FDI-Final - Angel Broking - 2014

A STUDY ON IMPACT OF
FOREIGN DIRECT INVESTMENT

IN INDIA
Foreign Direct Investments
ABSTRACT
Foreign direct investment (FDI) is direct investment by a company in production located
in another country either by buying a company in the country or by expanding operations
of an existing business in the country. Foreign direct investment is done for many reasons
including to take advantage of cheaper wages in the country, special investment
privileges such as tax exemptions offered by the country as an incentive for investment or
to gain tariff-free access to the markets of the country or the region. Foreign direct
investment is in contrast to portfolio investment which is a passive investment in the
securities of another country such as stocks and bonds.
It is commonly known that capital flows in developing economies like India have risen
sharply and has, therefore become a self propelling and dynamic factor in the accelerated
growth of economies. The impassioned advocacy of increased FDI flows is based on the
well worn arguments that FDI is a rich source of technology and know how; it can
stimulate the labor oriented export industries of India, promote technological change in
the industries and put India on a higher growth path. The excitement of FDI needs to be
based on analytical review of Indias needs, requirements and potential to participate in
huge investment flows.
The study takes a closer look at the structure of Foreign Direct Investments into India. It
traces the development of Indias economic policy regarding FDI and the resulting
changes. The expansion of FDI in India has been followed by a rapid economic growth
and an increasing openness to the rest of the world. The primary objective of this study is
to review why India has been a preferred destination for FDI and study the impact of FDI
on the Indian economy. The sub objectives of the study are to review the major reasons
for attracting FDI; to analyze the investment strategies in selecting the right investment
projects; to study if the FDI investments have contributed to the positive growth in the
standard of living and; to study the impact of FDI investments on the culture of the
country.
CONTENTS
Chapter No.
Name of the concept
Page No.
Introduction
Importance of the study
I
Objectives of the study

Methodology of the study
Limitations of the study
II
Review of Literature
III
Company Profile
IV
Industry Profile
Data analysis and interpretation
VI
Findings, Suggestions and Conclusion
VII
Bibliography
CHAPTER I - INTRODUCTION
Background
The Multinational companies play a vital role in the changes of economic condition in a
country. The role, importance, impact and their investment strategies in foreign direct
investment in India (FDI) have played a vital role in the economic development of India. The
foreign direct investment in started in 1990s in India as it plays an important role in the
development and globalisation process. The FDI has helped in the growth of economy by its
investment strategies, the investments made in the emerging markets like telecommunication,
transportation, automobile industry, manufacturing industries and other major industries have
brought enormous changes in the economy.
The investment strategies used by the investors not helped the growth in the economy but also
have an impact on the positive growth in the relative sectors and other sectors like the living
standards have increased and the increase in the living conditions have give a life blood for
the growth of saving which ultimately turned in to another form of invest source where by we
can find the changes in the growth of the overall markets in all the sectors like food to
manufacturing etc. There is a cyclic development in the economy of India as the recent world
wide recession has no much effect on the economy in India. The emerging markets in India
have provided the oxygen for the existence of positive growth in the markets.
The investment strategies in India have a very interesting progress as the investment was on a
wide spread into different sectors and in to different industries and could gain a good amount
of attraction in each and every sector. The growth in textile industries, pharmacy industries
automobile industries communication industries and other industries has attracted the FDI at
positive level from its start. Apart from all these the role of government plays a vital role in
pooling the FDI and as India is the worlds largest democratic country with open markets and
with governing the markets in well structured rules it has placed a base platform for the
investors to find a safe place to invest without any much restrictions. The intellectual
knowledge and well known English language and the human resource and cost efficiency
have shown a good result for the FDIs to find the best opportunity to invest and reach their
expectations.
IMPORTANCE OF THE STUDY

It is commonly known that capital flows in developing economies like India have risen
sharply and has, therefore become a self propelling and dynamic factor in the accelerated
growth of economies. The impassioned advocacy of increased FDI flows is based on the well
worn arguments that FDI is a rich source of technology and know how; it can stimulate the
labor oriented export industries of India, promote technological change in the industries and
put India on a higher growth path. The excitement of FDI needs to be based on analytical
review of Indias needs, requirements and potential to participate in huge investment flows.
The practical literature on the relationship between FDI and development is mixed. Despite a
number of studies and seeming contradictions, two consistent issues that repeatedly arise are:
What are the motivations for FDI flows into India?
What are the economic and social implications of FDI flows in India?
A detailed study of FDI in India requires an examination of the determinants and the impact
of FDI on Indian Economy. Studying FDI flows will help to assess the nature and the true
extent to which the Indian Economy has globalised.
The study takes a closer look at the structure of Foreign Direct Investments into India. It
traces the development of Indias economic policy regarding FDI and the resulting changes.
The expansion of FDI in India has been followed by a rapid economic growth and an
increasing openness to the rest of the world. It is equally important to understand why India
has become one of the important beneficiaries of FDI in the world and what drives the more
recent progress of India towards FDI.
OBJECTIVES OF THE STUDY

Keeping in view the importance of FDI in the development of economies and the dynamic
nature of the topic, the present study focuses on the following objectives.
The primary objective of this study is to review why India has been a preferred destination for
FDI and study the impact of FDI on the Indian economy.
The sub objectives of the study are
To review the major reasons for attracting FDI;
To analyze the investment strategies in selecting the right investment projects;
To study if the FDI investments have contributed to the positive growth in the standard
of living;
To study the impact of FDI investments on the culture of the country.
RESEARCH METHODOLOGY
Research Methodology is the procedure of collecting, analyzing and interpreting the data to
diagnose the problem and react to the opportunity in such a way where the costs can be
minimized and the desired level of accuracy can be achieved to arrive at a particular
conclusion.
Data is collected through secondary sources like research reports and websites. The required
data have been collected from various sources i.e. World Investment Reports, Asian
Development Banks Reports, various Bulletins of Reserve Bank of India, publications from
Ministry of Commerce, Govt. of India, Economic and Social Survey of Asia and the Pacific,
United Nations, Asian Development Outlook, Country Reports on Economic Policy and Trade
Practice- Bureau of Economic and Business Affairs, U.S. Department of State and from
websites of World Bank, IMF, WTO, RBI, UNCTAD, EXIM Bank etc. Primary data cannot be
taken because of limited resources and the study being carried out from UK.
LIMITATIONS
The study focuses on FDI in India only.
There are many determinants which determine the FDI in India. All the aspects
may not be covered in detail in the limited time given.
FDI policies are dynamic nature in nature and subject to change very often.
The study is based on secondary research where the data may not be authentic in
all the cases.
Primary Research is not carried out during the project, which is a major drawback.
CHAPTER II
LITERATURE REVIEW
Nayak D.N (2004) in his paper Canadian Foreign Direct Investment in India:
Some Observations, analyse the patterns and trends of Canadian FDI in India. He finds
out that India does not figure very much in the investment plans of Canadian firms. The
reasons for the same is the indifferent attitude of Canadians towards India and lack of
information of investment opportunities in India are the important contributing factor for
such an unhealthy trends in economic relation between India and Canada. He suggested
some measures such as publishing of regular documents like newsletter that would
highlight opportunities in India and a detailed focus on Indias area of strength so that
Canadian firms could come forward and discuss their areas of expertise would got long
way in enhancing Canadian FDI in India.
Balasubramanyam V.N Sapsford David (2007) in their article Does India need a lot
more FDI compares the levels of FDI inflows in India and China, and found that FDI in
India is one tenth of that of china. The paper also finds that India may not require
increased FDI because of the structure and composition of Indias manufacturing, service
sectors and her endowments of human capital. The requirements of managerial and
organizational skills of these industries are much lower than that of labour intensive
industries such as those in China. Also, India has a large pool of well Trained engineers
and scientists capable of adapting and restructuring imported know how to suit local
factor and product market condition all of these factors promote effective spillovers of
technology and know- how from foreign firms to locally own firms. The optimum level of
FDI, which generates substantial spillovers, enhances learning on the job, and contributes
to the growth of productivity, is likely to be much lower in India than in other developing
countries including China. The country may need much larger volumes of FDI than it
currently attracts if it were to attain growth rates in excess of 10 per cent per annum.
Finally, they conclude that the country is now in a position to unbundle the FDI package
effectively and rely on sources other than FDI for its requirements of capital.
Naga Raj R (2003) in his article Foreign Direct Investment in India in the 1990s:
Trends and Issues discusses the trends in FDI in India in the 1990s and compare them
with China. The study raises some issues on the effects of the recent investments on the
domestic economy. Based on the analytical discussion and comparative experience, the
study concludes by suggesting a realistic foreign investment policy.
Morris Sebastian (1999) in his study Foreign Direct Investment from India: 196483 studied the features of Indian FDI and the nature and mode of control exercised by
Indians and firms abroad, the causal factors that underlie Indian FDI and their specific
strengths and weaknesses using data from government files. To this effect, 14 case studies
of firms in the textiles, paper, light machinery, consumer durables and oil industry in
Kenya and South East Asia are presented. This study concludes that the indigenous private
corporate sector is the major source of investments. The current regime of tariff and
narrow export policy are other reasons that have motivated market seeking FDI.
Resources seeking FDI has started to constitute a substantial portion of FDI from India.
Neither the advantage concept of Kindlebrger, nor the concept of large oligopolies trying
to retain their technological and monopoly power internationally of Hymer and Vaitsos are
relevant in understanding Indian FDI, and hence are not truly general forces that underlie
FDI. The only truly general force is the inexorable push of capital to seek markets,
whether through exports or when conditions at home put a brake on accumulation and
condition abroad permit its continuation.
Kulwinder Singh38 (2005) in his study Foreign Direct Investment in India: A Critical
analysis of FDI from 1991-2005 explores the uneven beginnings of FDI, in India and
examines the developments (economic and political) relating to the trends in two sectors:
industry and infrastructure. The study concludes that the impact of the reforms in India on
the policy environment for FDI presents a mixed picture. The industrial reforms have gone
far, though they need to be supplemented by more infrastructure reforms, which are a
critical missing link.
Nirupam Bajpai and Jeffrey D. Sachs (2006) in their paper Foreign Direct
Investment in India: Issues and Problems, attempted to identify the issues and
problems associated with Indias current FDI regimes, and more importantly the other
associated factors responsible for Indias unattractiveness as an investment location.
Despite India offering a large domestic market, rule of law, low labour costs, and a well
working democracy, her performance in attracting FDI flows have been far from
satisfactory. The conclusion of the study is that a restricted FDI regime, high import tariffs,
exit barriers for firms, stringent labor laws, poor quality infrastructure, centralized decision
making processes, and a very limited scale of export processing zones make India an
unattractive investment location.
Chandan Chakraborty, Peter Nunnenkamp (2004) in their study Economic
Reforms, FDI and its Economic Effects in India assess the growth implications of FDI
in India by subjecting industry specific FDI and output data to Granger causality tests
within a panel co -integration framework. It turns out that the growth effects of FDI vary
widely across sectors. FDI stocks and output are mutually reinforcing in the manufacturing
sector. In sharp contrast, any causal relationship is absent in the primary sector. Most
strikingly, the study finds only transitory effects of FDI on output in the service sector,
which attracted the bulk of FDI in the post reform era. These differences in the FDI
Growth relationship suggest that FDI is unlikely to work wonders in India if only
remaining regulations were relaxed and still more industries opened up o FDI.
Basu P., Nayak N.C, Vani Archana (2007) in their paper Foreign Direct Investment
in India: Emerging Horizon, intends to study the qualitative shift in the FDI inflows in
India in depth in the last fourteen odd years as the bold new policy on economic front
makes the country progress in both quantity and the way country attracted FDI. It reveals
that the country is not only cost effective but also hot destination for R&D activities. The
study also finds out that R&D as a significant determining factor for FDI inflows for most
of the industries in India.
The software industry is showing intensive R&D activity, which has to be channelized in
the form of export promotion for penetration in the new markets. The study also reveals
strong negative influence of corporate tax on FDI inflows.
To sum up, it can be said that large domestic market, cheap labour, human capital, are the
main determinants of FDI inflows to India, however, its stringent labour laws, poor quality
infrastructure, centralize decision making processes, and a vary limited numbers of SEZs
make India an unattractive investment location.
Definition
Investment is usually understood as financial contribution to the
capital of an enterprise or purchase of shares in the enterprise. Foreign
investment
is
investment
in
an
enterprise
by
Non-Resident
irrespective of whether this involves new capital or re-investment of

