A

DESSERTATION REPORT

On

Analytical Study Of Foreign Direct Investment In India

AT

Pune, Maharashtra 411033.

Submitted By

SACHIN GADEKAR

(MBA-INTERNATIONAL BUSINESS )

Submitted To

In partial fulfillment of the requirement for the award of the degree of

Master of Business Administration(2013-2015)

Under the guidance of

Prof. RAJESH GADE

RAJIV GANDHI BUSINESS SCHOOL, TATHAWADE, PUNE

 ACKNOWLEDGEMENT

The attitude bliss and emphasis that accompanies the successful completion of my task would be incomplete
without the expression of appreciation towards those who helped me colour the mosaic of this dissertation
with the tiles of their knowledge, expertise, experience and co-operation.

I extend my special thanks to my Respected Guide, Prof. RAJESH GADE who has motivated and inspired
me throughout my dessertation work with her timely guidance, help, support and supervision.

SACHIN GADEKAR
 DECLARATION

I do hereby declare that this dissertation work entitled Analytical Study Of Foreign Direct
Investment In India with reference to Submitted by me to the University of Pune for the partial
fulfillment of the requirement for the award of Master of Business Administration (MBA) is a record of
my own research work. The report embodies the finding based on my study and observation and has not
been submitted earlier for the award of any degree or diploma to any Institute or University.

SACHIN GADEKAR

Place: Pune

Date:-
INDEX
 Serial No. Page No.
CONTENTS

1. INTRODUCTION 1

2. REVIEW OF LITERATURE 20

3. OBJECTIVE & SCOPE OF THE STUDY 22

4. DATA ANALYSIS & INTERPRETATION 23

5. FINDINGS , SUGGESTIONS & CONCLUSION 39

6. REFERENCES & BIBLIOGRAPHY 40

CHAPTER 1
INTRODUCTION

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1.1 Abstract
Foreign direct investment (FDI) influences the host countrys economic growth through
the transfer of new technologies and know-how, formation of human resources,
integration in global markets, increase of competition, and firms development and
reorganization. Empirically, a variety of studies considers that FDI generate economic
growth in the host country. However, there is also evidence that FDI is a source of
negative effects. Given this ambiguity of results, the present paper makes a review of the
existing theoretical and empirical literature on the subject, intending to shed light on the
main explanations for the divergence of results in different studies. The main idea that
stands out in this review is that the effects of FDI on economic growth are dependent on
the existing or subsequently developed internal conditions of the host country (economic,
political, social, cultural or other). Thus, the host countries authorities have a key role in
creating the conditions that allow for the leverage of the positive effects or for the
reduction of the negative effects of FDI on the host countrys economic growth.

1.2Introduction

Consistent economic growth, de-regulation, liberal investment rules, and operational

flexibility are all the factors that help increase the inflow of Foreign direct investment or
FDI.FDI or Foreign Direct Investment is any form of investment that earns interest in
enterprises which function outside of the domestic territory of the investor. FDIs require a
business relationship between a parent company and its foreign subsidiary. Foreign direct
business relationships give rise to multinational corporations. For an investment to be
regarded as an FDI, the parent firm needs to have at least 10% of the ordinary shares of
its foreign affiliates. The investing firm may also qualify for an FDI if it owns voting
power in a business enterprise operating in a foreign country.

India now with consistent growth performance and abundant high-skilled affordable
manpower provides enormous opportunity for investment both domestic and foreign.
Foreign direct investment (FDI) causes a flow of money into the economies which
stimulates economic activity, increases employment and induces the long run aggregate
supply and brings in best practices. The FDI policy was liberalized progressively through

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review of the policy on an ongoing basis and allowing FDI in more industries under the
automatic route.

