DISSERTATION

REPORT ON

Analytical Study Of Foreign Direct Investment ON Indian Economy

Project Report Submitted towards
Partial fulfillment of requirements for obtaining the degree of
Master of Business Administration
Session 2009-10

CERTIFICATE
This is to certify that Deepak Kumar Gautam

student of M.B.A IV SEM V.S.B. Meerut has

under gone a research project on Analytical Study Of Foreign Direct Investment in

India And submitted a report based on the same as a mandatory requirement for obtaining the
degree of Master of Business

Administration from Uttar Pradesh Technical University,

Lucknow.

Date:
Director of V.S.B.
Dr . J.R Bhatti
Meerut

CERTIFICATE

This is to certify that Deepak Kumar Gautam student of M.B.A IVsem, V.S.B. Meerut has
under gone a research project on Analytical Study Of Foreign Direct Investment in

India And submitted a report based on the same as a mandatory requirement for obtaining
the degree of Master of Business Administration from Uttar Pradesh Technical University,
Lucknow

Miss Garima Chaudhray

Faculty guide
Meerut
Date:

ACKNOWLEDGEMENT

I extend my sincere thanks to all those who helped me in the completion of this project. Without
their undying help and guidance, this project would not be what it is. I specially extend my
heartfelt thanks to my Faculty guide

for helping me at

every step, and guiding me in every way possible. This project would not have been successful
without her help and continuous guidance throughout. A special note of thanks also goes out to
the people from various fields for giving me their precious time and helping me with this project.
I also extend my appreciation towards my family who encouraged me and were by my side
whenever I needed them.

INDEX
TOPIC

PAGE NO.

Introduction
Meaning
Definition
History

Objective of the study

Research methodology
Conclusion
Recommendations & suggestions
Limitations of research
Bibliography
Annexure

Introduction and overview

What is Foreign Direct Investment ?
Meaning:
These three letters stand for foreign direct investment. The simplest explanation of FDI would be
a direct investment by a corporation in a commercial venture in another country. A key to
separating this action from involvement in other ventures in a foreign country is that the business
enterprise operates completely outside the economy of the corporations home country. The
investing corporation must control 10 percent or more of the voting power of the new venture.
According to history the United States was the leader in the FDI activity dating back as far as the
end of World War II. Businesses from other nations have taken up the flag of FDI, including
many who were not in a financial position to do so just a few years ago.
The practice has grown significantly in the last couple of decades, to the point that FDI has
generated quite a bit of opposition from groups such as labor unions. These organizations have
expressed concern that investing at such a level in another country eliminates jobs. Legislation
was introduced in the early 1970s that would have put an end to the tax incentives of FDI. But
members of the Nixon administration, Congress and business interests rallied to make sure that
this attack on their expansion plans was not successful. One key to understanding FDI is to get a
mental picture of the global scale of corporations able to make such investment. A carefully
planned FDI can provide a huge new market for the company, perhaps introducing products and
services to an area where they have never been available. Not only that, but such an investment
may also be more profitable if construction costs and labor costs are less in the host country.
The definition of FDI originally meant that the investing corporation gained a significant number
of shares (10 percent or more) of the new venture. In recent years, however, companies have
been able to make a foreign direct investment that is actually long-term management control as
opposed to direct investment in buildings and equipment.

FDI growth has been a key factor in the international nature of business that many are familiar
with in the 21st century. This growth has been facilitated by changes in regulations both in the
originating country and in the country where the new installation is to be built. Corporations
from some of the countries that lead the worlds economy have found fertile soil for FDI in
nations where commercial development was limited, if it existed at all. The dollars invested in
such developing-country projects increased 40 times over in less than 30 years. The financial
strength of the investing corporations has sometimes meant failure for smaller competitors in the
target country. One of the reasons is that foreign direct investment in buildings and equipment
still accounts for a vast majority of FDI activity. Corporations from the originating country gain a
significant financial foothold in the host country. Even with this factor, host countries may
welcome FDI because of the positive impact it has on the smaller economy.
Foreign direct investment (FDI) is a measure of foreign ownership of
productive assets, such as factories, mines and land. Increasing foreign
investment can be used as one measure of growing economic globalization.
Figure below shows net inflows of foreign direct investment as a percentage
of gross domestic product (GDP). The largest flows of foreign investment
occur

between

the

industrialized

countries

(North

America, Western

Europe and Japan).But flows to non-industrialized countries are increasing

sharply. Foreign direct investment (FDI) refers to long term participation by
country A into country B.
It usually involves participation in management, joint-venture, transfer of
technology and expertise. There are two types of FDI: inward foreign
direct investment and

outward

foreign

direct

investment,

resulting

in

a net FDI inflow (positive or negative) .Foreign direct investment reflects the
objective of obtaining a lasting interest by a resident entity in one economy
(direct investor) in an entity resident in an economy other than that of the
investor

(direct investment enterprise).The lasting interest implies the

existence of a long-term relationship between the direct investor and the

enterprise and a significant degree of influence on the management of the
enterprise. Direct investment involves both the initial transaction between
7

the two entities and all subsequent capital transactions between them and
among affiliated enterprises, both incorporated and unincorporated.

Foreign Direct Investment when a firm invests directly in production or other

facilities, over which it has effective control, in a foreign country.

Manufacturing FDI requires the establishment of production facilities.

Service FDI requires building service facilities or an investment foothold via capital
contributions or building office facilities.

Foreign subsidiaries overseas units or entities.

Host country the country in which a foreign subsidiary operates.

Flow of FDI the amount of FDI undertaken over a given time.

Stock of FDI total accumulated value of foreign-owned assets.

Outflows/Inflows of FDI the flow of FDI out of or into a country.

Foreign Portfolio Investment the investment by individuals, firms, or public bodies in

foreign financial instruments.

Stocks, bonds, other forms of debt.

Differs from FDI, which is the investment in physical assets.

Portfolio theory the behavior of individuals or firms administering large

amounts of

financial assets.
Product Life-Cycle Theory

Ray Vernon asserted that product moves to lower income countries as products move
through their product life cycle.

The FDI impact is similar: FDI flows to developed countries for innovation, and from
developed countries as products evolve from being innovative to being mass-produced.

The Eclectic Paradigm

Distinguishes between:
8

Structural market failure external condition that gives rise to monopoly

advantages as a result of entry barriers

Transactional market failure failure of intermediate product markets to

transact goods and services at a lower cost than internationalization

The Dynamic Capability Perspective

A firms ability to diffuse, deploy, utilize and rebuild firm-specific resources for a
competitive advantage.

Ownership specific resources or knowledge are necessary but not sufficient for
international investment or production success.

It is necessary to effectively use and build dynamic capabilities for quantity and/or
quality based deployment that is transferable to the multinational environment.

Firms develop centers of excellence to concentrate core competencies to the host

environment.

Monopolistic Advantage Theory

An MNE has and/or creates monopolistic advantages that enable it to operate subsidiaries
abroad more profitably than local competitors.

Monopolistic Advantage comes from:

Superior knowledge production technologies, managerial skills, industrial

organization, knowledge of product.

Economies of scale through horizontal or vertical FDI

Internationalization Theory

When external markets for supplies, production, or distribution fails to provide efficiency,
companies can invest FDI to create their own supply, production, or distribution streams.

Advantages

Avoid search and negotiating costs

Avoid costs of moral hazard (hidden detrimental action by external partners)

Avoid cost of violated contracts and litigation

Capture economies of interdependent activities

9

Avoid government intervention

Control supplies

Control market outlets

Better apply cross-subsidization, predatory pricing and transfer pricing

Definition
Foreign direct investment is that investment, which is made to serve the business interests of
the investor in a company, which is in a different nation distinct from the investor's country of
origin. A parent business enterprise and its foreign affiliate are the two sides of the FDI
relationship. Together they comprise an MNC.
The parent enterprise through its foreign direct investment effort seeks to exercise substantial
control over the foreign affiliate company. 'Control' as defined by the UN, is ownership of
greater than or equal to 10% of ordinary shares or access to voting rights in an incorporated firm.
For an unincorporated firm one needs to consider an equivalent criterion. Ownership share
amounting to less than that stated above is termed as portfolio investment and is not categorized
as FDI.
FDI stands for Foreign Direct Investment, a component of a country's national financial
accounts. Foreign direct investment is investment of foreign assets into domestic structures,
equipment, and organizations. It does not include foreign investment into the stock markets.
Foreign direct investment is thought to be more useful to a country than investments in the equity
of its companies because equity investments are potentially "hot money" which can leave at the
first sign of trouble, whereas FDI is durable and generally useful whether things go well or badly.
FDI or Foreign Direct Investment is any form of investment that earns interest in enterprises
which function outside of the domestic territory of the investor. FDIs require a business
relationship between a parent company and its foreign subsidiary. Foreign direct business
relationships give rise to multinational corporations. For an investment to be regarded as an FDI,
the parent firm needs to have at least 10% of the ordinary shares of its foreign affiliates. The
investing firm may also qualify for an FDI if it owns voting power in a business enterprise
operating in a foreign country.

History
10

In the years after the Second World War global FDI was dominated by the United States, as
much of the world recovered from the destruction brought by the conflict. The US accounted for
around three-quarters of new FDI (including reinvested profits) between 1945 and 1960. Since
that time FDI has spread to become a truly global phenomenon, no longer the exclusive preserve
of OECD countries.
FDI has grown in importance in the global economy with FDI stocks now constituting over 20
percent of global GDP. Foreign direct investment (FDI) is a measure of foreign ownership of
productive assets, such as factories, mines and land. Increasing foreign investment can be used as
one measure of growing economic globalization. Figure below shows net inflows of foreign
direct investment as a percentage of gross domestic product (GDP). The largest flows of foreign
investment

occur

between

the

industrialized

countries

(North

America, Western

Europe and Japan). But flows to non-industrialized countries are increasing sharply.