earnings.
Foreign investment is of two kinds
(i)
Foreign Direct Investment (FDI) and
(ii)
Foreign Portfolio Investment.
International Monetary Fund (IMF) and Organization for Economic Cooperation and
Development(OECD) define FDI similarly as a category of cross border investment made
by a resident in one economy (the direct investor) with the objective of establishing a
lasting interest in an enterprise (the direct investment enterprise) that is resident in an
economy other than that of the direct investor.
The motivation of the direct investor is a strategic long term relationship with the direct
investment enterprise to ensure the significant degree of influence by the direct investor in
the management of the direct investment enterprise. Direct investment allows the direct
investor to gain access to the direct investment enterprise which it might otherwise be
unable to do. The objectives of direct investment are different from those of portfolio
investment whereby investors do not generally expect to influence the management of the
enterprise.
Types of Foreign Direct Investment

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.
FDIs can be broadly classified into two types: outward FDIs and inward FDIs. This
classification is based on the types of restrictions imposed, and the various prerequisites
required for these investments.
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.
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 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.
Foreign Direct Investment is guided by different motives. FDIs that are undertaken to
strengthen the existing market structure or explore the opportunities of new markets can be
called 'market-seeking FDIs.' 'Resource-seeking FDIs' are aimed at factors of production
which have more operational efficiency than those available in the home country of the
investor.
Some foreign direct investments involve the transfer of strategic assets. FDI activities may
also be carried out to ensure optimization of available opportunities and economies of
scale. In this case, the foreign direct investment is termed as 'efficiency-seeking.'
Benefits of FDI
One of the advantages of foreign direct investment is that it helps in the economic
development of the particular country where the investment is being made. This is
especially applicable for the economically developing countries. During the decade of the
90s foreign direct investment was one of the major external sources of financing for most
of the countries that were growing from an economic perspective. It has also been
observed that foreign direct investment has helped several countries when they have faced
economic hardships. An example of this could be seen in some countries of the East Asian
region. It was observed during the financial problems of 1997-98 that the amount of
foreign direct investment made in these countries was pretty steady. The other forms of
cash inflows in a country like debt flows and portfolio equity had suffered major setbacks.
Similar observations have been made in Latin America in the 1980s and in Mexico in
1994-95.
Foreign direct investment also permits the transfer of technologies. This is done basically
in the way of provision of capital inputs. The importance of this factor lies in the fact that
this transfer of technologies cannot be accomplished by way of trading of goods and
services as well as investment of financial resources. It also assists in the promotion of the
competition within the local input market of a country. The countries that get foreign direct
investment from another country can also develop the human capital resources by getting
their employees to receive training on the operations of a particular business. The profits
that are generated by the foreign direct investments that are made in that country can be
used for the purpose of making contributions to the revenues of corporate taxes of the
recipient country.
Foreign direct investment helps in the creation of new jobs in a particular country. It also
helps in increasing the salaries of the workers. This enables them to get access to a better
lifestyle and more facilities in life. It has normally been observed that foreign direct
investment allows for the development of the manufacturing sector of the recipient
country.
Foreign direct investment can also bring in advanced technology and skill set in a country.
There is also some scope for new research activities being undertaken. Foreign direct
investment assists in increasing the income that is generated through revenues realized
through taxation. It also plays a crucial role in the context of rise in the productivity of the
host countries. In case of countries that make foreign direct investment in other countries
this process has positive impact as well. In case of these countries, their companies get an
opportunity to explore newer markets and thereby generate more income and profits.
It also opens up the export window that allows these countries the opportunity to cash in
on their superior technological resources. It has also been observed that as a result of
receiving foreign direct investment from other countries, it has been possible for the
recipient countries to keep their rates of interest at a lower level.
It becomes easier for the business entities to borrow finance at lesser rates of interest. The
biggest beneficiaries of these facilities are the small and medium-sized business
enterprises.
Disadvantages of FDI
The disadvantages of foreign direct investment occur mostly in case of matters related to
operation, distribution of the profits made on the investment and the personnel.
One of the most indirect disadvantages of foreign direct investment is that the
economically backward section of the host country is always inconvenienced when the
stream of foreign direct investment is negatively affected.
The situations in countries like Ireland, Singapore, Chile and China corroborate such an
opinion. It is normally the responsibility of the host country to limit the extent of impact
that may be made by the foreign direct investment. They should be making sure that the
entities that are making the foreign direct investment in their country adhere to the
environmental, governance and social regulations that have been laid down in the country.
The various disadvantages of foreign direct investment are understood where the host
country has some sort of national secret something that is not meant to be disclosed to
the rest of the world. It has been observed that the defense of a country has faced risks as a
result of the foreign direct investment in the country.
At times it has been observed that certain foreign policies are adopted that are not
appreciated by the workers of the recipient country. Foreign direct investment, at times, is
also disadvantageous for the ones who are making the investment themselves. Foreign
direct investment may entail high travel and communications expenses. The differences of
language and culture that exist between the country of the investor and the host country
could also pose problems in case of foreign direct investment.
Yet another major disadvantage of foreign direct investment is that there is a chance that a
company may lose out on its ownership to an overseas company. This has often caused
many companies to approach foreign direct investment with a certain amount of caution.
At times it has been observed that there is considerable instability in a particular
geographical region. This causes a lot of inconvenience to the investor.
The size of the market, as well as, the condition of the host country could be important
factors in the case of the foreign direct investment. In case the host country is not well
connected with their more advanced neighbors, it poses a lot of challenge for the investors.
At times it has been observed that the governments of the host country are facing problems
with foreign direct investment. It has less control over the functioning of the company that
is functioning as the wholly owned subsidiary of an overseas company.
This leads to serious issues. The investor does not have to be completely obedient to the
economic policies of the country where they have invested the money. At times there have
been adverse effects of foreign direct investment on the balance of payments of a country.
Even in view of the various disadvantages of foreign direct investment it may be said that
foreign direct investment has played an important role in shaping the economic fortunes of
a number of countries around the world.
Determinants of FDI
One of the most important determinants of foreign direct investment is the size as well as
the growth prospects of the economy of the country where the foreign direct investment is
being made. It is normally assumed that if the country has a big market, it can grow
quickly from an economic point of view and it is concluded that the investors would be
able to make the most of their investments in that country.
In case of foreign direct investments that are based on export, the dimensions of the host
country are important as there are opportunities for bigger economies of scale, as well as
spill-over effects.
The population of a country plays an important role in attracting foreign direct investors to
a country. In such cases the investors are lured by the prospects of a huge customer base.
Now if the country has a high per capita income or if the citizens have reasonably good
spending capabilities then it would offer the foreign direct investors with the scope of
excellent performances.
The status of the human resources in a country is also instrumental in attracting direct
investment from overseas. There are certain countries like China that have taken an active
interest in increasing the quality of their workers.
They have made it compulsory for every Chinese citizen to receive at least nine years of
education. This has helped in enhancing the standards of the laborers in China.
If a particular country has plenty of natural resources it always finds investors willing to
put their money in them. A good example would be Saudi Arabia and other oil rich
countries that have had overseas companies investing in them in order to tap the unlimited
oil resources at their disposal.
Inexpensive labor force is also an important determinant of attracting foreign direct
investment. The BPO revolution, as well as the boom of the Information Technology
companies in countries like India has been a proof of the fact that inexpensive labor force
has played an important part in attracting overseas direct investment.
Infrastructural factors like the status of telecommunications and railways play an
important part in having the foreign direct investors come into a particular country.
It has been observed that if the infrastructural facilities are properly in place in a country
then that country receives a substantial amount of foreign direct investment.
If a country has extended its arms to overseas investors and is also able to get access to the
international markets then it stands a better chance of getting higher amounts of foreign
direct investment.
It has been observed in the recent years that a couple of countries have altered their stance
vis-a-vis overseas investment. They have reset their economic policies in order to suit the
interests of the overseas investors.
These companies have increased the transparency of the legal frameworks in place. This
has been done so that the overseas companies can understand the implications of their
investment in a particular country and take the appropriate decisions.
FDI Policies
The foreign direct investment policies are the various rules and regulations that have been
laid down by the various countries in order to regulate the overseas investment that is
being made in a country.
The foreign direct investment policies take an important part in determining the amount of
foreign direct investment that comes in a country. These policies play an important part in
the decision making process of the foreign direct investors.
They are normally affected by the foreign direct investment policies that are in place in a
country and make their decision based on these policies. If the policies are suitable enough
for the companies they go ahead with their investment.
The foreign direct investment policies provide the various conditions under which foreign
direct investment may be made in a country. They also state the various situations where
exception would be made to the allowances that are provided to the foreign direct
investors.
The foreign direct investment policies are reviewed on a regular basis. The changes that
are made to the policies are also notified through a variety of means like the press notes
for example. There is also some mention in the policies about the various ways in which
foreign direct investment may be made in various sectors.
There are certain conditions where the investors need to seek permission from the various
authoritative figures like the national government or any other entity that is responsible for
looking after the various affairs that are related to foreign direct investment.
The foreign direct investment policies are made mainly by entities that are responsible for
looking after the matters related to foreign direct investment in a country. The policies may
also be formulated by organizations that are meant to promote the country as foreign direct
investment destination. There are certain objectives behind the foreign direct investment
policies. The makers of these policies have two broad objectives to promote the
investment opportunities that are present in the country to the overseas investors and strike
a balance between the overseas and local investors.
These policies also have various proposals that are made in order to improve the policies
that are in place for administering the foreign direct investment policies. These proposals
are important as they help in improving the foreign direct investment policy situations and
amend them so that they can appeal to the overseas investors.
This would lead to an increase in the foreign direct investment that is coming into the
country. The foreign direct investment policies also state the various areas where a
country's government would not allow foreign direct investment to be made. Some of
those areas are real estate and housing, gambling, lottery business, betting and chit funds
for example.
Certain countries have formulated a number of foreign direct investment acts. These acts
lay down the various conditions where certain companies have to seek permission from
important authorities in order to receive foreign direct investment of any form and shape.
There are certain companies that are granted such permissions but only after they complete
certain formalities.
These formalities also need to be observed even after the permission has been provided to
these companies as far as foreign direct investment is concerned. The various options in
which an overseas investor can gain entry into the market of a country for the purposes of
making foreign direct investment are also mentioned in these foreign direct investment
policies.
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:
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
preferential tariffs & other types of tax concessions
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)
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
CHAPTER III
COMPANY PROFILE
ANGEL BROKING LTD