FDI inflows had declined globally in 2009 and 2010. While India was able to largely
insulate itself from the decline in global inflows in 2009-10, FDI flows had moderated in
2010-11. The slowdown in FDI inflows could mainly be attributed to a lagged effect of a
pause in implementing investment decisions, which could range between one to two
years, depending upon the sector and size of individual projects. A number of global
investors had then remained cautious about making large investments in new sectors,
given the fragility of the global recovery. However, the months of April-June, 2011 have
shown a strong revival compared to the last two years. June 2011 witnessed second
highest inflow in last 11 years of US$ 5.656 billion, representing an increase of nearly
310%, in US $ terms, over the FDI equity inflows of US $ 1.380 billion received in June,
2010.
Therefore, we can say that there is a credible reversal of downward trend in FDI inflows
in the current financial year, where a significant upward trend in the FDI inflows is
evident. FDI equity inflows, for the first quarter of the current financial year (April-June,
2011), have been US $ 13.441 billion, representing an increase of almost 133%, in US $
terms, over the FDI equity inflows of US $ 5.772 billion for the corresponding period of
the last financial year (April-June, 2010). Commenting on the recovery Shri Anand
Sharma, Union Minister of Commerce and Industry said, There is a continuing effort on
the part of the Government to make the FDI policy more investor friendly. The release of
the final edition of the consolidated FDI Policy Circular effective from April 2011 is a
step in this direction. We have incorporated a number of significant changes in the policy
and announcement of the policy for FDI in Limited Liability Partnership (LLPs), are
indicators of the Governments strong commitment towards that end.
India continues to be one of the favoured destinations for FDI. In fact, the UNCTAD
World Investment Report (WIR) 2010, in its analysis of global trends and sustained
growth of Foreign Direct Investment (FDI) inflows, reported India as the second most
attractive location for FDI for 2010-2012.

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There has been a continuing and sustained effort to make the FDI policy more liberal and
investor-friendly. Significant rationalization and simplification of the policy has,
therefore, been carried out in the recent past. For example, a major exercise has been
undertaken for consolidation of FDI policy, with the aim of simplifying FDI policy,
promoting clarity of understanding of foreign investment rules among foreign investors
and sectoral regulators, as also for having a single policy platform. The process of
consolidation involved integration of 178 Press Notes, covering various aspects of FDI
policy, which had been issued since 1991, as also a large number of other regulations
governing FDI. The document was released as Circular 1 of 2010, on 31 March, 2010,
as per the commitment made. The document has also been updated at six monthly
intervals, to ensure that it remains current and updated.

1.3 Meaning & Definitions -

Meaning

A foreign direct investment (FDI) is a controlling ownership in a business enterprise in

one country by an entity based in another country.

Foreign direct investment is distinguished from portfolio foreign investment, a passive

investment in the securities of another country such as public stocks and bonds, by the
element of "control". According to the Financial Times, "Standard definitions of control
use the internationally agreed 10 percent threshold of voting shares, but this is a grey area
as often a smaller block of shares will give control in widely held companies. Moreover,
control of technology, management, even crucial inputs can confer de facto control."

The origin of the investment does not impact the definition as an FDI, i.e., the investment
may be made either "inorganically" by buying a company in the target country or
"organically" by expanding operations of an existing business in that country.

Definitions
Broadly, foreign direct investment includes "mergers and acquisitions, building new
facilities, reinvesting profits earned from overseas operations and intra company loans".

8
In a narrow sense, foreign direct investment refers just to building new facilities. The
numerical FDI figures based on varied definitions are not easily comparable. As a part of
the national accounts of a country, and in regard to the GDP equation Y=C+I+G+(X-M)
[Consumption + gross Investment + Government spending +(exports - imports)], where I
is domestic investment plus foreign investment, FDI is defined as the net inflows of
investment (inflow minus outflow) to acquire a lasting management interest (10 percent
or more of voting stock) in an enterprise operating in an economy other than that of the
investor. FDI is the sum of equity capital, other long-term capital, and short-term capital
as shown the balance of payments. FDI usually involves participation in management,
joint-venture, transfer of technology and expertise. Stock of FDI is the net (i.e., inward
FDI minus outward FDI) cumulative FDI for any given period. Direct investment
excludes investment through purchase of shares. FDI is one example of international
factor movements.
1.4 Types -

Horizontal: where the company carries out the same activities abroad as at home (for
example, Toyota assembling cars in both Japan and the UK.

Vertical: when different stages of activities are added abroad. Forward vertical FDI is
where the FDI takes the firm nearer to the market (for example, Toyota acquiring a car
distributorship in America) and Backward Vertical FDI is where international integration
moves back towards raw materials (for example, Toyota acquiring a tyre manufacturer or
a rubber plantation).

-Conglomerate: where an unrelated business is added abroad. This is the most unusual
form of FDI as it involves attempting to overcome two barriers simultaneously - entering
a foreign country and a new industry. This leads to the analytical solution that
internationalization and diversification are often alternative strategies, not complements.

FDI can take the form of Greenfield entry or takeover.

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 Greenfield entry implies assembling all the elements from scratch as Honda did in the
UK, whereas foreign takeover means the acquisition of an existing foreign company - as
Tatas acquisition of Jaguar Land Rover illustrates.

