INDIAN INVESTMENT IN ABROAD- FDI

PRESENTED BY:

ARCHANA

CONTENT INTRODUCTION CLASSIFICATION OF FDI REGULATORY AUTHORITIES INDIAN POLICY FRAMEWOR BENEFITS OF FDI PROBLEMS WITH FDI

WHAT IS FDI? 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 than that of the direct investor

CLASSIFICATION OF FDI TYPES OF FDI

BY DIRECTION BY TARGETBY MOTIVE

INWARD GREENFIELD INVESTMENT

RESOURCESEEKING

OUTWARDHorizontal and VerticalFDI

MKT & EfficiencySeeking

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 scare productive factors; technical know how, business experience and knowledge.

Authorities dealing with FI Foreign investment promotion board

(FIPB) Expedite clearance process. Periodically review implementation of

cleared proposal Review general and sectoral policy

guidelines Undertake investment promotion activities.

Secretariat for industrial assistance (sia) Acts of gateway to industrial investment in

India. Assist entrepreneurs and investors in

setting up projects Liaise with govt. bodies seek necessary

clearance

Foreign investment implementation authority (FIIA).

Quick implementation of FDI approval. Resolution of operational difficulties faced

by foreign investors. Gather feedback from foreign investors

Other authorities involved: Investment commission Project approval board RBI OF INDIA

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 corporate, Investment through GDRs and ADRs Mobilization of funds through preference

shares. Mobilization of funds through external

commercial borrowings. Foreign currency exchangeable bonds.

PRIMARY REASONSS FOR FDI INVESTMENT IN INDIA Local market demand – 68% Low cost operations -29% Ease of making FDI- 29% Labour availability -29% Entry of other players 24% Political Stability 24% Time zone advantage- 14%

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 human capital resources.

Increase in exports Increases tax revenues

Problem with FDI A company may lose out on its ownership

to an overseas company. Govt. has less control over the functioning

of the company that is functioning as the wholly owned subsidiary of an overseas comp.

FDI entering and taking the control of already established market, where local companies are meeting the requirement of the market.

Invest in machinery and intellectual property, not in wages

Large giants can set up monopolies in highly profitable sector.