Angel Bookings tryst with excellence in customer relations began more than 20 years ago.
Angel Group has emerged as one of the top 10 retail broking houses in India and
incorporated in 1987. Today, Angel has emerged as a premium Indian stock-broking and
wealth management house, with an absolute focus on retail business and a commitment to
provide "Real Value for Money" to all its clients.
It has memberships on BSE, NSE and the leading commodity exchanges in India NCDEX
& MCX. Angel is also registered as a depository participant with CDSL.
Angel Group Companies
Member on the BSE and Depository Participant
Angel Broking Ltd.
with CDSL
Angel Capital & Debt Market Membership on the NSE Cash and Futures &
Ltd.
Angel
Options Segment
Commodities
Broking
Ltd.
Angel Securities Ltd.
Member on the NCDEX & MCX

Member on the BSE
Incorporated
:1987
BSE Membership
:1997
NSE membership
:1998
Member of NCDEX and MCX
Depository Participants with CDSL
Angels presence-
Nation- wide network of 21 regional hubs
Presence 124 cities
6800 + sub brokers & business associates
5.9 lakh +clients
Management
S.No
Name
Designation & Department
1.
Mr. Dinesh Thakkar
Founder Chairman & Managing Director
2.
Mr. Lalit Thakkar
Managing Director - Institutional broking
3.
Mr. Amit Majumdar
Chief Strategy Officer
4.
Mr. Sachinn Joshi
Executive Director & CFO
5.
Mr. Vinay Agrawal
Executive Director Equity Broking
6.
Mr. Nikhil Daxini
Executive Director - Sales and Marketing
Mr. Santanu Syam
Executive Director Operations
8.
Mr. Ketan Shah
9.
Mr. Naveen Mathur
Associate Director Information Technology

and B2B Business
Associate Director Commodities & Currencies
Milestones
October, 2011 Angel Broking bagged the Dun & Bradstreet Equity Broking Awards
2011 for 'Best Retail Broking House' and 'Fastest Growing Equity Broking House'
(Large Firms) at Dun & Bradstreet Equity Broking Awards 2011.
March, 2011 Angel Broking was awarded with 'Best in Contribution Investor
Education & Category Enhancement of the year' and 'Best Commodity Research of the
year'.
November, 2010
Angel Broking bags the coveted Major Volume Driver
Award by BSE for 2009-10
October, 2009 Angel Broking bags the coveted Major Volume Driver Award by
BSE for 2008-09
May, 2009
Angel Broking wins two prestigious awards for 'Broking House
with Largest Distribution Network' and 'Best Retail Broking House' at Dun &
Bradstreet Equity Broking Awards
August, 2008 Crossed 500000 trading accounts
November, 2007 Major Volume Driver for 2007

December, 2006 Created 2500 business associates
October, 2006 Major Volume Driver award for 2006
September, 2006 Launched Mutual Fund and IPO business
July, 2006 Launched the PMS function
October, 2005 Major Volume Driver award for 2005
September, 2004 Launched Online Trading Platform
April, 2004 Initiated Commodities Broking division
April, 2003 First published research report
November, 2002 Angels first investor seminar
March, 2002 Developed web-enabled back office software
November, 1998 Angel Capital and Debt Market Ltd. Incorporated
December, 1997 Angel Broking Ltd. Incorporated
Vision of the Company

To provide best value for money to investors through innovative products, trading /
investment strategies, state-of-the-art technology and personalized service
Philosophy of the Company
Ethical practices & transparency in all our dealings customer interest above our own
always deliver what we promise effective cost management.
Quality Assurance Policy

We are committed to being the leader in providing World Class Product & Services which
exceed the expectations of our customers Achieved by teamwork and a process
of continuous improvement
CRM Policy
A Customer is the most important visitor on our premises. He is not dependent on us but
we are dependent on him. He is not interruption in our work, but is the
Purpose of it. We are not doing him a favour by serving. He is doing us a
favour by giving us an opportunity to do so
OUR ORGANIZATIONAL STRUCTURE
CSO (Central
Support Office)
Regional Office
Branches & Franchise

Branches
Regional Office

Branches
Regional Office

Branches
Angel Clients
Business Associates
Angel Clients
Logo of the company
Products of Angel Broking

Online Trading
Commodities
DP Services
PMS (Portfolio Management Services)
Insurance
IPO Advisory
Mutual Fund
Personal loans
Quality Assurance
E-Broking
Angle has different products and voila trading on BSC, NSC, F&O, MCX & NCDEX. It
provides four softwares to customers for online trading.
Angel Investor
User-friendly browser for investors
Easy online trading platform
Works in proxy and firewall system set up
Integrated Back office: Access account information anytime,

anywhere
Streaming quotes
Refresh static rates when required
Multiple exchanges on single screen
Online fund transfer facility
Angel Trade
Browser based for investor
No installation required
Advantage of mobility
Trading as simple as internet surfing
BSC, NSC, F&O, MCX & NCDEX
Angel Diet
Application based ideal for traders.
Multiple exchanges on single screen
User friendly & simple navigation
BSC, NSC, F&O, MCX & NCDEX
Angel Anywhere
Application-based platform for day traders
Intra-day/historical charts with various indicators
BSC, NSC, Cash & Derivatives
Investment Advisory Services
To derive optimum returns from equity as an asset class requires professional guidance and
advice. Professional assistance will always be beneficial in wealth creation. Investment
decisions without expert advice would be like treating ailment without the help of a doctor.
Expert Advice: Their expert investment advisors are based at various branches
across India to provide assistance in designing and monitoring portfolios.

Timely Entry & Exit: Their advisors will regularly monitor customers
investments and guide customers to book timely profits. They will also guide them in
adopting switching techniques from one stock to another during various market
conditions.
De-Risking Portfolio: A diversified portfolio of stocks is always better than
concentration in a single stock. Based on their research, They diversify the portfolio in
growth oriented sectors and stocks to minimize the risk and optimize the returns.
Commodities
A commodity is a basic good representing a monetary value. Commodities are most often
used as inputs in the production of other goods or services. With the advent of new online
exchange, commodities can now be traded in futures markets. When they are traded on an
exchange, Commodities must also meet specified minimum standards known as basic
grade.
Types of Commodities
Precious Metals
: Gold and Silver
Base Metals
: Copper, Zinc , Steel and Aluminum
Energy
: Crude Oil, Brent Crude and Natural Gas
Pulses
: Chana , Urad and Tur
Spices
: Black Pepper, Jeera, Turmeric , Red Chili
Others
: Guar Complex, Soy Complex, Wheat and Sugar
Benefits at Angel
Three different online products tailored for traders & investors.
Single Screen customized market-watch for MCX / NCDEX with BSE / NSE.
Streaming Quotes and real time Rates. Intra-day trading calls.
Research on 25 Agro Commodities, Precious and Base Metals, Energy products

and Polymers.
An array of daily, weekly and special research reports.
Active relationship management desk.
Seminars, workshops and investment camps for investors

Depositary Participant Services
Angel Broking Ltd. is a DP services provider though CDSL. We offer depository services
to create a seamless transaction platform to execute trades through Angel group of
companies and settle these transactions through Angel Depository services.
Wide branch coverage
Personalized/attentive services of trained a dedicated staff
Centralized billing & accounting
Acceptance & execution of instruction on fax
Daily statement of transaction & holdings statement on e-mail
No charges for extra transaction statement & holdings statement
Portfolio Management Services
Successful investing in Capital Markets demands ever more time and expertise.
Investment Management is an art and a science in itself. Portfolio Management Services
(PMS) is one such service that is fast gaining eminence as an investment avenue of choice
for High Net worth Investors (HNI). PMS is a sophisticated investment vehicle that offers
a range of specialized investment strategies to capitalize on opportunities in the market.
The Portfolio Management Service combined with competent fund management,
dedicated research and technology, ensures a rewarding experience for its clients.
Mutual Fund
To enable clients to diversify their investment in the right direction. Angel Broking has
added another product in its range with mutual funds.
Access to in-depth research & proper selection from diversified funds based on
your preferred criteria
Rating and rankings of all mutual funds from our in house expert analysts
News and alert for your Mutual fund Portfolio and performance tracking with
watch lists
Current and historical performance of different funds enabling comparisons
Benefits
No risk of loss, wrong transfer, mutilation or theft of share certificates.
Hassle free automated pay-in of your sell obligations by your clearing members
Reduced paper work.
Speedier settlement process. Because of faster transfer and registration of securities
in your account, increased liquidity of your securities.
Instant disbursement of non-cash benefits like bonus and rights into your account.
Efficient pledge mechanism.
FUNDAMENTAL SERVICES
The Sunday Weekly Report
This weekly report is ace of all th reports. It offers a comprehensive market overview and
likely trends in the week ahead. It also presents top picks based on an in-depth analysis of
technical and fundamental factors. It gives short term and long-term outlook on these
scripts, their price targets and advice trading strategies. Another unique feature of this
report is that it provides an updated view of about 70 prominent stocks on an ongoing
basis.
Stock Analysis
Angels stock research has performed very well over the past few years and angel model
portfolio has consistently outperformed the benchmark indices. The fundamentals of select
scripts are thoroughly analyzed and actionable advice is provided along with investment
rationale for each scrip.
Flash News
Key developments and significant news announcement that are likely to have an impact on
market / scripts are flashed live on trading terminals. Flash news keeps the market men
updated on an online basis and helps them to reshuffle their holdings
TECHNICAL SERVICES
Intra-Day Calls
For day traders angel provides intraday calls with entry, exit and stop loss levels during
the market hours and our calls are flashed on our terminals. Our analysts continuously
track the calls and provide the recommendations according to the market movements. Past
performance of these calls in terms of profit/loss is also available to our associates to
enable them to judge the success rate.
Posting Trading Calls
Angels Position Trading Calls are based on a through analysis of the price movements in
selected scripts and provides calls for taking positions with a 10 - 15 days time span with
stop losses and targets. These calls are also flashed on our terminals during market hours.
Derivative Strategies
Our analyst take a view on the NIFTY and selected scripts based on derivatives and
technical tools and devise suitable Derivative Strategies , which are flashed on our
terminals and published in our derivative reports.
Future Calls
A customised product for HNIs to help them trade with leveraged positions wherein clients
are advised on stocks with entry, exit and stop loss levels for short-term benefits. Over and
above this, financial status of the calls is mentioned at all times.
CHAPTER IV
INDUSTRY PROFILE
In India, FDI is considered as a developmental tool, which can help in achieving self-reliance
in various sectors of the economy. With the announcement of Industrial Policy in 1991, huge
incentives and concessions were granted for the flow of foreign capital to India. India is a
growing country which has large space for consumer as well as capital goods. Indias abundant
and diversified natural resources, its sound economic policy, good market conditions and
highly skilled human resources, make it a proper destination for foreign direct investments.
As per the recent survey done by the United National Conference on Trade and Development
(UNCTAD), India will emerge as the third largest recipient of foreign direct investment (FDI)
for the three-year period ending 2012 (World Investment Report 2010). As per the study, the
sectors which attracted highest FDI were services, telecommunications, construction activities,
and computer software and hardware. In 1991, India liberalised its highly regulated FDI
regime. Along with the virtual abolition of the industrial licensing system, controls over foreign
trade and FDI were considerably relaxed. The reforms did result in increased inflows of FDI
during the post reform period. The volume of FDI in India is relatively low compared with that
in most other developing countries.
FDI plays an important role in economic growth of an economy. Literature on factors
determining FDI inflows into an economy shows that many factors influences inflows such as
market size, inflation, trade openness, interest rate, wage rate, business environment, etc. FDI is
related positively with real GDP and previous period FDI inflow but inversely related with
inflation. It showed that the macroeconomic instability in terms of inflation has been an
important factor which influenced the inflow of FDI in India in the post reform period.
A large number of factors are held responsible for FDI Inflow to India. Foreign Direct
Investment inflow made its entry in India for the first time during the year 1991-92 with the
aim to bring together the intended investment and the actual savings of the country.
Why India Needs FDI