Foreign takeover is often covered by the term 'mergers and acquisitions (M&As) but
internationally, mergers are vanishingly small, accounting for less than 1 per cent of all
foreign acquisitions.

This choice of entry mode interacts with ownership strategy the choice of wholly
owned subsidiaries versus joint ventures to give a 2x2 matrix of choices Greenfield
wholly owned ventures, Greenfield joint ventures, wholly owned takeovers and joint
foreign acquisitions - giving foreign investors choices that they can match to their own
capabilities and foreign conditions

1.5 Methods

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

1. by incorporating a wholly owned subsidiary or company anywhere

2. by acquiring shares in an associated enterprise
3. through a merger or an acquisition of an unrelated enterprise
4. participating in an equity joint venture with another investor or enterprise[

1.6 Forms of FDI incentives

Foreign direct investment incentives may take the following forms:
1. low corporate tax and individual income tax rates
2. tax holidays
3. other types of tax concessions
4. preferential tariffs
5. special economic zones
6. EPZ Export Processing Zones
7. Bonded warehouses

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8. Maquiladoras
9. investment financial subsidies
10. free land or land subsidies
11. relocation & expatriation
12. infrastructure subsidies
13. R&D support
14. derogation from regulations

15. Governmental Investment Promotion Agencies (IPAs) use various marketing

strategies inspired by the private sector to try and attract inward FDI, including Diaspora
marketing.

16. by excluding the internal investment to get a profited downstream.

1.7 Foreign Investment Policy

Government of India facilitates Foreign Direct Investment (FDI) and investment from
Non-Resident Indians (NRIs) including Overseas Corporate Bodies (OCBs),
predominantly owned by them, to complement and supplement domestic investment.
Foreign technology induction is encouraged both through FDI and through foreign
technology collaboration agreements. Foreign Direct Investment and Foreign technology
collaboration agreements can be approved either through the automatic route under
powers delegated to the Reserve Bank of India (RBI) or otherwise by the Government.

Automatic Approval

In pursuance of Government's commitment to early implementation of the second phase

of the economic reforms and with a view to further liberalizing the FDI regime, all items/
activities have been placed under the automatic route for FDI/NR1 and OCB investment,
except the following:
All proposals that require an Industrial Licence which includes

11
 the item requiring an Industrial Licence under the Industries
(Development and Regulation) Act, 1951;
foreign investment being more than 24% in the equity capital of units
manufacturing items reserved for small scale industries; and
all items which require an Industrial Licence in terms of the locational
policy notified by Government under the New Industrial Policy of 1991.
All proposals in which the foreign collaborator has a previous venture/tie-up in
India.
All proposals relating to acquisition of shares in an existing Indian company in
favour of a foreign/NRI/OCB investor
All proposals falling outside notified sectoral policy/caps or under sectors in
which FDI is not permitted and /or whenever any investor chooses to make an
application to the FIPB and not to avail of the automatic route
All proposals for investment in public sector unit as also for EOU/EPZ/EHTP/STP units
would qualify for automatic route subject to the above parameters. The modalities and
procedures for automatic route would remain the same and RBI would continue to be
concerned agency for monitoring / reporting as per existing procedure. FDI/NRI/OCB
investment under the automatic route shall continue to be governed by the notified
sectoral policy and equity caps.

Foreign Technology Collaboration Agreements

RBI also gives automatic permission for foreign technology agreement in all areas of
electronics provided:
Lump sum payment of the price of the technology does not exceed USD 2 million and
Royalty payments do not exceed 5% of domestic sales and 8% of exports. (The royalty
rates are net of taxes).
The payments are subject to an overall ceiling of 8 percent of total sales over a period of
10 years from the date of agreement or over 7 years period from the date of
commencement of commercial production, whichever is earlier.

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 Application for investment under the automatic process are to be made to the RBI and
approval is generally granted within three weeks.

Investment Proposals under Hardware and software Technology Parks, Export Oriented
Units and Export Processing Zones

Foreign investment up to 100 percent is welcome in electronics and software industries

set up exclusively for exports. The units set up under these programs are bonded factories
eligible to import, free of duty

Procedure for approval

Once the investment in equity has been approved, the import of capital goods,
components and raw materials or the engagement of foreign technicians for short
durations do not require any additional approvals.
Approval of the Ministry of Home Affairs is not needed for hiring of foreign nationals
holding a valid employment visa.
Approval for setting up units in EPZs is given by the Board of Approvals in the Ministry
of Commerce.
Approval for setting up EOUs outside the Zones is given by the SIA, Ministry of
Industry.
Approval for setting up EHTP and STP units are cleared by the Inter Ministerial Standing
Committee (IMSC) setup under the Chairmanship of the Secretary, Department of
Electronics.
Proposals involving foreign direct investment not covered under automatic route are
considered by the Foreign Investment Promotion Board (FIPB).
10. Government approval