Foreign Direct investor

A foreign direct investor is an individual, an incorporated or unincorporated public or
privateenterprise, a government, a group of related individuals, or a group of related incorporated
and/or unincorporated enterprises which has a direct investment enterprise that is, a subsidiary,
associate or branch operating in a country other than the country or countries of residence of
the foreign direct
investor or investors.

11

Types of Foreign Direct Investment: An Overview

FDIs can be broadly classified into two types:
1 Outward FDIs
2 Inward FDIs
12

This classification is based on the types of restrictions imposed, and the various prerequisites
required for these investments.
Outward FDI: An outward-bound FDI is backed by the government against all types of associated
risks. This form of FDI is subject to tax incentives as well as disincentives of various forms. Risk
coverage provided to the domestic industries and subsidies granted to the local firms stand in the way of
outward FDIs, which are also known as 'direct investments abroad.'
Inward FDIs: Different economic factors encourage inward FDIs. These include interest
loans, tax breaks, grants, subsidies, and the removal of restrictions and limitations. Factors detrimental to
the growth of FDIs include necessities of differential performance and limitations related with ownership
patterns.

Other categorizations of FDI

Other categorizations of FDI exist as well. Vertical Foreign Direct Investment takes place when a
multinational corporation owns some shares of a foreign enterprise, which supplies input for it or
uses the output produced by the MNC.
Horizontal foreign direct investments happen when a multinational company carries out a similar
business operation in different nations.
Horizontal FDI the MNE enters a foreign country to produce the same products product

at home.
Conglomerate FDI the MNE produces products not manufactured at home.
Vertical FDI the MNE produces intermediate goods either forward or backward in the

supply stream.
Liability of foreignness the costs of doing business abroad resulting in a competitive
disadvantage.

Methods of Foreign Direct Investments

The foreign direct investor may acquire 10% or more of the voting power of an enterprise in an
economy through any of the following methods:

13

by incorporating a wholly owned subsidiary or company

by acquiring shares in an associated enterprise

through a merger or an acquisition of an unrelated enterprise

participating in an equity joint venture with another investor or enterprise

Foreign direct investment incentives may take the following forms:

low corporate tax and income tax rates

tax holidays

other types of tax concessions

preferential tariffs

special economic zones

investment financial subsidies

soft loan or loan guarantees

free land or land subsidies

relocation & expatriation subsidies

job training & employment subsidies

infrastructure subsidies

R&D support

derogation from regulations (usually for very large projects)

14

Entry Mode

The manner in which a firm chooses to enter a foreign market through FDI.

International franchising

Branches

Contractual alliances

Equity joint ventures

Wholly foreign-owned subsidiaries

Investment approaches:

Greenfield investment (building a new facility)

Cross-border mergers

Cross-border acquisitions

Sharing existing facilities

15

Why is FDI important for any consideration of going global ?

The simple answer is that making a direct foreign investment allows

companies to accomplish

several tasks:
1 .Avoiding foreign government pressure for local production.
2. Circumventing trade barriers, hidden and otherwise.
3. Making the move from domestic export sales to a locally-based national sales office.
4. Capability to increase total production capacity.
5.Opportunities for co-production, joint ventures with local partners, joint marketing
arrangements, licensing, etc;
A more complete response might address the issue of global business partnering in very general
terms. While it is nice that many business writers like the expression, think globally, act
locally, this often used clich does not really mean very much to the average business executive
in a small and medium sized company. The phrase does have significant connotations for
multinational corporations. But for executives in SMEs, it is still just another buzzword. The
simple explanation for this is the difference in perspective between executives of multinational
corporations and small and medium sized companies. Multinational corporations are almost
always concerned with worldwide manufacturing capacity and proximity to major
markets. Small and medium sized companies tend to be more concerned with selling their
products in overseas markets. The advent of the Internet has ushered in a new and very different
mindset that tends to focus more on access issues. SMEs in particular are now focusing on
access to markets, access to expertise and most of all access to technology.

16

The Strategic Logic Behind FDI

Resources seeking looking for resources at a lower real cost.
Market seeking secure market share and sales growth in target foreign market.
Efficiency seeking seeks to establish efficient structure through useful factors,
cultures, policies, or markets.

Strategic asset seeking seeks to acquire assets in foreign firms that promote
corporate long term objectives.

Enhancing Efficiency from Location Advantages

Location advantages - defined as the benefits arising from a host countrys comparative
advantages.- Better access to resources

Lower real cost from operating in a host country

Labor cost differentials

Transportation costs, tariff and non-tariff barriers

Governmental policies

Improving Performance from Structural Discrepancies

Structural discrepancies are the differences in industry structure attributes between

home and host countries.

Examples include areas where:

Competition is less intense

Products are in different stages of their life cycle

Market demand is unsaturated

There are differences in market sophistication

Increasing Return from Ownership Advantages

17

Ownership Advantages come from the application of proprietary tangible and intangible
assets in the host country.

Reputation, brand image, distribution channels

Technological expertise, organizational skills, experience

Core competence skills within the firm that competitors cannot easily imitate or match.

Ensuring Growth from Organizational Learning

MNEs exposed to multiple stimuli, developing:

Diversity capabilities

Broader learning opportunities

Exposed to:

New markets

New practices

New ideas

New cultures

New competition

The Impact of FDI on the Indian Economy

18

Employment

Firms attempt to capitalize on abundant and inexpensive labor.

Host countries seek to have firms develop labor skills and sophistication.

Host countries often feel like least desirable jobs are transplanted from home
countries.

Home countries often face the loss of employment as jobs move.

FDI Impact on Domestic Enterprises

Foreign invested companies are likely more productive than local competitors.

The result is uneven competition in the short run, and competency building efforts
in the longer term.

It is likely that FDI developed enterprises will gradually develop local supporting
industries, supplier relationships in the host country.

19

Foreign Direct Investment in India

The economy of India is the third largest in the world as measured by purchasing power parity
(PPP), with a gross domestic product (GDP) of US $3.611 trillion. When measured in USD
exchange-rate terms, it is the tenth largest in the world, with a GDP of US $800.8 billion (2006).
is the second fastest growing major economy in the world, with a GDP growth rate of 8.9% at
the end of the first quarter of 2006-2007. However, India's huge population results in a per capita
income of $3,300 at PPP and $714 at nominal.
The economy is diverse and encompasses agriculture, handicrafts, textile, manufacturing, and a
multitude of services. Although two-thirds of the Indian workforce still earn their livelihood
directly or indirectly through agriculture, services are a growing sector and are playing an
increasingly important role of India's economy. The advent of the digital age, and the large
number of young and educated populace fluent in English, is gradually transforming India as an
important 'back office' destination for global companies for the outsourcing of their customer
services and technical support.
India is a major exporter of highly-skilled workers in software and financial services, and
software engineering. India followed a socialist-inspired approach for most of its independent
history, with strict government control over private sector participation, foreign trade, and
foreign direct investment. However, since the early 1990s, India has gradually opened up its
markets through economic reforms by reducing government controls on foreign trade and
investment. The privatization of publicly owned industries and the opening up of certain sectors
to private and foreign interests has proceeded slowly amid political debate. India faces a
burgeoning population and the challenge of reducing economic and social inequality. Poverty
remains a serious problem, although it has declined significantly since independence, mainly due
to the green revolution and economic reforms. FDI up to 100% is allowed under the automatic
route in all activities/sectors except the following which will require approval of the
Government: Activities/items that require an Industrial License; Proposals in which the foreign
collaborator has a previous/existing venture/tie up in India

20

FDI in India includes, FDI inflows as well as FDI outflow from India. Also FDI foreign direct
investment and FII foreign institutional investors are a separate case study while preparing a
report on FDI and economic growth in India. FDI and FII in India have registered growth in
terms of both FDI flows in India and outflow from India. The FDI statistics and data are evident
of the emergence of India as both a potential investment market and investing country. FDI has
helped the Indian economy grow, and the government continues to encourage more investments
of this sort - but with $5.3 billion in FDI . India gets less than 10% of the FDI of China. Foreign
direct investment (FDI) in India has played an important role in the development of the Indian
economy. FDI in India has - in a lot of ways - enabled India to achieve a certain degree of
financial stability, growth and development. This money has allowed India to focus on the areas
that may have needed economic attention, and address the various problems that continue to
challenge the country. India has continually sought to attract FDI from the worlds major
investors.
In 1998 and 1999, the Indian national government announced a number of reforms designed to
encourage FDI and present a favorable scenario for investors. FDI investments are permitted
through financial collaborations, through private equity or preferential allotments, by way of
capital markets through Euro issues, and in joint ventures. FDI is not permitted in the arms,
nuclear, railway, coal & lignite or mining industries. A number of projects have been announced
in areas such as electricity generation, distribution and transmission, as well as the development
of roads and highways, with opportunities for foreign investors. The Indian national government
also provided permission to FDIs to provide up to 100% of the financing required for the
construction of bridges and tunnels, but with a limit on foreign equity of INR 1,500 crores,
approximately $352.5m. Currently, FDI is allowed in financial services, including the growing
credit card business.
These services include the non-banking financial services sector. Foreign investors can buy up to
40% of the equity in private banks, although there is condition that stipulates that these banks
must be multilateral financial organizations. Up to 45% of the shares of companies in the global
mobile personal communication by satellite services (GMPCSS) sector can also be
purchased. By 2004, India received $5.3 billion in FDI, big growth compared to previous years,
but less than 10% of the $60.6 billion that flowed into China. Why does India, with a stable
21

democracy and a smoother approval process, lag so far behind China in FDI amounts? Although
the Chinese approval process is complex, it includes both national and regional approval in the
same process. Federal democracy is perversely an impediment for India. Local authorities are not
part of the approvals process and have their own rights, and this often leads to projects getting
bogged down in red tape and bureaucracy. India actually receives less than half the FDI that the
federal government approves.

