%).

Sectoral caps in many other sectors relaxed;

BJP coalition government: pursued reforms vigorously and initiated second

generation reforms.

Progressive Liberalization



21

8.5 8.14 7.39 7.15

47.81

0

10

20

30

40

50

60

Service I.T Housing Construction Power Other

SECTOR WISE FDI INFLOW



0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

Percentage of Total FDI Inflows

COUNTRY WISE FDI INFLOWS TOINDIA



0

5

10

15

20

25

30

35

40

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

FDI inflows to India

USD (Billion)



RETAIL SECTOR



FDI IN RETAIL SECTOR

• 51% FDI in Multi Brand Retail• Increased FDI limit in single brand retail from

49% to 100%• Minimum Investment to be done is $100 million.• 50% of the investment should be done in

improving the back-end infrastructure.• 30% of all raw materials have to be procured

from the small and medium enterprises.• Permission to set retail stores only in cities with

a minimum population of 10 lakhs



IMPLICATIONS

• Job opportunities

• Benefit to the farmers Reduction in wastages

• Growth opportunities for retailers

• Benefit to stressed companies

• Real Estate companies

Pros:



Cons:

• Predatory pricing

• What about the middle men ?

• Small scale enterprise

• Contribution through public

revenue



AVIATION



FDI in Aviation

Civil Aviation sector includes Airports, Airlines,etc.

Airports: Greenfield Projects – 100% - AutomaticRoute

Existing Projects – 100% - Automatic up to74% Governmentroute beyond 74%

Airlines: Scheduled Air Transport Service/Domestic Scheduled Passenger Airline - 49% -(100% for NRIs) – Automatic Route

Non-Scheduled Air Transport Service - 74%

(100% for NRIs) - Automatic up to 49% -



Pros of FDI in Aviation

One of the few aviation markets in the worldwhich is under-served and has vast growthpotential

Most of the Indian air operators are in crisis and

in dire need of infusion of capital A move which will help distressed airline

companies

New airlines

Increased competition FDI will infuse cash flow

improve the current account deficit situation of theairline sector.

Better International Connectivity



Cons of FDI in Aviation

Fear of a takeover of Indian airlines by the Globalgiants.

Security Issues



Key Conditions Set By Government

Company should be registered in India and hasits principal place of business in India.

At least two-thirds of the Directors should becitizens of India.

Security clearance before deployment



Impact on Indian Airline Companies High Debt ridden kingfisher Airline

Spice jet

Air India



Shortcomings Only a handful of global airlines are making

profits

Permission to invest may not be through theautomatic route

Price war in the market.



FDI IN MINING SECTOR



FDI in Mining

Mining and Exploration of Metal and Non- Metal Ores – 100% - Automatic

Mining of Coal and Lignite for Captive Consumption – 100% - Automatic

Setting up Coal Processing Plants – 100% -

Automatic

Mining and mineral separation of titanium bearingminerals and ores – 100% - Government



Impacts

Efficient Raw material utilization

Upgradation of technology

Increase in production and exports of ores Improvement in the growth rate of mining sector



BANKING AND INSURANCE



FDI in Banking and InsuranceIndustry



FDI in Banking – Private Sector

Cap/Equity- 74% including investment by FIIs(Paid-up Cap)

Route for FDI - Automatic up to 49%

Government route beyond 49%and up to 74%

Limit of 10% on voting rights for banking(Parliamentary Approvals for any changes)

Subsidiary or Branches not both



FDI in Banking – Public Sector Cap/Equity - 20% (FDI and Portfolio Investment)

under Banking Companies (Acquisition &Transfer of Undertakings) Acts 1970/80.

Entry Route – Government

RBI still holds Prime control



FDI in Insurance Cap – 26% Route – Automatic

License from IRDA for undertaking insuranceactivities.

As prescribed in the Insurance Act, 1938.

Major Reason : Huge potential in Rural Markets

Current- 16,8600 Cr to Rs 1,230,000 Cr (USD

312 B)

C O ff f



Conclusion – Overall Effect of FDI

Increased Competition – Efficiency, Cost Benefits

Increased inclusion of rural markets.

Implementation of modern technology, management

efficiency and operational efficiency Larger Capital Inflows – Good for economy

Impact on Kirana stores (Unorganized Sector)

Dilution of Equity – Loss of Management Control

CHALTA

HAI!

fdi poilicy in india (1)

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