The FDI/ Foreign technology collaboration agreement proposals which do not conform
to the guidelines for automatic approval require Government approval through the
Foreign Investment Promotion Board (FIPB). The Government has set up a special
'Foreign Investment Promotion Board' (FIPB) as a fast track mechanism to invite and

13
facilitate foreign investments in large projects in India, which are considered beneficial
to the Indian economy but are not covered by the automatic approval process and norms
under which SIA is authorized to grant investment approvals.

Investment Proposals outside the Purview of the RBI

Other proposal including in services sector which do not conform to the guidelines for
automatic approval or seeking higher foreign equity investment are approved by the
Secretariat for Industrial Assistance (SIA) in the Ministry of Industry.

Their entire requirement of capital goods, raw materials and components, spares and
consumables, office equipments etc. Deemed export benefits are available to suppliers of
these goods from the Domestic Tariff Area (DTA). A part of the production from such
units is permitted to be sold in the DTA depending upon the level of the value addition
achieved.

1.8 Foreign Direct Investment in India-

Apart from being a critical driver of economic growth, foreign direct investment (FDI) is
a major source of non-debt financial resource for the economic development of India.
Foreign companies invest in India to take advantage of cheaper wages, special investment
privileges like tax exemptions, etc. For a country where foreign investments are being
made, it also means achieving technical know-how and generation of employment.

The continuous inflow of FDI in India, which is now allowed across several industries,
clearly shows the faith that overseas investors have in the country's economy.

The Indian governments policy regime and a robust business environment have ensured
that foreign capital keep flowing into the country. The government has taken many
initiatives in recent years such as relaxing FDI norms across sectors such as defense, PSU
oil refineries, telecom, power exchanges and stock exchanges, among others.

Market Size

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According to a recent report by global credit rating agency Moodys, FDI inflows have
increased significantly in India in the current fiscal. This, according to Moodys, is due to
Indias current pro-growth policies. Net FDI inflows totalled US$ 14.1 billion in the first
five months of 2014-15, representing a 33.5 per cent increase from the same period in
2013-14.

Total FDI inflows into India in the period April 2000November 2014 touched US$
350,963 million. Total FDI inflows into India during the period AprilNovember FY15
was US$ 18,884 million.

Mauritius is again emerging as the largest source of FDI in India, accounting for an
inflow of US$ 83,730 million in the April 2000-November 2014 period. According to
official data, the inflow of foreign investment from Singapore amounted to US$ 29,193
million, followed by the UK at US$ 21,761 million and Japan at US$ 17,557 million
during April 2000-November 2014.

Investments

The government has announced that foreign investors can put in as much as Rs 90,300
crore (US$ 14.65 billion) in Indias rail infrastructure through the FDI route, according to
a list of projects released by the Ministry of Railways. The Rs 63,000 crore (US$ 10.22
billion) Mumbai-Ahmadabad high-speed corridor project is the single largest. The other
big ones include the Rs 14,000 crore (US$ 2.27 billion) CSTM-Panvel suburban corridor,
to be implemented in public-private partnership (PPP), and the Rs 1,200 crore (US$

15
194.79 million) Kachrapara rail coach factory, besides multiple freight line,
electrification and signalling projects.

Israel-based world's seventh largest agrochemicals firm ADAMA Agrochemicals,

formerly known as Makhteshim Agan Industries, plans to invest at least US$ 50 million
over the next three years. ADAMA's global president and Chief Executive Chen
Lichtenstein said the idea was to expand both manufacturing and research and
development facilities in India aimed at growing better than the average industry growth.

Apple - world's most admired electronics brand - that sells devices such as the iPhone,
iPad tablet and iPod media player is planning to open 500 'iOS' stores in India in its
first major push that will include moving into smaller towns and cities.

The Department of Industrial Policy and Promotion (DIPP) has moved a Cabinet note to
allow 100 per cent FDI in medical devices as part of a strategy to not only reduce imports
but also promote local manufacturing for the global market, which will be worth over
US$ 400 billion next year.

Real estate private equity FDI is set to double after the Indian government ended the
three-year lock-in and has introduced 100 per cent FDI for completed assets, according to
JLL India. With India now allowing 100 per cent FDI in the construction sector, real
estate private equity investment could double and boost demand from overseas property
buyers, according to sector experts.