Investment Risks in India

22

Sovereign Risk
India is an effervescent parliamentary democracy since its political freedom from British rule
more than 50 years ago. The country does not face any real threat of a serious revolutionary
movement which might lead to a collapse of state machinery. Sovereign risk in India is hence nil
for both "foreign direct investment" and "foreign portfolio investment." Many Industrial and
Business houses have restrained themselves from investing in the North-Eastern part of the
country due to unstable conditions. Nonetheless investing in these parts is lucrative due to the
rich mineral reserves here and high level of literacy. Kashmir on the northern tip is a militancy
affected area and hence investment in the state of Kashmir are restricted by law

Political Risk
India has enjoyed successive years of elected representative government at the Union as well as
federal level. India suffered political instability for a few years in the sense there was no single
party which won clear majority and hence it led to the formation of coalition governments.
However, political stability has firmly returned since the general elections in 1999, with strong
and healthy coalition governments emerging. Nonetheless, political instability did not change
India's bright economic course though it delayed certain decisions relating to the economy.
Economic liberalization which mostly interested foreign investors has been accepted as essential
by all political parties including the Communist Party of India Though there are bleak chances
of political instability in the future, even if such a situation arises the economic policy of India
would hardly be affected.. Being a strong democratic nation the chances of an army coup or
foreign dictatorship are minimal. Hence, political risk in India is practically absent.

Commercial Risk
Commercial risk exists in any business ventures of a country. Not each and every product or
service is profitably accepted in the market. Hence it is advisable to study the demand / supply
condition for a particular product or service before making any major investment. In India one
can avail the facilities of a large number of market research firms in exchange for a professional

23

fee to study the state of demand / supply for any product. As it is, entering the consumer market
involves some kind of gamble and hence involves commercial risk

Risk Due To Terrorism

In the recent past, India has witnessed several terrorist attacks on its soil which could have a
negative impact on investor confidence. Not only business environment and return on
investment, but also the overall security conditions in a nation have an effect on FDI's. Though
some of the financial experts think otherwise. They believe the negative impact of terrorist
attacks would be a short term phenomenon. In the long run, it is the micro and macro economic
conditions of the Indian economy that would decide the flow of Foreign investment and in this
regard India would continue to be a favorable investment destination.

24

Objective of the study:

To know the flow of investment in India
To know how can India Grow by Investment .
To Examine the trends and patterns in the FDI across different sectors and from different
countries in India
To know in which sector we can get more foreign currency in terms of investment in

India
To know which country s safe to invest .
To know how much to invest in a developed country or in a developing.
To know Which sector is good for investment .
To know which country in investing in which country
To know the reason for investment in India
Influence of FII on movement of Indian stock exchange
To understand the FII & FDI policy in India.

FDI Policy in India

Foreign Direct Investment Policy
25

FDI policy is reviewed on an ongoing basis and measures for its further liberalization are taken.
Change in sectoral policy/sectoral equity cap is notified from time to time through Press Notes
by the Secretariat for Industrial Assistance (SIA) in the Department of Industrial Policy
announcement by SIA are subsequently notified by RBI under FEMA. All Press Notes are
available at the website of Department of Industrial Policy & Promotion. FDI Policy permits FDI
up to 100 % from foreign/NRI investor without prior approval in most of the sectors including
the services sector under automatic route. FDI in sectors/activities under automatic route does
not require any prior approval either by the Government or the RBI. The investors are required to
notify the Regional office concerned of RBI of receipt of inward remittances within 30 days of
such receipt and will have to file the required documents with that office within 30 days after
issue of shares to foreign investors.
The Foreign direct investment scheme and strategy depends on the respective FDI norms and
policies in India. The FDI policy of India has imposed certain foreign direct investment
regulations as per the FDI theory of the Government of India . These include FDI limits in India
for example:

o Foreign direct investment in India in infrastructure development projects excluding arms

and ammunitions, atomic energy sector, railways system , extraction of coal and lignite
and mining industry is allowed upto 100% equity participation with the capping amount
as Rs. 1500 crores.
o FDI figures in equity contribution in the finance sector cannot exceed more than 40% in
banking services including credit card operations and in insurance sector only in joint
ventures with local insurance companies.
o FDI limit of maximum 49% in telecom industry especially in the GSM services

26

Government Approvals for Foreign Companies Doing

Business in India
Government Approvals for Foreign Companies Doing Business in India or
Investment Routes for Investing in India, Entry Strategies for Foreign
Investors

India's foreign trade policy has been formulated with a view to

invite and encourage FDI in India. The Reserve Bank of India has prescribed
the administrative and compliance aspects of FDI. A foreign company
planning to set up business operations in India has the following options:

Investment under automatic route; and

Investment through prior approval of Government.

Procedure under automatic route

FDI in sectors/activities to the extent permitted under automatic route does not require any prior approval
either by the Government or RBI. The investors are only required to notify the Regional office concerned
of RBI within 30 days of receipt of inward remittances and file the required documents with that office
within 30 days of issue of shares to foreign investors.

List of activities or items for which automatic route for foreign investment is not available,
include the following:

Banking

NBFC's Activities in Financial Services Sector

Civil Aviation

Petroleum Including Exploration/Refinery/Marketing

27

Housing & Real Estate Development Sector for Investment from Persons other
than NRIs/OCBs.

Venture Capital Fund and Venture Capital Company

Investing Companies in Infrastructure & Service Sector

Atomic Energy & Related Projects

Defense and Strategic Industries

Agriculture (Including Plantation)

Print Media

Broadcasting

Postal Services

Procedure under Government approval

FDI in activities not covered under the automatic route, requires prior Government approval and
are considered by the Foreign Investment Promotion Board (FIPB). Approvals of composite
proposals involving foreign investment/foreign technical collaboration are also granted on the
recommendations of the FIPB. Application for all FDI cases, except Non-Resident Indian (NRI)
investments and 100% Export Oriented Units (EOUs), should be submitted to the FIPB Unit,
Department of Economic Affairs (DEA), Ministry of Finance. Application for NRI and 100%
EOU cases should be presented to SIA in Department of Industrial Policy & Promotion.

Investment by way of Share Acquisition

A foreign investing company is entitled to acquire the shares of an Indian company without
obtaining any prior permission of the FIPB subject to prescribed parameters/ guidelines. If the
acquisition of shares directly or indirectly results in the acquisition of a company listed on the
stock exchange, it would require the approval of the Security Exchange Board of India.
28

New investment by an existing collaborator in India

A foreign investor with an existing venture or collaboration (technical and financial) with an
Indian partner in particular field proposes to invest in another area, such type of additional
investment is subject to a prior approval from the FIPB, wherein both the parties are required to
participate to demonstrate that the new venture does not prejudice the old one.

General Permission of RBI under FEMA

Indian companies having foreign investment approval through FIPB route do not require any
further clearance from RBI for receiving inward remittance and issue of shares to the foreign
investors. The companies are required to notify the concerned Regional office of the RBI of
receipt of inward remittances within 30 days of such receipt and within 30 days of issue of shares
to the foreign investors or NRIs.

Participation by International Financial Institutions

Equity participation by international financial institutions such as ADB, IFC, CDC, DEG, etc., in
domestic companies is permitted through automatic route, subject to SEBI/RBI regulations and
sector specific cap on FDI.

FDI In Small Scale Sector (SSI) Units

A small-scale unit cannot have more than 24 per cent equity in its paid up capital from any
industrial undertaking, either foreign or domestic.
If the equity from another company (including foreign equity) exceeds 24 per cent, even if the
investment in plant and machinery in the unit does not exceed Rs 10 million, the unit loses its
small-scale status and shall require an industrial license to manufacture items reserved for smallscale sector. See also FDI in Small Scale Sector in India Further Liberalized

29

About foreign direct investment In India.

Is the process whereby residents of one country (the source country) acquire ownership of assets
for the purpose of controlling the production, distribution, and other activities of a firm in
another country (the host country). The international monetary funds balance of payment
manual defines FDI as an investment that is made to acquire a lasting interest in an enterprise
operating in an economy other than that of the investor. The investors purpose being to have an
effective voice in the management of the enterprise. The united nations 1999 world investment
report defines FDI as an investment involving a long term relationship and reflecting a lasting
interest and control of a resident entity in one economy (foreign direct investor or parent
enterprise) in an enterprise resident in an economy other than that of the foreign direct investor
( FDI enterprise, affiliate enterprise or foreign affiliate).

I.

Foreign direct investment: Indian scenario

FDI is permitted as under the following forms of investments

Through financial collaborations.
Through joint ventures and technical collaborations.
Through capital markets via Euro issues.
Through private placements or preferential allotments.

30

Sector Specific Foreign Direct Investment in India

Hotel & Tourism: FDI in Hotel & Tourism sector in India

100% FDI is permissible in the sector on the automatic route,
The term hotels include restaurants, beach resorts, and other tourist complexes providing
accommodation and/or catering and food facilities to tourists. Tourism related industry include
travel agencies, tour operating agencies and tourist transport operating agencies, units providing
facilities for cultural, adventure and wild life experience to tourists, surface, air and water
transport facilities to tourists, leisure, entertainment, amusement, sports, and health units for
tourists and Convention/Seminar units and organizations.