Offsetting the capital deficiency
Acquiring advanced technology
Gaining Production
Promoting Exports
FDI Culture In India
Many economists in the country have now realized the advantages of FDI to India. While the
achievements of the Indian government are to be lauded, a willingness to attract FDI has
resulted in what could be termed an FDI Industry. While researching the economic reforms
on FDI, it was discovered that there exists a plethora of boards, committees, and agencies that
have been constituted to ease the flow of FDI. A call to one agency about their mandate and
scope usually results in the quintessential response to call someone else. Reports from FICCI
and the Planning Commission place investor confidence and satisfaction at an all time high;
citizens too deserve to be clued in on the government bodies are doing. According to the
current policy FDI can come into India in two ways. Firstly FDI up to 100% is allowed under
the automatic route in all activities/sectors except a small list that require approval of the
Government. FDI in sectors/activities under automatic route does not require any prior
approval either by the Government or RBI.
The investors are 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. All proposals for foreign investment requiring Government
approval are considered by the Foreign Investment Promotion Board (FIPB). The FIPB also
grants composite approvals involving foreign investment/foreign technical collaboration.
Advantages of Foreign Direct Investment Inflows in India:
FDI inflows raise the capital for investment. Foreign capital has taken over the
domestic capital in terms of purchasing issue. Domestic capital is usually used or
invested in other sectors of the Indian market.
Foreign Direct Investment in greenfield ventures, has introduced technological
advancement and contemporary techniques for management in India, which the country
lacked badly before FDI made its entry.
The inflow of foreign capital in India has opened up a plethora of options in the Indian
market by ensuring foreign capital shares which stabilizes the country's economy
India ranks 17th in terms of foreign direct investment inflows, and has 1.4 percent
shares in FDI inflows among all other developing nations
Increase in Domestic Employment/Drop in unemployment
Investment in Needed Infrastructure.
Positive Influence on the Balance of Payments.
New Technology and Know How Transfer.
Increased Capital Investment.
Targeted Regional and Sectoral Development
Disadvantages of FDI in India:
Industrial Sector Dominance in the Domestic Market.
Technological Dependence on Foreign Technology Sources.
Disturbance of Domestic Economic Plans in Favor of FDI-Directed Activities.

Cultural Change Created by Ethnocentric Staffing The Infusion of Foreign Culture
, and Foreign Business Practices
India is potentially active in terms of investments and provides a galore of opportunities to the
foreign players into the market. Foreign companies who aspire to become a global player
would grab the opportunities, India provides in terms of investments. The foreign companies
enjoy the rights to set up branch offices, representative offices, and also carry out outsourcing
activities in terms of software developmental programmes in India. All these have opened up
innumerable options for the foreign investors to expand their businesses at a global level. These
are some of the factors which led to FDI Inflows in India.
Market Potential in India for Attracting FDI Inflows:
Over the years, FDI in India has become an inseparable and important aspect of the nonresident Indians (NRI). NRI investment in India has registered a surge with the initiation of
globalization and liberalization. NRI investment in India has been increasing by leaps and
bounds with NRI venturing into different proposals of business in India. There is a requirement
for strategic investment guidance in order to ensure smooth flow of NRI investment in India.
The business in India gets impetus with better investment guidance, one such site is that of
OIFC, wherein one can ask the expert. While the official website of the government give
details of the amount of FDI in India about the particular sector or business in India. The
government has also cleared 12 proposals for FDI in India worth over US$ 496.84 million. The
major inflows are expected to be accounted for by KKR Mauritius Cement Investments and
Shriram City Union Finance.
NRI investment in India is focusing on the real estate, infrastructure and education business in
India, besides other segments. The business in India is witnessing new heights especially on the
back of the robust growth in the manufacturing sector and good monsoon. The FDI investment
in India is also witnessing a boom in the automobile industry, with India being stated as the
seventh largest automobile producing country.
Additionally, the need to focus on the sustainable development and the concept of green power
is another important business in India receiving FDI. There has been a significant increase in
the interest shown and joint ventures (JV) being formed by foreign companies to harness the
non-conventional resources of India, thus attracting FDI India. Investment guidance for doing
business in India can also be subject to trend analysis of the NRI investments. The FDI
investment is considered one of the indicators to track which business is showing a robust
growth.
India is claimed to be the fifth largest economy across the globe and ranks third in the Gross
Domestic Product in the entire Asia, which is one of the most significant factors responsible for
FDI Inflows in India. India is also known to be the second largest country amongst all other
developing countries. Besides, India belongs to those rarest of countries, which offer growth
and earning opportunities through various industrial units. India offers maximum opportunities
for foreign investments, which have been a major cause behind the flourishing economy of the
country.
Investment Options For NRIs In India

The Indian economy has been on a continuous growth curve. This is providing the non-resident
Indians (NRIs) to explore multiple options to invest their funds in their home country. The
returns from India are considerably higher than those from the US or European countries
Some of the investment options available to NRIs in India are:
Investment in the Indian equities markets, including IPOs
Investment in mutual funds
Company fixed deposits and non-convertible debentures of companies
Real estate investments
Government securities
National Savings Certificates issued by post offices in India
Deposits in Indian banks
Both NRIs and PIOs are offered several facilities by the Government of India. NRIs are Indian
citizen who resides outside India, while PIO (Person of Indian Origin) refers to an individual
who at any time held an Indian passport, or any of whose parents or grandparents was a citizen
of India. While NRIs are allowed to invest in all sectors when Indian citizens are allowed, PIOs
are allowed to invest only in non-agricultural sectors. A 24% Scheme allows Indian
companies, except those engaged in agricultural activities, to issue up to 24% of their shares
and debentures to NRIs with repatriation benefits.
Investment options in India are plenty. Investing money ultimately depends on the risk appetite
of the person who is investing. There are so many options and it is difficult to choose the best
one because most of them are giving good returns. Some good investment options are given
below.
1. Bank Fixed Deposits (FD):
Fixed Deposit or FD is a good investment option today. It gives up to 8.5% annual return and
depends on the bank and period of investment. Minimum period is 15 days and maximum 5
years and above. Senior citizens get special interest rates for Fixed Deposits. This is considered
to be a safe investment because all banks operate under the guidelines of the Reserve Bank of
India.
2. Stock Market:
Investing in share market is another investment option to get more returns. But share market
investment depends on market conditions. Higher risk will get you higher returns. Before
investing you should have a good knowledge about its operation.
3. Mutual Funds:
Mutual Fund is a type of collective investment method by which many people deposit their
money in a fund and invest in various securities like stock, bonds or cash investments to get
good returns. For individual investors it is very easy type of investment because someone else
manages their funds, takes care of accounts and invests money over many different available
securities.
4. National Saving Certificate (NSC):

NSC is a safe investment related with the Government. Lock in period is 6 years. Minimum
amount is Rs100 and there is no upper limit. You get 8% interest calculated twice a year. NSC
comes under Section 80C, so you will get an income tax deduction up to Rs 1, 00,000.
5. Gold:
Gold has been the perfect tool to beat inflation. Real estate and shares beat gold on capital
appreciation. Real estate and shares have given returns of about 11% over inflation since 1979
(the year the index called Sensex was formed). But as a short term investment option, however,
gold is a very strong investment tool, compared to shares which are highly volatile. Gold does
not carry much risk at least in India, as we hardly see deflation in the gold price. Liquidity
option in gold is always 100%, compared to all other investments. At any period of time gold
can be converted into cash.
6. Real estate:
Real Estate in India is one of most successful investments in the last few years of Indian
history. Indian real estate has huge potential demand in almost every sector like commercial,
educational, housing, hospitality hotels, retail, manufacturing, healthcare etc. Real Estate
industry in India has reached a highest point at this period. It has been opened to foreign
investors also. This is the reason why many foreign investors are investing huge amounts of
money in this sector and making sizeable profit.
7. Equity:
Those who have the appetite to take risk they always can invest in equity market. Equity
market is also a good way to beat inflation. It is very difficult to neglect the enormous profits,
which have been earned by the investors in the equity investment market of India over past few
years. There are several interesting and new areas, where venture capital and private equity
firms are looking aggressively to enjoy the advantages.
Investment Opportunities for Overseas Indians

The business in India is a new wave of trend being followed globally. Investing in Indias
economy is becoming a big attraction for the foreign investors especially due to the booming
Indian economy and the staggering economy of the developed countries. The investment guide
is another tool with respect to providing services to the Indian community. India Connect is one
of the favoured slogan for forming the connection with non-resident Indians (NRIs). Ministry
of Overseas takes out a monthly newsletter India Connect targeting the Overseas Investors,
NRIs etc to come forward to do business in India. Through its knowledge partners, it provides
part of the investment guide as it provides information and also explains as and to set up a
business in India.
The robust Indian economy has become a trend to follow on and the business investments
being attracted are becoming part of the rising economic bandwagon to prosperity. The vast
investment opportunities available and the positive investment climate in India have become a
part of every business entrepreneurs life. The Ministry of Overseas Indian Affairs has set up an
Overseas Indian Facilitation Centre (OIFC) as a not-for-profit-trust, in partnership with
Confederation of Indian Industry (CII) to promote investment opportunities amongst the
overseas Indians. OIFC also assists the States in India to project investment opportunities to
Overseas Indians and help them make business investments. The India Connect concept is most
favoured as India has always been a great fascinating destination for the foreign players
especially with the large population base with a huge opportunity to do business investments.
The developing countries have been acclaimed as the forerunners of the global economy and in
its revival. It is important to understand that India is ready and is an indistinctively important
destination for foreign direct investments (FDI) in India and to make business investments. The
recent remarks by Barack Obama, the US President that India is not simply emerging but has
already emerged is in itself self-explanatory to the Indias potential. The investment guide to do
business in India is being provided with various forms of services handholding services is
one of them. It is such remarks by prominent personalities, which strengthen the claims and the
prestige of India. Furthermore, Frances support for India to obtain a permanent seat at United
Nations Security Council (UNSC) portrays the importance of India. It thus, becomes important
for various organisations providing investment guidance to come forward and to help
understand business in India. The services such as handholding services help investors to do
business in India and provide investment guide from conception to completion of the project.
Such services support companies of all countries interested in business investments to record
FDI in India etc. The States are being encouraged to actively promote their investment
opportunities/ projects/ business investments. Some of the most favored destinations being
Chennai, Hyderabad Bengaluru etc. The various services offered by the States to assist the nonresident Indians (NRIs), overseas Indians and high networth individuals (HNI) potray the
interest of the respective governments to assist as well as attract FDI in India and indirectly
help in developing the states infrastructure. Such services help in creating a conducive
environment for FDI in India.
Increased Standard Of living Through FDI In India:

The country which accepts FDI will benefit by increased job opportunities, higher standards of
living and better infra structure. The investing country or company usually has a 10% stake in
the enterprise making it eligible to multiply the money invested. Investors prefer FDI as there
is always a higher chance that the FDI investment will return higher than any investment made
in the home country.
It is the policy of the Government of India to attract and promote productive FDI in activities
which significantly contribute to industrialization and socio-economic development. FDI
supplements domestic capital and technology. FDI is boosting growth in the country via two
channels.
1. Adds to the capital-stock of the country, thereby allowing a more optimal production of
goods and services. Thus, the result of the relative inputs of labor and capital is maximized.
2. The other channel is FDI shaping the domestic economy by encouraging clustering, creating
competition-driven productivity gains, and exposing local firms to foreign technology and best
business practices.
Moreover, Indias tariff and non-tariff barriers may protect some domestic industries in the
short term, but in the long term will limit foreign direct investment (FDI) and imports that can
enhance innovation within Indian partner companies, and increase the standard of living for
Indias people.
There had been a marked rise in their per capita incomes which were enough to provide good
standards of living to Indias entire population because of FDI inflows to the country.
High tariffs are not merely a barrier to trade and limit FDI but are potentially distortive of
competition by restricting the entry of new players into the domestic market. The objective of
competition policy is to ease entry and exit conditions by removing some of the government
erected barriers such as trade restrictions which could be one of the main institutional barriers
to domestic competition.
The need to lower tariffs and the need for liberalising the domestic investment regime have
been discussed at various WTO Ministerial Meetings. It is often argued that such policies or
protectionist measures are in line with the industrial policy necessary to protect the domestic
industries and promote economic growth of a country. The purpose of industrial policy is to
establish a course of action to support the achievement of development goals that depend upon
the performance of the domestic manufacturing and industrial sectors. Industrial policy is
usually justified on the grounds that market failures impede the proper functioning of free
markets and thus prevent the ability of countries to attain development targets thus calling for
government intervention to overcome such market failures. However, too much government
intervention may hinder competition by creating barriers to entry as mentioned above and also
promote inefficiencies and have an adverse impact on consumer welfare.
Main Reasons Why India Attracts FDI:

India needs inflows of capital to drive investment in infrastructure, a lack of which is often
cited as restricting the countrys economic growth. Investment is also needed to expand
capacity and technology in sectors such as autos and steel, as well as to offset a big current
account deficit.
India offers an excellent case study of the effects of FDI and the differential ability of policy
makers to attract it for two main reasons. First, Indias federal system allows different regions
to respond to the same shocks and problems in different ways. This provides an excellent basis
for comparative study. Second, the country as a whole was relatively closed to foreign direct
investment until the 1991 liberalizing reforms. The balance of payments crisis and IMF
conditional reforms created a terrific natural experiment in how liberalization effects growth.
Though the central government was instrumental in opening up the economy, state
governments exert considerable and often determinative influence over the allocation of FDI.
Some of the other main reasons of why India attracts FDI are:
1. To achieve transfer of technology and management techniques
2. To reduce dependency on aid
Investment Strategies For Overseas Investment In India:
Bidding adieu to the global recession and a rather unaffected economy of Asian markets
especially India. The repetitive revision of Indias gross domestic product (GDP) by various
organisations including World Bank reflected the confidence in the Indian economy and its
prospects to sustain the countrys growth. The robust growth of the Indian economy also
becomes evident from the influx of the FDI. India has been declared one of the most preferred
destinations for the FDI inflows. Investment opportunities in India are plentiful. It becomes
evident with the numerous MNCs not only trailing their products and services into the Indian
markets but also coming forward to set up their manufacturing units in India. This form of
investment strategy is mainly to curb the expenses and to harness the potentials of the large
consumer base and the boosting middle class income. It provides greater scope for various
business investments.
With the West business and industry giants, foraying into India with customised products for
the Indian consumer in order to tap the investment opportunities in India. The Government of
India is trying to accommodate and utilize the conducive investment climate of the country by
relaxing and even introducing new policies. The change in the Indian Government is to
strategize and attract foreign investments into the country especially from the perspective of the
non resident Indians (NRI). Various banks are working on providing investment strategies and
investment guidance to the prospective overseas Indians/ investors to make the most fruitful
deals. With the global market trend on a rise, on back of developing countries robust economic
growth, investing in India has emerged as a trendsetter phenomenon. Business in India is
booming with the high demand supply curve on a rise. The investment advisors globally are
projecting the potentials of investing in India.
Investing/Entry Strategies For Foreign Companies Investing In India:
A foreign company planning to enter India, is required to meet all requirements of doing
business in India as required by domestic Indian businesses. In addition foreign companies are
required to seek governmental approval before investing in India. Some approvals are
automatic, - RBI Approvals - though application is required for those approvals.
Special Permission - FIPB Approvals - could be obtained to invest over and above the regular
percentage allowed.
1. As an Indian Company
Foreign company can commence operations in India by incorporating a company under the
Companies Act, 1956 through
I. Joint Ventures; or
II. Wholly Owned Subsidiaries
Foreign equity in such Indian companies can be up to 100% depending on the requirements of
the investor, subject to equity caps in respect of the area of activities under the Foreign Direct
Investment (FDI) policy. Details of the FDI policy, sectoral equity caps & procedures can be
obtained from Department of Industrial Policy & Promotion, Government of India.
A. Joint Venture With An Indian Partner

Foreign Companies can set up their operations in India by forging strategic alliances with
Indian partners. Joint Venture may entail the following advantages for a foreign investor:
Established distribution/ marketing set up of the Indian partner
Available financial resource of the Indian partners
Established contacts of the Indian partners which help smoothen the process of setting
up of operations
B. Wholly Owned Subsidiary Company

Foreign companies can also to set up wholly owned subsidiary in sectors where 100%
foreign direct investment is permitted under the FDI policy.
C. Incorporation of Company
For registration and incorporation, an application has to be filed with Registrar of
Companies (ROC). Once a company has been duly registered and incorporated as an
Indian company, it is subject to Indian laws and regulations as applicable to other domestic
Indian companies.
2. As a Foreign Company
Foreign Companies can set up their operations in India through:
A. Liaison office/ Representative office
Liaison office acts as a channel of communication between the principal place of business
or head office and entities in India. Liaison office cannot undertake any commercial
activity directly or indirectly and cannot, therefore, earn any income in India. Its role is
limited to collecting information about possible market opportunities and providing
information about the company and its products to prospective Indian customers. It can
promote export/import from/to India and also facilitate technical/financial collaboration
between parent company and companies in India.
The approval for establishing a liaison office in India is granted by the Reserve Bank of
India (RBI).
B. Project Office
Foreign Companies planning to execute specific projects in India can set up temporary
project/site offices in India. RBI has now granted general permission to foreign entities to
establish Project Offices subject to specified conditions. Such offices cannot undertake or
carry on any activity other than the activity relating and incidental to execution of the
project. Project Offices may remit outside India the surplus of the project on its
completion, general permission for which has been granted by the RBI.
C. Branch Office
Foreign companies engaged in manufacturing and trading activities abroad are allowed to set
up Branch Offices in India for the following purposes:
Export/Import of goods
Rendering professional or consultancy services
Carrying out research work, in which the parent company is engaged.
Promoting technical or financial collaborations between Indian companies and parent

or overseas group company.
Representing the parent company in India and acting as buying/selling agents in India.
Rendering services in Information Technology and development of software in India.
Rendering technical support to the products supplied by the parent/ group companies.
Foreign Airline/shipping Company.
A branch office is not allowed to carry out manufacturing activities on its own but is permitted
to subcontract these to an Indian manufacturer. Branch Offices established with the approval of
RBI, may remit outside India profit of the branch, net of applicable Indian taxes and subject to
RBI guidelines Permission for setting up branch offices is granted by the Reserve Bank of
India (RBI).
India FDI Policies:
The Indian Government issued its a new consolidated Foreign Direct Investment (FDI) Policy
on March 31, 2011 (the 2011 FDI Policy), which came into effect from April 1, 2011. In this
article we describe some of the major changes introduced in the 2011 FDI Policy.
1. Valuation of Convertible Instruments:
Under the earlier FDI policy, convertible instruments could be issued only when their
conversion price was decided upfront at the time of issuance. Such upfront determination of
conversion rate eliminated any scope of commercial benefit of investing through convertible
instruments. The 2011 FDI Policy provides that companies can now opt to prescribe a
conversion formula to determine the rate of conversion, subject to FEMA/SEBI pricing
guidelines. This is a welcome change that enables investors to benefit from unexpected
business growth.
2. Issue of Shares Against Investment in Kind and Incorporation Experiences:
The FDI policy so far allowed Indian companies to issue shares only against cash remittances
received through normal banking channels, except when converting External Commercial
Borrowings (ECB), or against lump sum technical know-how fees and royalty fees into equity.
Under the 2011 FDI Policy shares can now be issued against the:
(a)
import of capital goods/machinery/equipment (including second-hand machinery); and
(b)
pre-operative/ pre-incorporation expenses (including payments of rent, etc.)
It is important to note that if parties wish to issue shares against these items they need to obtain
prior approval from the Foreign Investment Promotion Board, even if the investment is
otherwise subject to the automatic route, which requires not prior permission. The FDI Policy,
2011, specifies that all payments should be made directly to the company by the foreign
investor. Payments to third parities in the absence of bank accounts or otherwise are not
permitted.
3. Removal of No objection Certificate from previous ventures:
Until now a if a foreign investor, with an existing joint venture or technical collaboration
(entered before January 12, 2005), could not make any new investment in a similar venture
unless the existing Indian partner issued a no objection letter and the new investment was also
subject to specific prior Government approval. The 2011 FDI Policy eliminates this earlier,
protectionist measure. This further opens up access to the Indian market but is expected to
subject Indian entities to more competition from abroad.
4. Downstream Investment:
To determine levels of foreign investment in companies the earlier FDI policy identified
foreign owned and controlled companies under further categories as 'investing companies',
'operating companies' and 'investing-cum-operating companies.' The 2011 FDI Policy
simplifies the categories confining them to:
a. Companies owned or controlled by foreign investors, and
b. Companies owned and controlled by Indian residents.
5. Sector Specific Changes:
FDI for the production of seeds and planting material permitted without restrictions,
which was earlier subject to such production under controlled condition.
FDI in multi-brand retail continues to be prohibited.
FDI in LLPs still not permitted.
Culture Of India - Changing Through FDI