FDI real estate private equity, which is currently estimated at around US$ 1billion - US$
1.5 billion per annum, could reach to up to US$ 3 billion in the next few years, according
to leading agency, JLL India.

The Ministry of Finance has announced that it has cleared 15 FDI applications, including
that of Panacea Biotech and Sanofi-Synthelabo (India), and recommended HDFC Bank's
proposal to hike foreign holding to the Cabinet for consideration.

Government Initiatives-

16
Indias cabinet has cleared a proposal which allows 100 per cent FDI in railway
infrastructure, excluding operations. Though the initiative does not allow foreign firms to
operate trains, it allows them to do other things such as create the network and supply
trains for bullet trains etc.

The government has notified easier FDI rules for construction sector, where 100 per cent
overseas investment is permitted, which will allow overseas investors to exit a project
even before its completion. It also said that 100 per cent FDI will be permitted under
automatic route in completed projects for operation and management of townships, malls
and business centres.

With the objective of encouraging foreign firms to transfer state-of-the-art technology in

defence production, the government may increase the FDI cap for the sector to 74 per
cent from 49 per cent at present. India is expected to spend US$ 40 billion on defence
purchases over the next 4-5 years, mostly from abroad.

The Union Cabinet has cleared a bill to raise the foreign investment ceiling in private
insurance companies from 26 per cent to 49 per cent, with the proviso that the
management and control of the companies must be with Indians.

The Reserve Bank of India (RBI) has allowed a number of foreign investors to invest, on
repatriation basis, in non-convertible/ redeemable preference shares or debentures which
are issued by Indian companies and are listed on established stock exchanges in the
country.
In an effort to bring in more investments into debt and equity markets, the RBI has
established a framework for investments which allows foreign portfolio investors (FPIs)
to take part in open offers, buyback of securities and disinvestment of shares by the
Central or state governments.

1.9 Sector Specific Foreign Direct Investment in India

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 Hotel & Tourism: FDI in Hotel & Tourism sector in India
100% FDI is permissible in the sector on the automatic route. The term hotels include
restaurants, beach resorts, and other tourist complexes providing accommodation and/or
catering and food facilities to tourists. Tourism related industry include travel agencies,
tour operating agencies and tourist transport operating agencies, units providing facilities
for cultural, adventure and wild life experience to tourists, surface, air and water transport
facilities to tourists, leisure, entertainment, amusement, sports, and health units for
tourists and Convention/Seminar units and organizations.
For foreign technology agreements, automatic approval is granted if
i. up to 3% of the capital cost of the project is proposed to be paid for technical and
consultancy services including fees for architects, design, supervision, etc.
ii. up to 3% of net turnover is payable for franchising and marketing/publicity
support fee, and up to 10% of gross operating profit is payable for management fee,
including incentive fee.
Private Sector Banking:
Non-Banking Financial Companies (NBFC)
49% FDI is allowed from all sources on the automatic route subject to guidelines issued
from RBI from time to time.
a. FDI/NRI/OCB investments allowed in the following 19 NBFC activities shall be
as per levels indicated below:
1. Merchant banking
2. Underwriting
3. Portfolio Management Services
4. Investment Advisory Services
5. Financial Consultancy
6. Stock Broking
7. Asset Management
8. Venture Capital
9. Custodial Services
10. Factoring
11. Credit Reference Agencies
12. Credit rating Agencies
13. Leasing & Finance
14. Housing Finance
15. Foreign Exchange Brokering
16. Credit card business

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 17. Money changing Business
18. Micro Credit
19. Rural Credit
b. Minimum Capitalization Norms for fund based NBFCs:
i) For FDI up to 51% - US$ 0.5 million to be brought upfront
ii) For FDI above 51% and up to 75% - US $ 5 million to be brought upfront
iii) For FDI above 75% and up to 100% - US $ 50 million out of which US $ 7.5 million
to be brought upfront and the balance in 24 months
c. Minimum capitalization norms for non-fund based activities:
Minimum capitalization norm of US $ 0.5 million is applicable in respect of all permitted
non-fund based NBFCs with foreign investment.
d. Foreign investors can set up 100% operating subsidiaries without the condition to
disinvest a minimum of 25% of its equity to Indian entities, subject to bringing in US$ 50
million as at b) (iii) above (without any restriction on number of operating subsidiaries
without bringing in additional capital)
e. Joint Venture operating NBFC's that have 75% or less than 75% foreign investment
will also be allowed to set up subsidiaries for undertaking other NBFC activities, subject
to the subsidiaries also complying with the applicable minimum capital inflow i.e. (b)(i)
and (b)(ii) above.
f. FDI in the NBFC sector is put on automatic route subject to compliance with
guidelines of the Reserve Bank of India. RBI would issue appropriate guidelines in this
regard.
Insurance Sector: FDI in Insurance sector in India