For foreign technology agreements, automatic approval is granted if

i.

up to 3% of the capital cost of the project is proposed to be paid for technical and
consultancy services including fees for architects, design, supervision, etc.

ii.

up to 3% of net turnover is payable for franchising and marketing/publicity support fee,

and up to 10% of gross operating profit is payable for management fee, including
incentive fee.

31

Private Sector Banking:

Non-Banking Financial Companies (NBFC)
49% FDI is allowed from all sources on the automatic route subject to guidelines issued from
RBI from time to time.
a. FDI/NRI/OCB investments allowed in the following 19 NBFC activities shall be as per
levels indicated below:
i.

Merchant banking

ii.

Underwriting

iii.

Portfolio Management Services

iv.

Investment Advisory Services

v.

Financial Consultancy

vi.

Stock Broking

vii.

Asset Management

viii.

Venture Capital

ix.

Custodial Services
32

x.

Factoring

xi.

Credit Reference Agencies

xii.

Credit rating Agencies

xiii.

Leasing & Finance

xiv.

Housing Finance

xv.

Foreign Exchange Brokering

xvi.

Credit card business

xvii.

Money changing Business

xviii.

Micro Credit

xix.

Rural Credit

b. Minimum Capitalization Norms for fund based NBFCs:

i) For FDI up to 51% - US$ 0.5 million to be brought upfront
ii) For FDI above 51% and up to 75% - US $ 5 million to be brought upfront
iii) For FDI above 75% and up to 100% - US $ 50 million out of which US $ 7.5 million
to be brought up front and the balance in 24 months
c. Minimum capitalization norms for non-fund based activities:
Minimum capitalization norm of US $ 0.5 million is applicable in respect of all permitted nonfund based NBFCs with foreign investment.

33

d. Foreign investors can set up 100% operating subsidiaries without the condition to disinvest
a minimum of 25% of its equity to Indian entities, subject to bringing in US$ 50 million as at b)
(iii) above (without any restriction on number of operating subsidiaries without bringing in
additional capital)
e. Joint Venture operating NBFC's that have 75% or less than 75% foreign investment will
also be allowed to set up subsidiaries for undertaking other NBFC activities, subject to the
subsidiaries also complying with the applicable minimum capital inflow i.e. (b)(i) and (b)(ii)
above.
f. FDI in the NBFC sector is put on automatic route subject to compliance with guidelines of
the Reserve Bank of India. RBI would issue appropriate guidelines in this regard.

Insurance Sector: FDI in Insurance sector in India

FDI up to 26% in the Insurance sector is allowed on the automatic route subject to obtaining
license from Insurance Regulatory & Development Authority (IRDA)

Telecommunication:
FDI in Telecommunication sector
i.

In basic, cellular, value added services and global mobile personal communications by
satellite, FDI is limited to 49% subject to licensing and security requirements and
adherence by the companies (who are investing and the companies in which investment
is being made) to the license conditions for foreign equity cap and lock- in period for
transfer and addition of equity and other license provisions.

ii.

ISPs with gateways, radio-paging and end-to-end bandwidth, FDI is permitted up to 74%
with FDI, beyond 49% requiring Government approval. These services would be subject
to licensing and security requirements.

iii.

No equity cap is applicable to manufacturing activities.

34

iv.

FDI up to 100% is allowed for the following activities in the telecom sector :
a.

ISPs not providing gateways (both for satellite and submarine cables);

b.

Infrastructure Providers providing dark fiber (IP Category 1);

c.

Electronic Mail; and

d.

Voice Mail
The above would be subject to the following conditions:

e.

FDI up to 100% is allowed subject to the condition that such companies would
divest 26% of their equity in favor of Indian public in 5 years, if these companies
are listed in other parts of the world.

f.

The above services would be subject to licensing and security requirements,

wherever required.

Proposals for FDI beyond 49% shall be considered by FIPB on case to case basis.

Trading:
FDI in Trading Companies in India
Trading is permitted under automatic route with FDI up to 51% provided it is primarily export
activities, and the undertaking is an export house/trading house/super trading house/star trading
house. However, under the FIPB route:i. 100% FDI is permitted in case of trading companies for the following activities:

exports;
35

bulk imports with ex-port/ex-bonded warehouse sales;

cash and carry wholesale trading;

other import of goods or services provided at least 75% is for procurement and sale of
goods and services among the companies of the same group and not for third party use or
onward transfer/distribution/sales.

ii. The following kinds of trading are also permitted, subject to provisions of EXIM Policy:
a. Companies for providing after sales services (that is not trading per se)
b. Domestic trading of products of JVs is permitted at the wholesale level for such trading
companies who wish to market manufactured products on behalf of their joint ventures in
which they have equity participation in India.
c. Trading of hi-tech items/items requiring specialized after sales service
d. Trading of items for social sector
e. Trading of hi-tech, medical and diagnostic items.
f. Trading of items sourced from the small scale sector under which, based on technology
provided and laid down quality specifications, a company can market that item under its
brand name.
g. Domestic sourcing of products for exports.
h. Test marketing of such items for which a company has approval for manufacture
provided such test marketing facility will be for a period of two years, and investment in
setting up manufacturing facilities commences simultaneously with test marketing
FDI up to 100% permitted for e-commerce activities subject to the condition that such companies
would divest 26% of their equity in favor of the Indian public in five years, if these companies

36

are listed in other parts of the world. Such companies would engage only in business to business
(B2B) e-commerce and not in retail trading.

Power:
FDI In Power Sector in India
Up to 100% FDI allowed in respect of projects relating to electricity generation, transmission
and distribution, other than atomic reactor power plants. There is no limit on the project cost and
quantum of foreign direct investment.

Drugs & Pharmaceuticals

FDI up to 100% is permitted on the automatic route for manufacture of drugs and
pharmaceutical, provided the activity does not attract compulsory licensing or involve use of
recombinant DNA technology, and specific cell / tissue targeted formulations.
FDI proposals for the manufacture of licensable drugs and pharmaceuticals and bulk drugs
produced by recombinant DNA technology, and specific cell / tissue targeted formulations will
require prior Government approval.

Roads, Highways, Ports and Harbors

FDI up to 100% under automatic route is permitted in projects for construction and maintenance
of roads, highways, vehicular bridges, toll roads, vehicular tunnels, ports and harbors.

Pollution Control and Management

FDI up to 100% in both manufacture of pollution control equipment and consultancy for
integration of pollution control systems is permitted on the automatic route.

Call Centers in India / Call Centres in India

FDI up to 100% is allowed subject to certain conditions.

37

Business Process Outsourcing BPO in India

FDI up to 100% is allowed subject to certain conditions.

Special Facilities and Rules for NRI's and OCB's

NRI's and OCB's are allowed the following special facilities:
1. Direct investment in industry, trade, infrastructure etc.
2. Up to 100% equity with full repatriation facility for capital and dividends in the following
sectors
i.

34 High Priority Industry Groups

ii.

Export Trading Companies

iii.

Hotels and Tourism-related Projects

iv.

Hospitals, Diagnostic Centers

v.

Shipping

vi.

Deep Sea Fishing

vii.

Oil Exploration

viii.

Power

ix.

Housing and Real Estate Development

x.

Highways, Bridges and Ports

xi.

Sick Industrial Units

xii.

Industries Requiring Compulsory Licensing

38

3. Up to 40% Equity with full repatriation: New Issues of Existing Companies raising
Capital through Public Issue up to 40% of the new Capital Issue.
4. On non-repatriation basis: Up to 100% Equity in any Proprietary or Partnership engaged
in Industrial, Commercial or Trading Activity.
5. Portfolio Investment on repatriation basis: Up to 1% of the Paid up Value of the equity
Capital or Convertible Debentures of the Company by each NRI. Investment in
Government Securities, Units of UTI, National Plan/Saving Certificates.
6. On Non-Repatriation Basis: Acquisition of shares of an Indian Company, through a
General Body Resolution, up to 24% of the Paid Up Value of the Company.
7. Other Facilities: Income Tax is at a Flat Rate of 20% on Income arising from Shares or
Debentures of an Indian

39

LITERATURE REVIEW
Cleeve (2008) used the secondary school education index (which represents the weight of
enrolled pupils in the total population of secondary school age) to measure human capital. But
he found that this proxy did not show the accumulated stock of human capital, and he deemed
it essential to use adult illiteracy, too, as an indicator of the education and skills level of the
population. But he did not obtain conclusive results for this indicator either, maybe because of
the small variability in the illiteracy rates of the countries in the sample.
A country with stable economic and financial circumstances presupposes general price
stability, the maintenance of full employment and balance of payments equilibrium, and a
country enjoying all these conditions will tend to receive greater FDI inflows (Cleeve, 2008).
Several indicators are used to measure this determinant (economic and financial stability),
with the inflation rate being one of the most usual measures since it can gauge price stability,
which is a condition of economic equilibrium. In this context, high or volatile inflation rates
are a clear sign of economic instability and may become an impediment to FDI (Botri and
kufli, 2006). Balance of payments deficits likewise denote instability and can lead to
restrictions on the free movement of capital, thereby hampering the repatriation of profits
40

(Schneider and Frey, 1985).

