Beruflich Dokumente
Kultur Dokumente
Index
Introduction Types of FDI Major Bodies Constituted to FDI India as a FDI destination Entry Process Entry Strategy Pros & Cons of FDI in India Sectorial Analysis Special Investment Avenues FDI Equity Inflow Country Wise FDI Inflows Recommendations Conclusion
Introduction
It is defined as an investment involving a longterm relationship and reflecting a lasting interest and control of a resident entity of one economy in an enterprise resident of another economy other than that of the foreign direct investors.
Contd.
Generally speaking FDI refers to capital inflows from abroad that invest in the production capacity of the economy and are: Usually preferred over other forms of external finance because they are:
Non-debt creating, non-volatile and their returns depend on the performance of the projects financed by the investors
FDI also facilitates international trade and transfer of knowledge, skills and technology.
Contd.
The FDI relationship consists of a parent enterprise and a foreign affiliate which together form a multinational corporation (MNC).
In order to qualify as FDI the investment must afford the parent enterprise control over its foreign affiliate. The IMF defines control in this case as owning 10% or more of the ordinary shares or voting power of an incorporated firm or its equivalent for an unincorporated firm.
Foreign Direct Investment (FDI) is permitted as under the following forms of investments: Through financial collaborations
ventures
and
technical
Types of FDI
Greenfield Investment Mergers & Acquisitions Horizontal Foreign Direct Investment
Forbidden Territories
FDI is not permitted in the following industrial sectors:
Arms and ammunition Atomic Energy Railway Transport Coal and lignite Mining of iron, manganese, chrome, Gypsum, Sulphur, Diamonds, Copper, Zinc
All proposals that require an Industrial License All proposals in which the foreign collaborator has a previous venture/tie up in India
Illustrative List Of Sectors Under Automatic Route For FDI upto 100%
Most manufacturing activities Drugs and pharmaceuticals Food processing Electronic hardware Software development Film industry Advertising Hospitals Pollution control and management Management consultancy Computer related Services Construction and related Engineering Services Health related & Social Services Travel related services
Decision of CCFI is usually conveyed in 8-10 weeks. Thereafter, filings have to be made by the Indian
Contd.
Well-established legal system with independent judiciary
Developed banking system and vibrant capital market India among the top three investment hot spots and one of the fastest growing economies in the world Large English speaking population
Cons:
Constant FDI inflow in the country has lead to increased liquidity & its subsequent strikes of inflation Also there has been immense pressure on our rupees
Contd.
Cons:
FDI regulations currently in force allow an entity to receive FDI in construction development only if the minimum built-up area of the project is 50,000 square meters Many real estate projects have failed to take-off due to the delay in obtaining statutory clearances and conversion of land usage Current FDI regulations provide for a three-year lock-in for each tranche of foreign investment, and early exit needs government approval FDI policy for investment in hotels and hospitals is far less stringent than the one for housing projects
Well developed and competent automotive ancillary industry along with automobile testing and R&D centers Increase in the manufacturing capacity
Important aspects of FDI in the power sector of India are Power projects involving generation and distribution tasks are allowed in all types and sizes As per the Electricity Act 2003, trading in power is activated Thermal power plants will get a return of 16 percent on equity The import of equipments will be entitled to 20 percent of import duty A duration of 30 years will given as a renewable license period Power generating projects will have a five year tax holiday .
Opportunities of Foreign Direct Investment (FDI) in the Power Sector in India exist in Hydro Projects Captive Power Ultra Mega Power Projects Nuclear Power National Grid Program Rural Electrification Trading Renewable The government of India aims at reaching 2,00,000 MW by the year 2012
Sub Sectors
%age with total FDI inflows in Computer Software & Hardware Sector
105.69
0.10
3.
Others (Software)
648.18
141.60
0.13
42,458.62
9,573.28
9.03
Share Of Top Five RBIs Regions (With State Covered) Attracted FDI Inflows For Computer Software & Hardware
Rank RBIs Regional Office States Covered Amount of FDI inflows
Rupees in crores 1. Mumbai Maharashtra, Dadra & Nagar Haveli, Daman & Diu Karnataka 9,334.00 US $ in million 2,118.72 22.13
2.
Bangalore
5,076.08
1,129.83
11.80
3.
Chennai
4,416.89
1,004.44
10.49
4.
New Delhi
3,858.26
855.03
8.93
5.
Hyderabad
1,463.37
339.13
3.54
Total of above
24,148.60
5,447.15
56.89
However, license from the Insurance Regulatory & Development Authority (IRDA) has to be obtained
There is a proposal to increase this limit to 49%
Cons:
Non-executive Directors of a Corporate Agent are not permitted to be the Director/s of Life Insurance Company
Challenges
Skilled Workers
Inflation
Competition
Taxation Policy
Real Estate
Cons:
Large-scale exit of domestic retailers Threat for the growth of domestic retail sector Lead to unemployment
Electronic Hardware and software technology Parks Export oriented units Special Economic zones
An SEZ unit can be set up to undertake trading activities in addition to manufacturing of goods and rendering of services
FDI Equity Inflows (Month Wise) during Financial Year 2010 2011:
Financial Year 2010 2011 (April March) Amount of FDI Inflows (in Rs. Crore) (in US$ mn)
1 April 2010
2010 2011 (upto April 2010) 2009 2010 (upto April 2009) %age growth over last year
9,854
9,854 11,708 (-) 16%
2,214
2,214 2,339 (-) 05 %
FDI Equity Inflows (Month Wise) during Financial Year 2011 2012:
Financial Year 2011 2012 (April March)
1 April 2011 2011 2012 (upto April 2011)
9,697
(+) 43 %
2,179
(+) 43 %
Recommendations
Attract Quality FDI Attract Technology And Localize Production The Spillover Illusion Focus On Export-oriented FDI Target Specific Sectors Increase Ease Of Doing Business
Conclusion
India is continuously gaining its position as a preferred investment destination. The trend line shows a positive growth of inward FDI in India and even in the time of global economic crises it was able to attract investment higher that the previous years. The service sector came up as the front runner in terms of receiving FDI followed by telecommunication and electrical equipments. The main reason behind the success of Service sectors lies in the huge skilled labour pool having good education and knowledge of English. Many MNCs are setting up their BPO and KPO in India to utilize the skilled labours to support their business activities. Mauritius emerged as the highest investing country using FDI route. The main reason is DTAA agreement as per this treaty the capital gain arising in India from the sale of securities can be taxed only in Mauritius. Since in Mauritius such gains are not taxed this becomes tax free income. In case of other countries they levied tax on such gains.
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