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

Telecommunication: FDI in Telecommunication sector

i. In basic, cellular, value added services and global mobile personal
communications by satellite, FDI is limited to 49% subject to licensing and security
requirements and adherence by the companies (who are investing and the companies in

19
 which investment is being made) to the license conditions for foreign equity cap and
lock- in period for transfer and addition of equity and other license provisions.
ii. ISPs with gateways, radio-paging and end-to-end bandwidth, FDI is permitted up
to 74% with FDI, beyond 49% requiring Government approval. These services would be
subject to licensing and security requirements.
iii. No equity cap is applicable to manufacturing activities.
iv. FDI up to 100% is allowed for the following activities in the telecom sector :
a. ISPs not providing gateways (both for satellite and submarine cables);
b. Infrastructure Providers providing dark fiber (IP Category 1);
c. Electronic Mail; and
d. Voice Mail

The above would be subject to the following conditions:

e. FDI up to 100% is allowed subject to the condition that such companies

would divest 26% of their equity in favor of Indian public in 5 years, if these companies
are listed in other parts of the world.
f. The above services would be subject to licensing and security
requirements, wherever required.
Proposals for FDI beyond 49% shall be considered by FIPB on case to case basis.
Trading: FDI in Trading Companies in India

Trading is permitted under automatic route with FDI up to 51% provided it is primarily
export activities, and the undertaking is an export house/trading house/super trading
house/star trading house. However, under the FIPB route:-

i. 100% FDI is permitted in case of trading companies for the following activities:
exports;
bulk imports with ex-port/ex-bonded warehouse sales;
cash and carry wholesale trading;

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

ii. The following kinds of trading are also permitted, subject to provisions of EXIM
Policy:

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

Up to 100% FDI allowed in respect of projects relating to electricity generation,

transmission and distribution, other than atomic reactor power plants. There is no limit on
the project cost and quantum of foreign direct investment.

Drugs & Pharmaceuticals

FDI up to 100% is permitted on the automatic route for manufacture of drugs and
pharmaceutical, provided the activity does not attract compulsory licensing or involve use
of recombinant DNA technology, and specific cell / tissue targeted formulations.

21
 FDI proposals for the manufacture of licensable drugs and pharmaceuticals and bulk
drugs produced by recombinant DNA technology, and specific cell / tissue targeted
formulations will require prior Government approval.

Roads, Highways, Ports and Harbors

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

Pollution Control and Management

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

Call Centers in India / Call Centres in India

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

Business Process Outsourcing BPO in India

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

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

NRI's and OCB's are allowed the following special facilities:

1. Direct investment in industry, trade, infrastructure etc.

2. Up to 100% equity with full repatriation facility for capital and dividends in the
following sectors:

i. 34 High Priority Industry Groups

ii. Export Trading Companies
iii. Hotels and Tourism-related Projects

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 iv. Hospitals, Diagnostic Centers
v. Shipping
vi. Deep Sea Fishing
vii. Oil Exploration
viii. Power
ix. Housing and Real Estate Development
x. Highways, Bridges and Ports
xi. Sick Industrial Units
xii. Industries Requiring Compulsory Licensing
xiii. Industries Reserved for Small Scale Sector

3. Up to 40% Equity with full repatriation: New Issues of Existing Companies

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

Certain terms and conditions do apply.

1.10 Investment Risks in India

1) Sovereign Risk
India is a vibrant parliamentary democracy and has been one since its political
independence from British rule more than 50 years ago. There is no serious revolutionary
movement in India; hence there is no conceivable possibility of the state collapsing.
Sovereign Risk in India is therefore zero for both "foreign direct investment" and
"foreign portfolio investment." It is however advisable to avoid investing in the extreme

23
north-eastern parts of India because of terrorist threats. Kashmir in the northern tip is also
a troubled area, but investment opportunities in Kashmir are anyway restricted by law.

2) Political Risk
India suffered political instability for a few years due to the failure of any party to win an
absolute majority in Parliament. However, political stability has returned since the
previous general elections in 1999. However, political instability did not change India's
economic course though it delayed certain decisions relating to the economy.