Botri and kufli (2006), in a study focused on a group of underdeveloped South-east

European countries (SE)
whose economies were in transition (from being centrally planned),
had to use proxies that fit these circumstances in order to measure economic stability. So they
used the weight of the private sector in the economy or the number of privatizations, which
tend to show the speed of transition of the economies and indicate that the market
mechanisms are better developed. They achieved statistically significant results on both
proxies; the effect was found to be positive for the weight of the private sector and negative
for the number of privatizations, which the authors ascribe to investors being more interested
in small scale privatizations in these countries
In their analysis of FDI in eighty developing countries (DCs) Schneider and Frey (1985) used
some other proxies, such as the percentage of external aid from Communist or Western
countries and economic and political multilateral aid, which sought to explain how far the
origin of external aid to those countries could influence their attractiveness. It was found that
countries nearest to Western economies tended to attract more FDI. On the whole the
conclusions suggest, as might be expected, that economic stability has a significant positive
effect on FDI (cf. Table 2). The most surprising conclusion was drawn by Botri and kufli

41

(2006) when they used the unemployment rate as a proxy for economic stability, for which a
negative effect on FDI was expected, since high unemployment tends to be linked to poorer
economic stability (Martins, 2005). The positive effect found by the authors may be related to
the fact that the proxy is more adjusted to a measure of cheap labour, which does attract more
FDI, than a measure of economic stability, thus distorting the result.

India Further Opens Up Key Sectors for Foreign Investment

India has liberalized foreign investment regulations in key sectors, opening up commodity
exchanges, credit information services and aircraft maintenance operations. The foreign
investment limit in Public Sector Units (PSU) refineries has been raised from 26% to 49%.
An additional sweetener is that the mandatory disinvestment clause within five years has been
done away with. FDI in Civil aviation up to 74% will now be allowed through the automatic
route for non-scheduled and cargo airlines, as also for ground handling activities. 100% FDI in
aircraft maintenance and repair operations has also been allowed.
But the big one, allowing foreign airlines to pick up a stake in domestic carriers has been given a
miss again. India has decided to allow 26% FDI and 23% FII investments in commodity
exchanges, subject to the proviso that no single entity will hold more than 5% of the stake.
Sectors like credit information companies, industrial parks and construction and development
projects have also been opened up to more foreign investment. Also keeping India's civilian
nuclear ambitions in mind, India has also allowed 100% FDI in mining of titanium, a mineral
which is abundant in India.
Sources say the government wants to send out a signal that it is not done with reforms yet. At the
same time, critics say contentious issues like FDI and multi-brand retail are out of the policy
radar because of political compulsions.
42

Sector-wise FDI Inflows ( From April 2000 to January 2010)

SECTOR

AMOUNT OF FDI
INFLOWS

In Rs Million
Services Sector

787420.81

PERCENT OF TOTAL
FDI INFLOWS (In terms
of Rs)

In US$
Million
18118.40

22.39

Computer Software &

391109.74
hardware

8876.43

11.12

Telecommunications

275441.38

6215.55

7.83

Construction
Activities

213595.12

5029.01

6.07

Automobile

146799.41

3310.23

4.17

Housing & Real estate 217936.02

5118.85

6.20

Power

3129.66

3.90

Chemicals (Other than

87008.07
Fertilizers)

1964.06

2.47

Ports

63290.50

1551.88

1.80

Metallurgical
industries

109563.20

2612.85

3.11

Electrical Equipments 57379.63

1324.92

1.63

Cement & Gypsum

Products

70781.19

1621.03

2.01

Petroleum & Natural

Gas

94417.17

2244.17

2.68

Trading

62416.85

1480.94

1.77

Consultancy Services 48647.43

1112.92

1.38

Hotel and Tourism

52500.05

1217.50

1.49

Food Processing
Industries

34362.49

760.32

0.98

Electronics

33914.75

748.57

0.96

Misc. Mechanical &

28310.13
Engineering industries

648.86

0.80

137089.37

43

Forbidden Territories:

Arms and ammunition

Atomic Energy

Coal and lignite

Rail Transport

Mining of metals like iron, manganese, chrome, gypsum, sulfur, gold, diamonds, copper,
zinc.

44

Foreign Investment through GDRs (Euro Issues)

Indian companies are allowed to raise equity capital in the international market through the issue
of Global Depository Receipt (GDRs). GDR investments are treated as FDI and are designated in
dollars and are not subject to any ceilings on investment. An applicant company seeking
Government's approval in this regard should have consistent track record for good performance
(financial or otherwise) for a minimum period of 3 years. This condition would be relaxed for
infrastructure projects such as power generation, telecommunication, petroleum exploration and
refining, ports, airports and roads.

1. Clearance from FIPB

There is no restriction on the number of Euro-issue to be floated by a company or a group of
companies in the financial year. A company engaged in the manufacture of items covered under
Annex-III of the New Industrial Policy whose direct foreign investment after a proposed Euro
issue is likely to exceed 51% or which is implementing a project not contained in Annex-III,
would need to obtain prior FIPB clearance before seeking final approval from Ministry of
Finance.
45

2. Use of GDRs
The proceeds of the GDRs can be used for financing capital goods imports, capital expenditure
including domestic purchase/installation of plant, equipment and building and investment in
software development, prepayment or scheduled repayment of earlier external borrowings, and
equity investment in JV/WOSs in India.

Foreign direct investments in India are approved through two routes

1. Automatic approval by RBI

The Reserve Bank of India accords automatic approval within a period of two weeks (subject to
compliance of norms) to all proposals and permits foreign equity up to 24%; 50%; 51%; 74%
and 100% is allowed depending on the category of industries and the sectoral caps applicable.
The lists are comprehensive and cover most industries of interest to foreign companies.
Investments in high priority industries or for trading companies primarily engaged in exporting
are given almost automatic
approval by the RBI.

2. The FIPB Route Processing of non-automatic approval cases

FIPB stands for Foreign Investment Promotion Board which approves all other cases where the
parameters of automatic approval are not met. Normal processing time is 4 to 6 weeks. Its
approach is liberal for all sectors and all types of proposals, and rejections are few. It is not
necessary for foreign investors to have a local partner, even when the foreign investor wishes to
46

hold less than the entire equity of the company. The portion of the equity not proposed to be held
by the foreign investor can be offered to the public.

iii.
Sr. No.
1.
2.
3.
4.

Analysis of sector specific policy for FDI

Sector/Activity
Hotel & Tourism
NBFC
Insurance
Telecommunication:

FDI cap/Equity
100%
49%
26%

cellular, value added services

49%

ISPs

5.

with

gateways,

radio-

Entry/Route
Automatic
Automatic
Automatic
Automatic
Above 49% need Govt. licence

paging

74%

Electronic Mail & Voice Mail

Trading companies:

100%

primarily export activities

51%

Automatic

bulk imports, cash and carry

6.

wholesale trading
100%
Power(other than atomic reactor

Automatic

power plants)

100%
100%

Automatic
Automatic

100%

Automatic

100%

Automatic

7.
Drugs & Pharmaceuticals
8.
Roads, Highways, Ports and
Harbors
9.
Pollution

Control

and
47

10
11.
12.

Management
Call Centers
BPO
For NRI's and OCB's:
i.

34 High Priority

100%
100%

Automatic
Automatic

100%

Automatic

Industry Groups
ii.

Export

Trading

Companies
iii.

Hotels

and

Tourism-related Projects
iv.

Hospitals,
Diagnostic Centers

v.

Shipping

vi.

Deep Sea Fishing

vii.

Oil Exploration

viii.

Power

ix.

Housing and Real

Estate Development

x.

Highways,
Bridges and Ports

xi.

Sick

Industrial

Units
xii.

Industries
48

Requiring

Compulsory

Licensing
xiii.

Industries
Reserved for Small Scale
Sector

13.

Airports:

14
15.
16.
17.

Greenfield projects

100%

Automatic

Existing projects
Assets reconstruction company
Cigars and cigarettes
Courier services
Investing
companies
in

100%
49%
100%
100%
49%

Beyond 74% FIPB

FIPB
FIPB
FIPB
FIPB

infrastructure

(other

than

telecom sector)

iv.

Analysis of FDI inflow in India

From April 2000 to August 2009-10
(Amount US$ in Millions)

S.No

Financial Year

Total FDI Inflows

% Growth Over Previous Year

1.

2000-01

4,029

----

2.

2001-02

6,130

(+) 52

3.

2002-03

5,035

(-) 18

4.

2003-04

4,322

(-) 14

5.

2004-05

6,051

(+) 40

6.

2005-06

8,961

(+) 48

7.

2006-07

22,826

(+) 146

8.

2007-08

34,362

(+) 51
49

9.

2008-09

35,168

(+) 02

10.

2009-10

16,232

----

50

TOTAL FDI INFLOWS IN INDIA

40,000
35,168
34,362

35,000
30,000
25,000

22,826
TOTAL FDI INFLOWS

20,000
16,232

15,000
10,000
5,000

8,961
6,130
4,029

5,035 4,322

6,051

51

v.

Analysis of share of top ten investing countries FDI equity in flows

From April 2000 to January 2010
(Amount in Millions)

Sr. No

Country

Amount of FDI Inflows

As

Total
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

Mauritius
Singapore
U.S.A.
U.K.
Netherlands
Japan
Cyprus
Germany
France
U.A.E.

19,18,633.61
3,80,142.56
3,32,935.60
2,40,974.98
1,78,047.76
1,50,129.05
1,32,448.04
1,12,242.06
61,686.39
50,915.59

To
FDI

Inflow
44.01
8.72
7.64
5.53
4.08
3.44
3.04
2.57
1.42
1.17

52

Mauritius
53

Mauritius invested Rs.19,18,633 million in India Up to the January 2010, equal to 44.01 percent
of total FDI inflows.