India is building up the reforms, but admits that inter-governmental politics have been
impacting government policy. India's diverse economy encompasses traditional village
farming, modern agriculture, handicrafts, a wide range of modern industries, and a multitude
of services. Services are the major source of economic growth, accounting for more than half
of India's output with less than one third of its labor force. India is expected to be the worlds
largest economy by 2050, surpassing China and the US, in view of its continuing robust
growth in the recent past.
CHAPTER V
DATA ANALYSIS
INDIA THE MOST PREFERRED DESTINATION FOR FDI - REVIEW
India is established as one of the top tier world destinations for FDI. In the Asia-Pacific region,
the country consolidated its second top position, besides China, after a lull in 2009 because of
financial crisis. To augment, Indias inward investment rule went through a series of changes
since economic reforms were escorted in two decades back. The expectation of the policymakers was that an investor friendly command will help India establish itself as a preferred
destination of foreign investors. These expectations remained largely unfulfilled despite the
consistent attempts by the policy makers to increase the attractiveness of India by further
changes in policies that included opening up of individual sectors, raising the hitherto existing
caps on foreign holding and improving investment procedures. But after 2005 - 2006, official
statistics started reporting steep increases in FDI inflows. Portfolio investors and roundtripping investments are the important contributors to Indias reported FDI inflows.
Inward FDIs in the county have been constantly rising since the sharp drop witnessed in 2009,
following the global financial crisis. Foreign investors see huge long-term growth potential in
the country. As much as 75% of global businesses already present in the country are looking to
considerably expand their operations going forward according to the Indian attractive survey by
Ernst & Young. This also confirms that India is undergoing a changeover, both in terms of
investor perception of its market potential, and in reality.
The cumulative amount of FDI inflows into India were US$2,80,412 million for the period
April 2000 December 2012, including data ofre-invested earnings & other capital of
equity inflows. These are the estimates on an average basis, based upon data for the previous
two years, published by RBI in Monthly Bulletin. The cumulative amount of Indian FDI
inflows, excluding, amount remitted through RBIs-NRI Schemes, were US$1,87,804 million
for the period April 2000 April 2011.
The resource requirement in a developing economy for investment usually exceeds the
availability of resources that could be domestically generated. In India, the Gross Domestic
Investment has historically been short of the Gross Domestic Savings by around 1.2 to 1.3 per
cent of GDP on an annual basis. Countries, therefore, encourage the inflow of capital from
abroad to supplement the domestic savings for a higher investment and a larger increase in
production capacities. Foreign Direct Investment is considered as the most preferred route of
supplementing the domestic savings as it brings along with the investment new management
practices and technologies. Besides enlarging the productive capacity they also contribute to
enhancement of export potential/earning of the country.
The economic liberalization, which was initiated in 1991, therefore, attempted to significantly
liberalize the FDI policy regime. Over the years, India has emerged as a preferred destination
for foreign investment. Besides the sustained GDP growth of economy, which has expanded
market in India, the enabling environment and a transparent open policy regime has
significantly contributed to the emergence of India as a preferred location. India FDI policy
regime operates in a dynamic setting and has been undergoing a process of continuous review
in line with requirement and investors perception. As a part of this process, the FDI policy is
being liberalized progressively on an ongoing basis in order to allow FDI in more industries
under the automatic route. In the year 2000, the Government allowed FDI up to 100 per cent
under automatic route for most of the activities and a small negative list was notified where
either the automatic route was not available or there were limits on FDI. Since then, the policy
has been gradually simplified and rationalized and more sectors have been opened up for
foreign investment.
India has been declared one of the most preferred destinations for the FDI inflows. Investment
opportunities in India are plentiful. It becomes evident with the numerous MNCs not only
trailing their products and services into the Indian markets but also coming forward to set up
their manufacturing units in India. This form of investment strategy is mainly to curb the
expenses and to harness the potentials of the large consumer base and the boosting middle class
income. It provides greater scope for various business investments.
With the West business and industry giants, foraying into India with customized products for
the Indian consumer in order to tap the investment opportunities in India. The Government of
India is trying to accommodate and utilize the conducive investment climate of the country by
relaxing and even introducing new policies. The changes in the Indian Government are to
strategies and attract foreign investments into the country especially from the perspective of the
overseas Indians or the non resident Indians (NRI). Various banks are working on providing
investment strategies and investment guidance to the prospective overseas Indians/ investors to
make the most fruitful deals.
With the global market trend on a rise, on back of developing countries robust economic
growth, investing in India has emerged as a trendsetter phenomenon. Business in India is
booming with the high demand supply curve on a rise. The investment advisors globally are
projecting the potentials of investing in India.
It is important for investors to have some trend analysis of investment scope before they plan
to start or set up a business in India, thus the role of investment advisors to prepare extensive
investment guides to help and direct the trade investments and the scope of foraying into a
particular business in India becomes crucial.
India is today rated as one of the most attractive investment destinations across the globe. The
UNCTAD World Investment Report (WIR) 2010, in its analysis of the global trends and
sustained growth of Foreign Direct Investment (FDI) inflows, has reported India to be the
second most attractive location for FDI for 2010-2012. According to the WIR 2010 report, the
top five most attractive locations for FDI for 2009-11 are China, India, Brazil, United States
and the Russian Federation. For India, to maintain its momentum of GDP growth, it is vital to
ensure that the robustness of its FDI inflow is also maintained.
To add, according to the '9th Annual European Attractiveness Survey conducted by Ernst &
Young, India will rank fifth among the most attractive destinations for European firms within
the next three years, mainly on account of India's perceived specialization as a hub for low cost
outsourcing business. The report said, "Foreign investors are not deterred by current regulatory
issues to invest in India. India's perceived specialization as a low-cost business process
outsourcing hub continues to appeal the investors across the globe."
Foreign players are looking forward to expand their footprints in Indias secure business
environment, especially in manufacturing and R&D. In fact, the American company 3M is
aiming to come up with an R&D centre with about 200 scientists in Bengaluru. French tyre
baron, Michelin is setting up a manufacturing facility in Tamil Nadu. The project is estimated
to be worth US$2.26 billion and the Foreign Investment Promotion Board (FIPB) has already
given approval for it.
The highly attractive sectors for the private equity (PE) investors are the infrastructure
development, education and sustainable development sectors among others. It is evident from
the huge number of projects being taken in the infrastructure sector through the public private
partnership (PPP) mode. It would not be an exaggeration to conclude that the successful
implementation of the numerous infrastructure related projects form a backbone for the various
parts of the country to develop. Thus, substantiating the importance and relevance of detailed
yet crisp investment strategies and guide for the Overseas Indians. Private Equity (PE) and
venture capital (VC) investors are keen on cashing by investing in various sectors in India.
Some of the most preferred sectors for PE/VCs are:
1. Healthcare:
A survey of over 60 PE and VC firms carried by research firm Venture Intelligence has
announced that companies have invested more than US$2 billion in the Indian healthcare and
life sciences sector in the last five years. Diagnostic services, monster beat headphones,
medical devices/equipment, Vibram Five Fingers Classic blue new, hospital chains and
wellness products and services are some of the key areas the investors seem to be quite
interested in.
2. Education:
The investors consider two fundamental things before investing: considerable government
support and increasing privatization of the education sector, according to Private Equity Group,
an advisory firm for PE investment in India. As per a Chennai based deal tracer, Venture
Intelligence, LeBron James 7 Basketball Shoes Think Pink Limited Edition, nearly 30 such
investments worth around US$ 300 million was invested in education-related companies since
2005.
3. Beverages:
Ahmet C Bozer, President (Eurasia and Africa), whos spearheading the Coca-Cola operations
in over 90 countries, seems pretty optimist about Indias growth potential and considers India
as one of the fastest growing markets for Coca-Cola. According Bozer, Indias Beverage
industry will outgrow the world average. In the years to come, the opportunities will be huge
and growth will be in double digits. Coca Cola India is also working in the same direction by
partnering different bottling partners; few of them are local Indian companies. Investments are
also happening, in the areas of Technology, Infrastructure, consumer marketing and
manufacturing capacity. The company is working in coordination with its bottling partners to
harness the growth potential of this country.
Thus the country's higher economic growth rate and acute market potential are seen as major
factors of its perpetual progress and development, and investors are ready to infuse capital in
such economy where higher return is always ensured.
Recent Changes In FDI Policy
Significant changes have been made in the FDI policy regime in the recent time to ensure that
India remains increasingly attractive and investor-friendly. In an attempt to simplify the rules
and regulations pertaining to the foreign direct investment policy, the Department of Industrial
Policy and Promotion (DIPP) had issued a consolidated FDI policy on March 31, 2010. The
Circular which became effective from April 1, 2010 consolidated all prior press notes / press
releases / clarifications issued and reflected in a coherent manner the current policy framework
on FDI. To the surprise of many, it was not to be a onetime affair the Government this time had
bigger plans to update the FDI policy bi-annually, by issuing a new circular which would
supersede all prior press notes and circulars. Keeping intact the promise, in this chain the
government of India has recently released the third edition of the Consolidated FDI Policy
Circular on 31 March 2011 which has become effective from April 1, 2011. It is further crucial
to note that it is necessary to comply with any changes notified by the Reserve Bank of India
after the issuance of this Circular. The Indian government has made scores of changes to the
FDI policy to attract more foreign direct investment amidst 25% decline in FDI FY2010-2011.
Main Features Of The New Consolidate FDI Policy Circular

1. Removal of the condition of prior approval in case of existing joint ventures/ technical
collaborations in the same field:
This has been done through deletion of Clause 4.2.2 of the earlier Circular, which
provided that FDI would be subject to the Existing Venture/ tie-up conditions as
stated in sub-clauses of Clause 4.2.2 (basically stating that where a non-resident
investor has an existing joint venture/ technology transfer/ trademark agreement, as on
January 12, 2005, new proposals in the same field for investment/technology
transfer/technology collaboration/trademark agreement would have to be under the
Government approval route through FIPB/ Project Approval Board). A discussion
paper had been released by DIPP last year on the need for review of this condition.
Based on stakeholder comments received by the DIPP on its discussion paper, the
Government while releasing the FDI Circular 1 of 2011 has in its press release stated
that it has decided to abolish this condition. The press release further states that It is
expected that this measure will promote the competitiveness of India as an investment
destination and be instrumental in attracting higher levels of FDI and technology
inflows into the country.
2. Pricing of convertible instrument greater flexibility introduced:
This has been done through amendment made in Clause 3.2.1 of the Circular which
earlier provided that The pricing of the capital instruments should be
decided/determined upfront at the time of issue of the instruments Now it has been
added that price / conversion formula be determined upfront so in effect instead of
having to specify the price of convertible instruments upfront, companies will now
also have the option of prescribing a conversion formula, subject to the condition that
price at the time of conversion should not in any case be lower than the fair value
worked out, at the time of issuance of such instruments, in accordance with the
prevailing valuation norms. This would help the recipient companies in obtaining a
better valuation based upon their performance.
3. Liberalization of policy for non-cash capital contributions:

This amendment has been brought about through additions in Clause 3.4.6 of the
Circular. The existing policy FDI provided for conversion of only ECB/lump-sum
fee/Royalty into equity. The Government has now decided to permit issue of equity,
with prior approval from FIPB, in the following cases, subject to stipulated conditions:
(a) Import of capital goods/ machinery/ equipment (including second-hand
machinery)
(b) Pre-operative/ pre-incorporation expenses (including payments of rent etc.)
This measure, which liberalizes conditions for conversion of non-cash items into
equity, is expected to significantly ease the conduct of business.
4. Foreign Institutional Investor Investment:
Clause 3.1.4 (i) of the earlier Circular 2 of 2010 provided as under: An FII may invest
in the capital of an Indian company either under the FDI Scheme/Policy or the
Portfolio Investment Scheme. 10% individual limit and 24% aggregate limit for FII
investment would still be applicable even when FIIs invest under the FDI
scheme/policy. It has now been clarified in Clause 3.1.4 (i) that aggregate FII limit of
24% can be increased to sectoral cap/ statutory ceiling by Board of Directors
resolution followed by special resolution in shareholders meeting. While this has
always been clear under the FEMA provisions, the earlier FDI Circulars did not
specifically mention this and now with this amendment the provisions relating to FII
investments are aligned with the FEMA provisions.
5. Hundred% FDI in some area of Farm Sector:
The new FDI Policy allow 100 per cent FDI in development and production of seeds
and planting material, floriculture, horticulture, and cultivation of vegetables and
mushrooms under controlled conditions. Besides, animal husbandry (including of
breeding of dogs), pisci-culture, aquaculture under controlled conditions and services
related to agro and allied sectors have been brought under the 100 per cent FDI norm.
Similarly, the tea sector has also been brought under the 100 per cent FDI norm.
The DIPP has imposed certain conditions for companies dealing with development of
transgenic seeds and vegetables wanting to take the 100 per cent FDI route. Under the
100 per cent FDI in tea sector, it demands compulsory divestment of 26 per cent equity
of the company in favor of an Indian partner/Indian public within a period of five years
prior to approval of the State Government concerned in case of any future land use
change.
The new policy will lead to increasing dependency on foreign companies and shut down of
small domestic firms not in a position to sustain competition from established foreign players.
The revised FDI policy does carry the process of liberalization further and would assist in
augmenting FDI into the Country. However, the revised FDI policy has kept at bay
significantly expected changes such as permitting FDI in Limited Liability Partnership, MultiBrand Retail Trading and several other subjects on which draft discussion papers were released
earlier for public comments. It is important that these areas are also taken up the Government
for liberalisation towards making India one of the most favourable FDI destinations in the
world.
IMPACT OF FDI ON INDIAN ECONOMY

The contemporary world has been witnessing an incessant form of economic growth
characterized by the flow of private capital from developed world to the developing countries
in the form of foreign direct investment (FDI). More than ever, in 1990s, foreign direct
investment (FDI) became the single largest source of external finance for developing nations
and Indian economy too has shown a similar trend in receiving such investment. The
investment scenario of India is one of the exhilarating points for discussion for scholars
interested to capture the events that signify the outcomes of reforms of 1991 in India. India has
had some amount of success in exerting a pull on FDI since the beginning of the post 1991
reform. By 1990 foreign direct investment has become inevitably a key component of national
development strategies for almost all the countries over the Globe and FDI was considered to
be an essential too for jump-starting economic growth through its bolstering of domestic
capital, productivity and employment.
After more than a decade, the first and second-generation reforms have created favorable and
encouraging environment for foreign investment in India. Half of FDI inflows to the
developing world, propelled largely by an increase in registered Greenfield projects, are
accounted by India and China. With the liberalization of the Indian economy, the large Indian
market is being opened to foreign investors and several companies are setting up or have
already set up operations in India and the countrys market oriented policies are boosting this
economic activity for its all round development. Though the economists and market analysts
continued to remain apprehensive about governments snail pace progress towards opening up
sectors for FDI up to 100%, some of the success stories already achieved and the overseas
investors seeing the potential for attractive returns from investments in India, turns as a caveat
that drives the government to extend certain liberal policy frameworks for FDI and foreign
technology transfer. Foreign direct investment (FDI) plays an extraordinary and growing role in
global business. It can provide a firm with new markets and marketing channels, cheaper
production facilities, access to new technology, products, skills and financing. For a host
country or the foreign firm which receives the investment, it can provide a source of new
guarantees or the willingness of governments to bailout the banking system.
More than half of the FDI companies believe that the business climate has improved to a large
extent in India. Almost similar is the perception about the improvement in labour laws,
economic reforms and attitude the view that Indias image in the eyes of foreign companies has
shown sign of improvement to a large extent. However, some of the people dont consider that
Indias image has improved in the world. Interestingly despite alliance of many political
parties, the political stability has improved to a large extent.
FDI Impact In India
International capital flows have significant potential benefits for economies around the world.
Countries with sound macroeconomic policies and well-functioning institutions are in the best
position to reap the benefits of capital flows and minimize the risks. Countries that permit free
capital flows must choose between the stability provided by fixed exchange rates and the
flexibility afforded by an independent monetary policy. Much of the increase in capital flows is
due to trade in equity and debt markets, with the result that the international pattern of asset
ownership. The integration of debt and equity markets should have been accompanied by a
short period of large capital flows as investors re-allocated their portfolios towards foreign debt
and equity. After this adjustment period is over, there seems little reason to suspect that
international portfolio flows will be either large or volatile. The prolonged increase in the size
and volatility of capital flows observed that the adjustment to greater financial integration is
taking a very long time, or that integration has little to do with the recent behavior of capital
flows. The nature, volatility and impact of international capital flows are still a debatable issue.
The present paper tries to make a preliminary attempt to test whether international capital flows
has the positive impact on financial market and economic growth with the help of macro
economic variables in the economy? Hence, the financial sector reforms to revive the capital
markets help to attract the capital flows due to comparative returns. The international capital
flow has positive contribution for the economic growth of developing countries explicitly.
Some of the major impacts on Indian economy include:

1. FDI leads to Generation of Employment Opportunities:
The effect of FDI on Employment generation is an indirect phenomenon. Owing to large
amount of FDI inflow leads to high capital formation at cheaper rates. This in turn leads to
establishment of new business units or expansion of existing ones. Technological
transformations and human resource mobility leads to emergence of many business
undertakings. This leads to employment opportunities. In India the employment generation is
growing at positive trend.
2. FDI growth in India leads to increasing the trends of gross capital formation:
The capital is the life and blood of every business or every production activity. Whether it is
production of goods or service capital is must. The gross capital formation comprises of
generation of capital by different production sectors. It comprises capital generated by both
public and private sectors. In the private sector the lot of capital generated in the form of fixed
asset would consists of Foreign Direct Investments. Therefore the growth of inflow of FDI
would lead to positive growth of Gross capital formation. The Gross Capital formation in India
is having increasing trend in India owing to increasing trends in FDI growth.
Effect of FDI on Indias GDP:
The gross domestic product is the major indicator of economic growth. It is developing at an
increasing rate in India. The gross domestic product (GDP) is one the primary indicators used
to gauge the health of a countrys economy. It represents the total money value of all goods and
services produced over a specific time period. The fact that the service sector now accounts for
more than half the GDP is a milestone in Indias economic history and takes it closer to the
fundamentals of a developed economy. At the time of independence agriculture occupied the
major share of GDP while the contribution of services was relatively very less. Since
liberalization policy in India the GDP is growing at an increasing rate. The growth of Indian
GDP is largely influenced by FDI.
The Impact of FDI on Various Macro Economic Variables:

In this section an attempt has been to assess the impact of FDI separately on various macro
economic variables. As we all by now known, FDI involves the transfer managerial resources
to the host country. There have been disagreements about the costs borne and the benefits enjoy
by host and recipient country between pro-liberalization and anti-liberalization/anti-market
views. One country losses need not necessarily be another country gains. Kindelberger argues
that the relationship arising from the FDI process is not a zero sum game. Ex-ante, both
countries must believe that the expected benefits to them must be greater than the costs to be
borne by them, because an agreement would not otherwise be reached and the under lying
project would not be initiated. However, believing in something ex-ante is not guarantee that it
materializes ex-post. The impact of FDI on host country can be classified into economic,
political, and social effects. The main intention at heart of every MNC is profitability and hence
they invest where the returns are high, buy raw materials including cheap labour where it is
relatively cheap. MNCs succeed because of market imperfections and cast doubts on it as claim
on welfare of host country. The conventional wisdom that FDI is always improving is no longer
a conventional wisdom. The economic effect of FDI can be classified into micro and macro
effects.
Micro Effects: The micro effects of FDI reflect on structural changes in the economic and
industrial organization. An important issue is whether FDI is conducive to the creations of
competitive environment in the host country. Markusen and Venables put forward two simple
analysis channels to find the micro effect of FDI. They are
1. Product Market Competition.
2. Linkage Effect
Product Market Competition (PMC)

Through PMC the MNCs will be substituting the products of domestic firms in host country.
Linkage Effect
MNCs may work as complimentary firms to domestic firms in host country where it is possible
for FDI to act as a catalyst leading to the development of local industry. FDI may have benefits,
but it will not come without costs. The decade of liberalization and the impact of the FDI on
macro economic factors in India have to be found in this study. To assess the impact of FDI on
various relevant macro-economic variables namely exports, private final consumption
expenditure, Forex, Gross Domestic Investment, gross domestic savings, trade balance, balance
of payments.
2013 Month Wise FDIs

Month
FDI Inflows (US$ Million)
January 2013
2,157
February 2013
1,795
March 2013
1,525
April 2013
2,321
May 2013
1,631
June 2013
1,444
July 2013
1,657
August 2013
September 2013
1,408
October 2013
4,132
1,226
November 2013
1,638
December 2013
1,101
Total Year 2013
22,035
Total Year 2012
22,789
%age growth over last year
-3%
Monthwise FDI Inflows In India For 2013 (in USD)
Source: Nic.in
Over the last one year, September 2013 witnessed the maximum FDI inflows of US$ 4,132
followed by 2,321 in April 2013. The year ended on a least FDI inflows of us$1,101 in
December 2013.
Year Wise FDI Inflows In India Through FIPB Route/ RBIs Automatic Route/
Acquisition Route
FDI Inflows In India From 2000-2013

Financial Year
(April March)
2000 2001
Capital Inflow (US$

Million)
%age Growth Over

Previous Year
4,029
2001 2002
6,130
+52%
2002 2003
5,035
-18%
2003 2004
4,322
-14%
2004 2005
6,051
+40%
2005 2006
8,961
+48%
2006 2007
22,826
+146%
2007 2008
2008 2009
34,843
+53%
41,873
+20%
2009 2010
37,745
-10%
2010 2011
34,847
-8%
2011 2012
46,553
+34%
2012 2013
36,860
-21%
2013 2014 (9 Months till Dec 2013)
24,824
Total
3,14,902
Source: Nic.in
FDI Inflows In India From 2000-2013
Source: Nic.in
For the financial year (FY) 2012-2013 (April 2012 - March 2013), India's FDI inflow
amounted to US$36.86 billion, down by 21% from US$46.55 billion of the FY2011-2012. The
inflow for the first nine months of FY2013-2014 is US$24.824 billion.
Share Of Top Investing Countries - FDI Equity Inflows In India
FDI Investments By Country In India (US$ Million) 2000 -2013
Rank
Country
2011-12
(AprilMarch)
Financial Year
2012-13
2013-14 Cumulative %age to total
(April- (for April
Inflows
Inflows (in
March)
Dec 14) (April 00 terms of US $)
Dec 14)
Mauritius
9,942
9,497
3,678
77,344
37%
Singapore
5,257
2,308
3,205
22,666
11%
U.K.
7,874
1,080
3,148
20,697
10%
Japan
2,972
2,237
810
15,360
7%
U.S.A
1,115
557
623
11,744
6%
The Netherlands
1,409
1,856
1,596
10,561
5%
Cyprus
1,587
490
380
7,269
3%
8
9
Germany
France
1,622
860
658
6,138
3%
663
646
267
3,840
2%
10
U.A.E.
353
180
223
2,645
1%
35,121
22,423
16,560
209,963
* Total FDI Inflows