The political divide in India is not one of policy, but essentially of personalities.
Economic liberalization (which is what foreign investors are interested in) has been
accepted as a necessity by all parties including the Communist Party of India (Marxist).

Thus, political instability in India, in practical terms, posed no risk to foreign direct
investors because no policy framed by a past government has been reversed by any
successive government so far. You can find a comparison in Italy which has had some 45
governments in 50 years, yet overall economic policy remains unchanged. Even if
political instability is to return in the future, chances of a reversal in economic policy are
next to nil.

As for terrorism, no terrorist outfit is strong enough to disturb the state. Except for
Kashmir in the north and parts of the north-east, terrorist activity is either non-existent or
too weak to be of any significance. It would take an extreme stretching of the imagination
to visualise a Bangladesh-type state-disrupting revolution in India or a Kuwait-type
annexation of India by a foreign power.

Hence, political risk in India is practically non-existent.

3) Commercial Risk
Commercial risk exists in business in any country. Not each and every product or service
can be readily sold, hence it is necessary to study the demand/supply situation for a
particular product or service before making any major investment. There is a large
number of market research firms in India (including our own) which will study
demand/supply situation for any product/service and advise the potential investor
accordingly in exchange of a professional fee. The India One Stop website provides some
accurate statistics and insights into the most viable sectors for foreign direct investments.

4) Risk of Foreign Sanctions

India did not seem to be in the good books of the United States government due to its

24
nuclear weapons and missiles development policy. However, US President Bill Clinton's
state visit to India in 2000 was a massive hit which even saw the President dancing with a
crowd of colorfully dressed women in the northwestern state of Rajasthan. Subsequent to
the visit, visits between the two countries at different levels took place, and the US
government has all but come to terms with the reality of a nuclear-armed India.

Background to the sanctions: The US had imposed some sanctions against India
because of its nuclear tests in May 1998. But these sanctions have been theoretical and
even such theoretical sanctions were relaxed within months of their imposition. Given the
fact that US foreign policy in the post-Cold War era is dictated by its economic interests,
it anyway seemed most unlikely that Iraq or Libya-type sanctions would ever be imposed
on India. India is highly self-sufficient in terms of basic technology and requirements,
hence the threat sanctions could not bring India to its knees. The United States seems to
understand this which is perhaps why it never went ahead with really biting sanctions
against India.

Regardless of how strong the threat of sanctions were, the US President's above-
mentioned state visit to India has laid to rest all doubts. In fact, the United States has
often referred to India as a great potential trading partner as well as, perhaps, a politically
strategic partner in Asia. India's rapidly improving relations with Israel has only lent
further momentum to India-US bonding.

Given the fact that the United States has somehow managed for itself the role of the
world's policeman (a role to which India is explicitly opposed), other countries notably
Japan and Australia have also toned down their opposition to India's nuclear weapons
programme. In other words, it is now business as usual for the world vis--vis India.

It is however theoretically possible that relations with the United States can go sour again
in the future. If that happens, India's sheer self-sufficiency in all matters except in the not-
so-critical cutting edge technologies, will ensure that no sanction will hurt more than a
mosquito bite on an elephant.

The threat of foreign sanctions is therefore of academic and speculative value.

1.11 Limitation of the study

1. More requirement of time
2. High cost

25
 Chapter 2
Literature Review
From a review of a range of literature sources, this section describes the benefits that FDI
can bring to an economy and examines the impact of increased FDI on economic growth
and skills demand.
2.1 Benefits Of FDI-
1)More consumer savings
One of the biggest advantage of FDI is that it will increase the savings of Indian
consumer as he will get good quality products at much cheaper rates. Consumer savings
are likely to increase 5 to 10% from FDI.
2) Higher remuneration for farmers
Another advantage of FDI is that it will help a lot in improving the miserable condition of
Indian farmers who are committing suicides on daily basis because of lesser return from

26
their agricultural produce. But FDI will certain help a lot in improving their conditions as
the farmers are going to get 10 to 30 %higher remuneration because of FDI.
3) Increase in employment opportunities
FDI is certainly going to increase the employment opportunities in India by providing
around 3 to 4 million new jobs. Not only this another 4 to 6 million jobs will be created in
logistics, labour etc. because of FDI.
4) Increase in government revenue
Government revenues are certainly going to increase a lot because of FDI. Government
revenues will increase by 25 to 30 billion dollars which is a really big amount. This
government revenue can help a lot in the development of Indian economy.