Many companies based outside of India utilize Mauritian holding

companies to take advantage of the India- Mauritius Double Taxation Avoidance Agreement
(DTAA). The DTAA allows foreign firms to bypass Indian capital gains taxes, and may allow
some India-based firms to avoid paying certain taxes through a process known as round
tripping.
The extent of round tripping by Indian companies through Mauritius is unknown. However, the
Indian government is concerned enough about this problem to have asked the government of
Mauritius to set up a joint monitoring mechanism to study these investment flows. The potential
loss of tax revenue is of particular concern to the Indian government. These are the sectors which
attracting more FDI from Mauritius Electrical equipment Gypsum and cement products
Telecommunications Services sector that includes both non- financial and financial Fuels.

Singapore
Singapore continues to be the single largest investor in India amongst the Singapore with FDI
inflows into Rs. 3,80,142 crores up to January 2010
Sector-wise distribution of FDI inflows received from Singapore the highest inflows have been
in the services sector (financial and non financial), which accounts for about 30% of FDI inflows
from Singapore. Petroleum and natural gas occupies the second place followed by computer
software and hardware, mining and construction.

U.S.A.
The United States is the third largest source of FDI in India (7.64 % of the total), valued at
732335 crore in cumulative inflows up to January 2010. According to the Indian government, the
top sectors attracting FDI from the United States to India are fuel, telecommunications, electrical
equipment, food processing, and services. According to the available M&A data, the two top
sectors attracting FDI inflows from the United States are computer systems design and
programming and manufacturing

U.K.
54

The United Kingdom is the fourth largest source of FDI in India (5.53 % of the total), valued at
2,40,974 crores in cumulative inflows up to January 2010
Over 17 UK companies under the aegis of the Nuclear Industry Association of UK have tied up
with Ficci to identify joint venture and FDI possibilities in the civil nuclear energy sector.
UK companies and policy makers the focus sectors for joint ventures, partnerships, and trade are
non-conventional energy, IT, precision engineering, medical equipment, infrastructure
equipment, and creative industries.

Netherlands
FDI from Netherlands to India has increased at a very fast pace over the last few years.
Netherlands ranks fifth among all the countries that make investments in India. The total flow of
FDI from Netherlands to India came to Rs. 1, 78,047 crores between 1991 and 2002. The total
percentage of FDI from Netherlands to India stood at 4.08% out of the total foreign direct
investment in the country up to August 2009.

55

Following Various industries attracting FDI from Netherlands to India are:

Food processing industries

Telecommunications that includes services of cellular mobile, basic telephone, and radio
paging

Horticulture

Electrical equipment that includes computer software and electronics

Service sector that includes non- financial and financial services

vi.

Analysis of sectors attracting highest FDI equity inflows

From April 2000 to March 2010
(Amount in Millions)

Sr. No

Country

Amount

of

FDI %

Inflows

Total

As

1.

Service Sector

9,65,210.77

Inflow
22.14

2.
3.
4.
5.
6.
7.
8.
9.
10.

(Financial & Non Financial)

Computer Software & Hardware
Telecommunication
Housing & Real Estate
Construction Activities
Automobile Industry
Power
Metallurgical Industries
Petroleum & Natural Gas
Chemical

4,13,419.03
3,68,899.62
3,25,021.36
2,65,492.96
1,90,172.22
1,79,849.92
1,25,785.57
1,11,957.00
1,01,680.18

9.48
8.46
7.46
6.09
4.36
4.13
2.89
2.57
2.33

To
FDI

56

The sectors receiving the largest shares of total FDI inflows up to arch 2010 were the
service sector and computer software and hardware sector, each accounting for 22.14 and
9.48 percent respectively. These were followed by the telecommunications, real estate,
construction and automobile sectors. The top sectors attracting FDI into India via M&A
activity were manufacturing; information; and professional, scientific, and technical
services. These sectors correspond closely with the sectors identified by the Indian
government as attracting the largest shares of FDI inflows overall.
The ASSOCHAM has revealed that FDI in Chemicals sector (other than fertilizers) registered
maximum growth of 227 per cent during April 2008 March 2009 as compared to 11.71 per cent
during the last fiscal. The sector attracted USD 749 million FDI in FY 09 as compared to USD
229 million in FY 08.
During the year 2009 government had raised the FDI limit in telecom sector from 49 per cent to
74 per, which has contributed to the robust growth of FDI. The telecom sector registered a
growth of 103 per cent during fiscal 2008-09 as compared to previous fiscal. The sector attracted
USD 2558 million FDI in FY 09 as compared to the USD 1261 million in FY 08, acquired 9.37
per cent share in total FDI inflow.
India automobile sector has been able to record 70 per cent growth in foreign investment. The
FDI inflow in automobile sector has increased from USD 675 million to 1,152 million in FY 09
over FY 08. The other sectors which registered growth in highest FDI inflow during April
March 2009 were housing & real estate (28.55 per cent), computer software & hardware (18.94
per cent), construction activities including road & highways (16.35 per cent) and power (1.86 per
cent).

57

Foreign Investment Promotion Board

The FIPB (Foreign Investment Promotion Board) is a government body that offers a single
window clearance for proposals on foreign direct investment in the country that are not allowed
access through the automatic route. Consisting of Senior Secretaries drawn from different
ministries with Secretary ,Economic Affairs in the chair, this high powered body discusses and
examines proposals for foreign investment in the country for restricted sectors ( as laid out in the
Press notes and extant foreign investment policy) on a regular basis. Currently proposals for
investment beyond 600 crores require the concurrence of the CCEA (Cabinet Committee on
Economic Affairs). The threshold limit is likely to be raised to 1200 crore soon.The Board thus
plays an important role in the administration and implementation of the Governments FDI
policy. In circumstances where there is ambiguity or a conflict of interpretation, the FIPB has
stepped in to provide solutions. Through its fast track working it has established its reputation as
a body that does not unreasonably delay and is objective in its decision making. It therefore has a
strong record of actively encouraging the flow of FDI into the country. The FIPB is assisted in
this task by a FIPB Secretariat. The launch of e- filing facility is an important initiative of the
Secretariat to further the cause of enhanced accessibility and transparency .

58

Low Income Countries in Global FDI Race

The situation of foreign direct investment has been relatively good in the recent times with an
increase of 38%. Normally, the foreign direct investment is made mostly into the extractive
industries. However, now the foreign direct investors are also looking to pump money into the
manufacturing industry that has garnered 47% of the total foreign direct investment made in
1992. However, the situation has not been the same in the countries with a middle income range.
The middle income countries have not received a steady inflow of foreign direct income coming
their way. The situation is comparatively better in the low income countries. They have had an
uninterrupted and continually increasing flow of foreign direct investment. It has been observed
that the various debt crises, as well as, other forms of economic crises have had less effect on
these countries.
These countries had lesser amounts of commercial bank obligations, which again had been
caused by the absence of proper financial markets, as well as the fact that their economies were
not open to foreign direct investment. During the later phases of the decade of 70s the Asian
countries started encouraging foreign direct investments in their economies. China has received
the most of the foreign direct investment that was pumped into the countries
with low income. It accounted for as much as 86% of the total foreign direct investment made in
the lower income countries in with low income. It accounted for as much as 86% of the total
foreign direct investment made in the lower income countries in 1995.
The economic liberalization in China started in 1979. This led to an increase in the foreign direct
investment in China. In the years between 1982 and 1991 the average foreign direct investment
in China was US$ 2.5 billion. This average increased by seven times to become US$ 37.5 billion
during 1995. A significant amount of the foreign direct investment in China was provided in the
industrial sector.
It was as much as 68%. Around 20% of the foreign direct investment of China was made in the
real estate sector. During the same period Nigeria had been the second best in terms of receiving
foreign direct investment. In the recent times India has risen to be the third major foreign direct

59

investment destination in the recent years. Foreign direct investment started in India in 1991 with
the initiation of the economic liberation.
There were more initiatives that enabled India to garner foreign direct investments worth US$
2.9 billion from 1991 to 1995. This was a significant increase from the previous twenty years
when the total foreign direct investment in India was US$1 billion. Most of the foreign direct
investment made in India has been in the infrastructural areas like telecommunications and
power. In the manufacturing industry the emphasis has been on petroleum refining, vehicles and
petrochemicals Vietnam is a low income country, which is supposed to have the same potential
as China to generate foreign direct investment.
The foreign direct investment laws were introduced in Vietnam in 1987-88. This led to an
increase in the foreign direct investment made in the country. The amount stood at US$ 25
million in 1993 compared to US$ 8 million in 1993. This amount increased by 3 times after the
USA removed its economic sanctions in 1994. The gas and petroleum industries were the biggest
beneficiaries of the foreign direct investment. Bangladesh started receiving increasing foreign
direct investment after 1991, when the economic reforms took place in the country.
After 1991 it was possible for foreign companies to set up companies in Bangladesh without
taking permission beforehand. The foreign direct investment rose from US$ 11 million in 1994
to US$ 125 million in 1995. As per the available statistics the manufacturing industry,
comprising of clothing and textiles took up 20% of the total approved foreign direct investment.
Food processing, chemicals and electric machinery were also important in this regard. The
increase in the foreign direct investment in Ghana was remarkable as well. The figures increased
from US$11.7 million, on an average, from 1986 to 1992 to US$ 201 million, on an average,
from 1993 to 1995. This improvement was brought about by the privatization of the Ashanti
Goldfields.

60

FOREIGN INSTITUTIONAL INVESTMENT

I.