Source: Nic.in
* Includes inflows under NRI Schemes of RBI.
Over the last decade, Mauritius is the largest contributor to this mainly because most of the
investors want to take advantage of the double taxation avoidance agreement between
Mauritius and India, and Mauritius-based investors do not have to pay capital gains tax in
India. For the FY2012-2013 (April 2012 - March 2013), India's FDI inflow was primarily from
Mauritius with US$9.49 billion compared to US$9.94 billion in FY2011-2012. For the first 9
months of 2013 2014, the FD inflows from Mauritius are US$3.67 billion. Mauritius has
been the single largest source of FDI into the country in the first 12 years of the new
millennium. As much as $77 billion worth of money has been invested in India after being
routed through Mauritius. This is 37% of the total FDI in the country in the past decade.
FDI Investments (Cumulative) By Country In India (US$ Million) 2000 -2013
Source: Nic.in
During the same period, 2000 2013, Singapore stood second with US$22.66 billion, denoting
10%; followed by UK with US$20.69 billion, representing 10%. Investments from U.S.A.
witnessed a declining trend, as the county is facing the credit crunch from the past few years.
Sectors Attracting Highest FDI Equity Inflows - India
FDI Investments By Sector In India (US$ Million) 2000 -2013
Rank
Sector
Services
Construction
Activities
Telecommunications
Computer Software
& Hardware
Drugs & Pharma
Chemicals
Automobile
Power
Metallurgical
Hotel & Tourism
2
3
4
5
6.
7.
8.
9.
10
Financial Year
2012-13
2013-14 Cumulative %age to total
(April- (for April Inflows
Inflows (in
March) Dec 2013) (April 00 - terms of US
Dec 13)
$)
5,216
4,833
1,590
38,824
19 %
3,141
1,332
914
22,994
11 %
2011-12
(AprilMarch)
1,997
796
304
486
82
540
12,938
12,231
6%
6%
3,232
4,041
923
1,652
1,786
993
1,123
292
1,537
536
1,466
3,259
1,266
490
871
549
300
279
11,584
9,371
9,166
8,384
7,807
6,910
6%
5%
4%
4%
4%
3%
Source: Nic.in
The services sector in India, which includes financial and non-financial services, attracted the
majority of the FDIs from investors during the financial period April 2000 - December 2013.
The sector attracted US$38.824 billion representing 19% of total inflows into the country. In
second place, Construction sector attracted US$22.994 billion, followed by Telecom sector
with US$12.938 billion during the period April 2000 December 2013.
India's economic policies are designed in such a way that it attracts significant capital inflows
into the country on a sustained basis, thereby encouraging technology collaboration between
Indian and foreign firms. Almost all sectors are opened to foreign investment with varying
percentage of foreign ownership allowed, except for atomic energy, lottery business, gambling
and betting, and some forms of retail trading.
FDI Investments (Cumulative) By Sector In India US$ Million 2000 -2013
Source: Nic.in
CHAPTER VI
FINDINGS, SUGGESTIONS & CONCLUSION
FINDINGS
India is established as one of the top tier world destinations for FDI. In the Asia-Pacific region,
the country consolidated its second top position, besides China, after a lull in 2009 because of
financial crisis. To augment, Indias inward investment rule went through a series of changes
since economic reforms were escorted in two decades back. The cumulative amount of FDI
inflows into India were US$3,14,902 million for the period April 2000 December 2013,
including data ofre-invested earnings & other capital of equity inflows. These are the
estimates on an average basis, based upon data for the previous two years, published by RBI in
Monthly Bulletin. Mauritius, Singapore and UK are the top three contributors of FDI into India
while Services, Construction and Telecom sectors attracted the major capital.
As per the recent survey done by the United National Conference on Trade and Development,
India will emerge as the third largest recipient of FDI for the three-year period ending 2013. As
per the study, the sectors which attract highest FDI were services, telecommunications,
construction activities, and computer software and hardware.
There has been a continuing and sustained effort to make the FDI policy more liberal and
investor-friendly. Significant rationalisation and simplification of the policy has, therefore,
been carried out in the recent past. DIPP, in its consultation paper titled FDI Policyrational
and relevance of caps has, as a landmark initiative, accepted that up to 49% foreign investment
is indirectly possible in all sectors. This effectively means that an Indian owned and controlled
company can make downstream investments even in prohibited sectors such as multibrand
retail trading etc. It is important here to note that foreign investment for this purpose includes
not only strategic foreign investment but also FII under portfolio investment schemes, NRI,
GDR, ADR etc.
SUGGESTIONS
It is important to consider whether the FDI that is attracted is beneficial to the economy.
There is already a substantial body of research into the effects of FDI generally and the
factors that can make FDI more or less beneficial.
FDI can make a positive contribution to economic growth, by providing additional

capital and facilitating technology transfers.
A further potential advantage of FDI is the possibility of technology spillovers, which

can potentially enable the recipient country to benefit from advanced technologies
developed overseas.
To pursue a growth of around 7 percent in the Gross Domestic Product of India, the net
capital flows should increase by at least 28 to 30 percent on the whole.
The savings of the country stood at 24 percent. The gap formed between intended
investment and the actual savings of the country was lifted up by portfolio investments
by Foreign Institutional Investors, loans by foreign banks and other places, and foreign
direct investments. Among these three forms of financial assistance, India prefers as
well as possesses the maximum amount of Foreign Direct Investments.
As largely debated FDI has both positive and negative factors. These factors should be
properly studied before allowing any FDI into a particular sector or the country.
CONCLUSION
Amidst todays time of fierce competition and a quest to achieve and enhance a substantial
level of economic and social development; each and every nation is trying to liberalize its
economic policies in order to attract investments from not only, domestic players, but also from
magnates all across the globe. Consequently, people with generous reserves of funds, all around
the globe, are expanding their wings and seeking opportunities for investing in different
spheres of this lucrative market. India too is not oblivious to the rapid developments taking
place in the global market and has emerged as one of the prime destinations for the investment
of funds from an impressive number of foreign investors.
FDI is a superb conduit for the transfer of technology and know-how to developing countries.
This message has not been lost on India's policy makers. They have though until the decade of
the nineties attempted to regulate and control its spheres of activity and the contractual forms
of foreign enterprise participation in the economy. The framework of policies they put in place
was guided by the desire to limit foreign control of economic activity but at the same time take
advantage of the technology and know how provided by foreign capital. This attempt at riding
two horses in tandem, a complex feat, inevitably resulted in a complex and cumbersome
bureaucratically guided FDI regime and earned India the reputation for hostility towards FDI.
The GDP growth in India is anticipated to hover around 7% yearly and the number of people in
the Indian middle class is set to triple over the next 15 years, the domestic demand is expected
to grow exponentially. Indias young demographic profile also helps it in providing an
increasingly well-educated and cost-competitive labor force. These factors put India in a good
position to attract an increasing proportion of global FDI going forward.
BIBLIOGRAPHY
http://dipp.nic.in/Fdi_Circular/FDI_Circular_012011_31March2011.pdf
http://profitguruonline.com/investment-planning/foreign-direct-investment.asp
http://www.economywatch.com/indianeconomy/india-development.html
http://www.economywatch.com/foreign-direct-investment/fdi-india/
http://www.ibef.org/artdispview.aspx?
in=36&art_id=29000&cat_id=140&page=1
http://www.fdiintelligence.com/Special-Reports/Asia-Pacific-continues-to-top-global-FDIdestination-rankings
http://www.ifrnd.org/IMBR/24%20Apr%202011/Invest%20In%20India_The%20Foreign
%20Direct%20Investment%20Scenario.pdf
http://countingpips.com/fx/2011/06/24/india-foreign-direct-investment/
http://www.dipp.nic.in/fdi_statistics/india_FDI_April2011.pdf
http://www.rediff.com/business/slide-show/slide-show-1-india-among-preferred-fdidestinations-says-e-and-y/20110606.htm
http://positivepress.in/media/?p=1955
http://www.mightylaws.in/384/consolidated-foreign-direct-investment-policy-2011-provegame-changer-boosting-investor-confidence
http://www.femaleget.info/posts/516.html
http://investmentopportunitiesinindia.wordpress.com/category/indian-economy-2/
http://business.mapsofindia.com/fdi-india/factors-responsible-inflow.html
http://www.ijimt.org/papers/142-M563.pdf
http://www.theindiaeconomyreview.org/Article.aspx?aid=106&mid=5
http://investmentarticle.com/fdi-destination-india.html
http://investmentopportunitiesinindia.wordpress.com/category/business-opportunities/
http://xa.yimg.com/kq/groups/12632651/1845945415/name/CDI-11-Jan-March+2011.pdf
http://www.dartmouth.edu/~worldoutlook/archives/spring08/sloan-rossiter_fdi.pdf
http://www.themalaysianinsider.com/business/article/why-is-india-fdi-declining/
http://lawquestinternational.com/update-%E2%80%93-india%E2%80%99s-new-fdipolicy-april-2011
http://countingpips.com/fx/2011/06/24/india-foreign-direct-investment/
http://www.ifrnd.org/IMBR/24%20Apr%202011/Invest%20In%20India_The%20Foreign
%20Direct%20Investment%20Scenario.pdf

FDI-Final - Angel Broking - 2014

Hochgeladen von

Dokumentinformationen

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

FDI-Final - Angel Broking - 2014

Hochgeladen von

Copyright:

Verfügbare Formate

A STUDY ON IMPACT OF

FOREIGN DIRECT INVESTMENT

Foreign Direct Investments

Foreign Direct Investments

Name of the concept

Objectives of the study

Data analysis and interpretation

Findings, Suggestions and Conclusion

Foreign Direct Investments

Foreign Direct Investments

Foreign Direct Investments

IMPORTANCE OF THE STUDY

Foreign Direct Investments

OBJECTIVES OF THE STUDY

To review the major reasons for attracting FDI;

To analyze the investment strategies in selecting the right investment projects;

To study the impact of FDI investments on the culture of the country.

Foreign Direct Investments

Foreign Direct Investments

The study focuses on FDI in India only.

may not be covered in detail in the limited time given.

all the cases.

Foreign Direct Investments

Foreign Direct Investments

Foreign Direct Investments

Foreign Direct Investments

Foreign Direct Investments

Foreign Direct Investments

irrespective of whether this involves new capital or re-investment of

Foreign Direct Investment (FDI) and

Foreign Portfolio Investment.

Foreign Direct Investments

Types of Foreign Direct Investment

Foreign Direct Investments

Foreign Direct Investments

Foreign Direct Investments

Foreign Direct Investments

Foreign Direct Investments

Foreign Direct Investments

Foreign Direct Investments

Foreign Direct Investments

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

preferential tariffs & other types of tax concessions

special economic zones

investment financial subsidies

soft loan or loan guarantees

Foreign Direct Investments

free land or land subsidies

relocation & expatriation subsidies

job training & employment subsidies

derogation from regulations (usually for very large projects)

Equity joint ventures

Wholly foreign-owned subsidiaries

Greenfield investment (building a new facility)

Sharing existing facilities

Foreign Direct Investments

Foreign Direct Investments

ANGEL BROKING LTD

Angel Broking Ltd.