Introduction to FII

Since 1990-91, the Government of India embarked on liberalization and economic reforms with
a view of bringing about rapid and substantial economic growth and move towards globalization
of the economy. As a part of the reforms process, the Government under its New Industrial
Policy revamped its foreign investment policy recognizing the growing importance of foreign
direct investment as an instrument of technology transfer, augmentation of foreign exchange
reserves and globalization of the Indian economy. Simultaneously, the Government, for the first
time, permitted portfolio investments from abroad by foreign institutional investors in the Indian
capital market. The entry of FIIs seems to be a follow up of the recommendation of the
Narsimhan Committee Report on Financial System. While recommending their entry, the
Committee, however did not elaborate on the objectives of the suggested policy. The committee
only suggested that the capital market should be gradually opened up to foreign portfolio
investments.
From September 14, 1992 with suitable restrictions, FIIs were permitted to invest in all the
securities traded on the primary and secondary markets, including shares, debentures and
warrants issued by companies which were listed or were to be listed on the Stock Exchanges in
India. While presenting the Budget for 1992-93, the then Finance Minister Dr. Manmohan Singh
had announced a proposal to allow reputed foreign investors, such as Pension Funds etc., to
invest in Indian capital market.

II.

Market design in India for foreign institutional investors

Foreign Institutional Investors means an institution established or incorporated outside India

which proposes to make investment in India in securities. A Working Group for Streamlining of
the Procedures relating to FIIs, constituted in April, 2003, inter alia, recommended streamlining
of SEBI registration procedure, and suggested that dual approval process of SEBI and RBI be
changed to a single approval process of SEBI. This recommendation was implemented in
December 2003.
61

Currently, entities eligible to invest under the FII route are as follows:
i)

As FII: Overseas pension funds, mutual funds, investment trust, asset management
company, nominee company, bank, institutional portfolio manager, university funds,
endowments, foundations, charitable trusts, charitable societies, a trustee or power of
attorney holder incorporated or established outside India proposing to make
proprietary investments or with no single investor holding more than 10 per cent of

ii)

the shares or units of the fund.

As Sub-accounts: The sub account is generally the underlying fund on whose behalf
the FII invests. The following entities are eligible to be registered as sub-accounts,
viz. partnership firms, private company, public company, pension fund, investment
trust, and individuals.

FIIs registered with SEBI fall under the following categories:

a) Regular FIIs- those who are required to invest not less than 70 % of their investment in equityrelated instruments and 30 % in non-equity instruments.
b) 100 % debt-fund FIIs- those who are permitted to invest only in debt instruments.
The Government guidelines for FII of 1992 allowed, inter-alia, entities such as asset management
companies, nominee companies and incorporated/institutional portfolio managers or their power
of attorney holders (providing discretionary and non-discretionary portfolio management
services) to be registered as FIIs. While the guidelines did not have a specific provision
regarding clients, in the application form the details of clients on whose behalf investments were
being made were sought.
While granting registration to the FII, permission was also granted for making investments in the
names of such clients. Asset management companies/portfolio managers are basically in the
business of managing funds and investing them on behalf of their funds/clients. Hence, the
intention of the guidelines was to allow these categories of investors to invest funds in India on

62

behalf of their 'clients'. These 'clients' later came to be known as sub-accounts. The broad
strategy consisted of having a wide variety of clients, including individuals, intermediated
through institutional investors, who would be registered as FIIs in India. FIIs are eligible to
purchase shares and convertible debentures issued by Indian companies under the Portfolio
Investment Scheme.

iii.

Prohibitions on Investments:

FIIs are not permitted to invest in equity issued by an Asset Reconstruction Company. They are
also not allowed to invest in any company which is engaged or proposes to engage in the
following activities:
1) Business of chit fund
2) Nidhi Company
3) Agricultural or plantation activities
4) Real estate business or construction of farm houses (real estate business does not include
development of townships, construction of residential/commercial premises, roads or bridges).
5) Trading in Transferable Development Rights (TDRs).

iv.

Trends of Foreign Institutional Investments in India.

Portfolio investments in India include investments in American Depository Receipts (ADRs)/

Global Depository Receipts (GDRs), Foreign Institutional Investments and investments in
offshore funds. Before 1992, only Non-Resident Indians (NRIs) and Overseas Corporate Bodies
were allowed to undertake portfolio investments in India. Thereafter, the Indian stock markets
were opened up for direct participation by FIIs. They were allowed to invest in all the securities
traded on the primary and the secondary market including the equity and other
securities/instruments of companies listed/to be listed on stock exchanges in India. It can be
observed from the table below that India is one of the preferred investment destinations for FIIs
over the years. As of March 2009, there were 1609 FIIs registered with SEBI.

63

SEBI Registered FIIs in India

v.
Year

Year
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09

End of March
0
3
156
353
439
496
450
506
527
490
502
540
685
882
996
1279
1609

2009-10

1805

FII trend in India

Gross

Gross Sales (b)

Net

Purchases

(Rs.crore)

Investment (a- FII inflow

(a) (Rs. crore)

% increase in

b)

64

1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10

17
5593
7631
9694
15554
18695
16115
56856
74051
49920
47061
144858
16953
346978
520508
896686
548876
-

4
466
2835
2752
6979
12737
17699
46734
64116
41165
44373
99094
171072
305512
489667
844504
594608
-

(Rs. crore)
13
5127
4796
6942
8575
5958
1584
10122
9935
8755
2688
45764
45881
41466
30841
52182
-45732
-

39338.46
-6.45
44.75
23.52
-30.52
126.59
739.02
-1.85
-11.88
69.30
1602.53
0.26
-9.62
-25.62
69.20
187.64
-

2010 data was not available

65

FII INFLOW
1000000
800000

Gross Purchases (a) (Rs.crore)

Gross Sales (b) (Rs.crore)

600000
400000
200000
0

Net Investment (a-b) (Rs.crore)

-200000

There may be many other factors on which a stock index may depend i.e. Government policies,
budgets, bullion market, inflation, economic and political condition of the country, FDI,
Re./Dollar exchange rate etc. But for my study I have selected only one independent variable i.e.
FII and dependent variable is indices of nifty.

vi.

Co relation with Indices

Indices

Co-relation with FII

66

Sensex
Bankex
Power
IT
Capital Goods

0.80
0.18
0.33
0.13
0.44

From the above table we can say that FII has a positive impact on all the indices which means
that if FIIs come in India then it is goods for the Indian economy. FIIs have more co-relation
with Sensex so we can say that they are mostly invest in big and reputed companies which are
included in Sensex.
Power and Capital Goods sector have more co-relation with FII investment which shows more
interest of FIIs in those sectors.

DIFFERENCE BETWEEN FDI AND FII

FDI v/s FII
Both FDI and FII is related to investment in a foreign country. FDI or Foreign Direct Investment
is an investment that a parent company makes in a foreign country. On the contrary, FII or

67

Foreign Institutional Investor is an investment made by an investor in the markets of a foreign

nation.In FII, the companies only need to get registered in the stock exchange to make
investments. But FDI is quite different from it as they invest in a foreign nation. The Foreign
Institutional Investor is also known as hot money as the investors have the liberty to sell it and
take it back. But in Foreign Direct Investment, this is not possible. In simple words, FII can enter
the stock market easily and also withdraw from it easily. But FDI cannot enter and exit that
easily. This difference is what makes nations to choose FDIs more than then FIIs.
FDI is more preferred to the FII as they are considered to be the most beneficial kind of foreign
investment for the whole economy. specific enterprise. It aims to increase the enterprises
capacity or productivity or change its management control. In an FDI, the capital inflow is
translated into additional production. The FII investment flows only into the secondary market. It
helps in increasing capital availability in general rather than enhancing the capital of a specific
enterprise.The Foreign Direct Investment is considered to be more stable than Foreign
Institutional Investor. FDI not only brings in capital but also helps in good governance practices
and better management skills and even technology transfer. Though the Foreign Institutional
Investor helps in promoting good governance and improving accounting, it does not come out
with any other benefits of the FDI. While the FDI flows into the primary market, the FII flows
into secondary market. While FIIs are short-term investments, the FDIs are long term.
1. FDI is an investment that a parent company makes in a foreign country. On the contrary,
FII is an investment made by an investor in the markets of a foreign nation.
2. FII can enter the stock market easily and also withdraw from it easily. But FDI cannot enter
and exit easily.
3. Foreign Direct Investment targets a specific enterprise. The FII increasing capital availability
in general.
4. The Foreign Direct Investment is considered to be more stable than Foreign Institutional
Investor

68

Objective of the study

To know the flow of investment in India

To know how can India Grow by Investment .
To Examine the trends and patterns in the FDI across different sectors and from different
countries in India
To know in which sector we can get more foreign currency in terms of investment in

India
To know which country s safe to invest .
To know how much to invest in a developed country or in a developing.
To know Which sector is good for investment .
To know which country in investing in which country
To know the reason for investment in India
Influence of FII on movement of Indian stock exchange
To understand the FII & FDI policy in India.

RESEARCH METHODOLOGY

69

Research is a way of finding new ways of looking at familiar things in order to

explore ways of changing it. Research as a process involves defining and
redefining problems, hypothesis, formulation organizing and evaluating data
deriving, deductions, inference an conclusions, after careful testing. Research
methodology is a way to mathematically solve the research problem. It may be
understood as a science of studying how research is done scientifically.

Research Design
A research design provides the framework to be used as a guide in collecting and
analyzing data.
We can classify research design into the following three categories:
Exploratory research.
Descriptive research.
Casual research.
Amongst these mentioned designs, we have opted for
descriptive research.

Descriptive Research
A descriptive research is generally based on the secondary data that are readily
available. It does not have a formal and rigid design as the researcher may have to
change her focus or direction, depending on the availability of new ideas and
relationships among variables. Sometimes, such studies may be based on the
detailed case analysis of a few firms or individuals.

Source of Data Collection

70

The data for this study has been collected through both the primary and secondary
sources:
Primary sources:
A close ended questionnaire having the option for suggestions in
the end has been used for primary data collection. Moreover,
while getting the questionnaire filled up; related questions were
asked from the respondents.
Secondary data:
As a secondary data source - Books, Websites, booklets of the
company have been used to collect the data.

Sampling:
Population:
Rajpur Road (Dehradun)
Dilaram Chock( Dehradun)

Sample size
100 Respondents were asked to fill the questionnaire.

Method of Sampling
There are two types of sampling method:
1. Probability Sampling Method and
2.

Non-probability Sampling Method

The major sampling methods under non-probability sampling are:

71

 Convenience Sampling
Judgment Sampling
Quota Sampling
In the survey, the method of sampling used is Convenience Sampling

ethod of research
CHI SQUARE TEST :

Preference/B
rand
Quality

Rin

Wheel

Areal

13

Total

20

72

Availibility

Price

10

11

13

34

SETTING UP THE HYPOTHESIS:

If the proportion of the FDI on Indian economy are denoted as
Pn,Pw,Ps,then the null and alternative hypothesis will be set up as
follows:
H0 : Pn=Pw=Pe
(null hypothesis: proportion
of consumers from each of
the four ward are equal)
H1 : Pn=Pw=Pe
(Alternative hypothesis:
proportion of consumers
from FDI on Indian
Economy)

Testing the hypothesis:

F0
5
2
13
2
3
3
6
-

Fe
5.88
6.47
7.65
1.47
1.62
1.92
2.65
2.92
3.44

F0- Fe
-0.88
-4.77
5.35
0.53
1.38
-1.92
0.35
3.08
-3.44

(F0- Fe)^2
0.774
22.753
28.623
0.281
1.904
3.686
0.123
9.486
11.834

Total

(F0- Fe)^2/
Fe
0.1316
3.088
3.742
0.192
1.175
1.920
0.046
3.2486
3.440
16.982

The value of the Chi Square Statistic is 16.982

73

Chi square distribution :

Determining degrees of freedom :

Number of Degree of freedom =
(Number of rows-1)*( Number of columns-1)
Therefore,
(3-1)*(3-1)=2*2=4
Therefore we have Degree of freedom is 4 and =1% we hav Chi
square Statistic is 13.277.Since the sample Chi Square Statistic does
not fall in the acceptence region, we will reject the null hypothesis.

In order to accomplish this project successfully we will take following steps.

Data collection:
Secondary Data:
Internet, Books , newspapers, journals and books, other reports and projects, literatures
FDI:

74

The study is limited to a sample of investing countries e.g. Mauritius, Singapore, USA etc. and
sectors e.g. service sector, computer hardware and software, telecommunications etc. which had
attracted larger inflow of FDI from different countries.
FII:

Correlation: We have used the Correlation tool to determine whether two ranges of data
move together that is, how the Sensex, Bankex, IT, Power and Capital Goods are
related to the FII which may be positive relation, negative relation or no relation.
We will use this model for understanding the relationship between FII and stock indices
returns. FII is taken as independent variable. Stock indices are taken as dependent
variable

Hypothesis Test: If the hypothesis holds good then we can infer that FIIs have significant
impact on the Indian capital market. This will help the investors to decide on their
investments in stocks and shares. If the hypothesis is rejected, or in other words if the null
hypothesis is accepted, then FIIs will have no significant impact on the Indian bourses.

DATA ANALYSIS AND INTERPRETATION

Q.1 Are you aware of the term foreign Direct investment (FDI)?
a. yes
64
b. no
36

75

YES
No

Q.2 Are you aware of the FDI issue in India?

a. Yes
72
b. No
28

76

yes
No

Q.3 What do you think how it will affect India. If 51% FDI is
permitted?
77

a. positive impact
b. negative impact
c. no impact
d. cant say

25
15
30
30

positive impact
Negative impact
no impact
cant say

78

Q.4 Does granting of 51% FDI will affect your business?

a. yes
46
b no
24
c. dont know
30

yes
No
Dont know

79

Q.5 If 51% FDI prover to be useful for the country then will you
sacrifice apart of your business profit for the welfare of the
country?
a. yes
67
b. no
33

yes
No

80

Q.6 IF 51% FDI is granted the n you will

a. Welcome it
b. revolt it
c. take no action

56
24
20

81

welcome it
Revolt it
Take no action

Q7. How much you agree with the saying FDI is always fruitful for
the country?
a) Strongly agree
30
b) Agree
25
c) Disagree
15
d) strongly disagree
30
82

strongly agree
Agree
Disagree
Strongly disagree

83

Q 8. Whats your opinion if you are asked whether FDI should be

allowed for 51%?
a) Yes, it should be allowed
68
b) b. no. it should not be allowed
32

yes
No

84

Conclusion
The government has added an element of social benefit to its latest plan for
calibrated opening of the multi-brand sector to foreign direct investment
(FDI). Only those foreign retailers who first invest in the back-end supply
chain and infrastructure would be allowed to set up multi brand outlets in
the country. The idea is that the firms must have already created jobs for
rural India before they venture into multi-brand retailing.
It can be said that the advantages of allowing unrestrained FDI in the retail
sector evidently outweigh the disadvantages attached to it and the same can
be deduced from the examples of successful experiments in countries like
Thailand and China; where too the issue of allowing FDI in the retail sector
was first met with incessant protests, but later turned out to be one of the
most promising political and economical decisions of their governments and
led not only to the commendable rise in the level of employment but also led
to the enormous development of their countrys GDP.
Moreover, in the fierce battle between the advocators and antagonist of
unrestrained FDI flows in the Indian retail sector, the interests of the
consumers have been blatantly and utterly disregarded. Therefore, one of
the arguments which inevitably needs to be considered and addressed while
deliberating upon the captioned issue is the interests of consumers at large
in relation to the interests of retailers.
It is also pertinent to note here that it can be safely contended that with the
possible advent of unrestrained FDI flows in market, the interests of the
retailers constituting the unorganized retail sector will not be gravely
undermined, since nobody can force a consumer to visit a mega shopping
complex or a small . Consumers will shop in accordance with their utmost
convenience, where ever they get the lowest price, max variety, and a good
consumer experience.
The Industrial policy 1991 had crafted a trajectory of change whereby every
sectors of Indian economy at one point of time or the other would be
embraced by liberalization, privatization and globalization.FDI in multi-brand
retailing and lifting the current cap of 51% on single brand retail is in that
85

sense a steady progression of that trajectory. But the government has by far
cushioned the adverse impact of the change that has ensued in the wake of
the implementation of Industrial Policy 1991 through safety nets and social
safeguards. But the change that the movement of retailing sector into the
FDI regime would bring about will require more involved and informed
support from the government. One hopes that the government would stand
up to its responsibility, because what is at stake is the stability of the vital
pillars of the economy- retailing, agriculture, and manufacturing. In short, the
socio economic equilibrium of the entire country.

CONCLUSION

A large number of changes that were introduced in the countrys regulatory economic policies
heralded the liberalization era of the FDI policy regime in India and brought about a structural
breakthrough in the volume of the FDI inflows into the economy maintained a fluctuating and
86

unsteady trend during the study period. It might be of interest to note that more than 50% of the
total FDI inflows received by India , came from Mauritius, Singapore and the USA.
The main reason for higher levels of investment from Mauritius was that the fact that India
entered into a double taxation avoidance agreement (DTAA) with Mauritius were protected from
taxation in India. Among the different sectors, the service sector had received the larger
proportion followed by computer software and hardware sector and telecommunication sector.
According to findings and results, we have concluded that FII did have significant impact on
Sensex but there is less co-relation with Bankex and IT. One of the reasons for high degree of
any linear relation can also be due to the sample data. The data was taken on monthly basis. The
data on daily basis can give more positive results (may be). Also FII is not the only factor
affecting the stock indices. There are other major factors that influence the bourses in the stock
market.

Bibliography
www.rbi.org
87

www.fin.in.nic
www.sebi.org
http://books.google.co.in/books?
id=0VUafaE3pOIC&pg=PA4&dq=types+of+foreign+direct+investment
&hl=en&ei=efzrS_rEAoy5rAfv34DbBg&sa=X&oi=book_result&ct=bookthumbnail&resnum=1&ved=0CDUQ6wEwAA#v=onepage&q=types
%20of%20foreign%20direct%20investment&f=false
http://www.indiahousing.com/fdi-foreign-direct-investment.html
http://finance.indiamart.com/investment_in_india/fdi.html
http://www.answers.com/topic/foreign-direct-investment#History
http://www.unctad.org/sections/dite_iiab/docs/diteiiab20041_en.pdf
http://www.economywatch.com/foreign-direct-investment/
http://www.legalserviceindia.com/articles/fdi_india.htm

QUESTIONNAIRE
Q.1 Are you aware of the term foreign Direct investment (FDI)?
a. yes
64
b. no
36
Q.2 Are you aware of the FDI issue in India?
c. Yes
72
d. No
28
Q.3 What do you think how it will affect India. If 51% FDI is
permitted?
a. positive impact
b. negative impact
c. no impact

25
15
30
88

d. cant say

30

Q.4 Does granting of 51% FDI will affect your business?

a. yes
46
b no
24
c. dont know
30
Q.5 If 51% FDI prover to be useful for the country then will you
sacrifice apart of your business profit for the welfare of the
country?
a. yes
67
b. no
33

Q.6 IF 51% FDI is granted the n you will

d. Welcome it
e. b. revolt it
f. take no action

56
24
20

Q7. How much you agree with the saying FDI is always fruitful for
the country?
e) Strongly agree
30
f) Agree
25
g) Disagree
15
h) strongly disagree
30
Q 8. Whats your opinion if you are asked whether FDI should be
allowed for 51%?
89

c) Yes, it should be allowed

d) b. no. it should not be allowed

68
32

90