2.2) Impact of increased FDI-

1) Destruction of small entrepreneurs
The biggest fear from FDI is that it is likely to destroy the small entrepreneurs or small
kirana shops as they will not be able to withstand the tough competition of big
entrepreneurs as these entrepreneurs are going to provide all the goods to the consumers
at much lesser prices.
2) Shrinking of jobs
Many critics of FDI are of the view that entry of big foreign chains like Wal-Mart,
Carrefour etc. are not going to generate any jobs in reality in India. At best the jobs will
move from unorganized sector to organized sector while their number will remain the
same or lesser but not more.
3) No real benefit to farmers

27
Critics of FDI are also of the view that it is a fallacy that the farmers are going to benefit
in any way because of the entry of foreign chains in India rather it will make the Indian
farmers a slave of these big chains & the farmers will entirely be on their mercy. Thus,
FDI is only going to deteriorate the already miserable conditions of Indian farmers.

28
 CHAPTER 3
OBJECTIVE & SCOPE
Objectives:
1. To study the trends and pattern of flow of FDI.
2. To assess the determinants of FDI inflows.
3. To evaluate the impact of FDI on the Indian economy.
4. To know the flow of investment in India

Scope -
1. Domestic capital is inadequate for purpose of economic growth.
2. Foreign capital is usually essential, at least as a temporary measure, during the period
when the capital market is in the process of development.
3. Foreign capital usually brings it with other scarce productive factors like technical
knowhow, business expertise and knowledge.

29
CHAPTER 4 DATA COLLECTION & ANALYSIS

DATA COLLECTION
In this project secondary data are used.

Secondary data-

is data collected by someone other than the user. Common sources of secondary data for
social science include censuses, organisational records and data collected through
qualitative methodologies or qualitative research. Primary data, by contrast, are collected
by the investigator conducting the research.

Secondary data analysis saves time that would otherwise be spent collecting data and,
particularly in the case of quantitative data, provides larger and higher-quality databases
that would be unfeasible for any individual researcher to collect on their own. In addition,
analysts of social and economic change consider secondary data essential, since it is
impossible to conduct a new survey that can adequately capture past change and/or
developments.

30
4.1 FDI equity inflows (month-wise) during the financial year 2014-15:
In this table shows FDI equity inflows (month-wise) during the financial year 2014-15.
(Table no. 4.1)

Financial Year Amount of FDI Equity inflows

2014-15
(In Rs. Crore) (In US$ mn)
( April-March )
1. April, 2014 10,290 1,705
2. May, 2014 21,373 3,604
3. June, 2014 11,508 1,927
4. July, 2014 21,022 3,500
5. August, 2014 7,783 1,278
6. September, 2014 16,297 2,678
7. October, 2014 16,288 2,655
8. November, 2014 9,486 1,537
2014-15 ( from April, 114,047 18,884
2014 to November,
2014) #
2013-14 (from April, 92,994 15,458
2013 to November,
2013) #
%age growth over last ( + ) 23 % ( + ) 22 %
year
( Source : secondary data )

(Graph no.4.1)

31
 (In Rs. Crore)
25,000
20,000
15,000
10,000 (In Rs. Crore)
5,000
0

Interpretation - In the above table 4.1 shows that the fdi equity inflows in the months
April 2004 was 10,290(In Rs. Crore) and the month of November was 9,486 due to
changes in return on investment and other environmental factors. The % growth FDI
over last year increase by ( + ) 23 %.

4.2 SECTORS ATTRACTING HIGHEST FDI EQUITY INFLOWS:

32
In this table shows sectors attracting highest fdi equity inflows.(Table no. 4.2)
Sector 2012-13 2013-14 2014-15 Cumulativ % age to
Ran ( April - (April- (April- e total
ks March) March) Novembe Inflows Inflows (In
r, (April 00 - terms of
November US$)
14)
1. SERVICES SECTOR ** 26,306 13,294 11,189 196,759 18 %
(4,833) (2,225) (1,847) (41,307)
2. CONSTRUCTION 7,248 7,508 4,240 112,797 10 %
DEVELOPMENT: (1,332) (1,226) (703) (24,009)
TOWNSHIPS,
HOUSING, BUILT-UP
INFRASTRUCTURE
3. TELECOMMUNICATI 1,654 7,987 14,726 81,446 7%
ONS (304) (1,307) (2,472) (16,635)
(radio paging, cellular
mobile, basic telephone
services)
4. COMPUTER 2,656 6,896 5,241 64,911 6%
SOFTWARE & (486) (1,126) (862) (13,679)
HARDWARE
5. DRUGS & 6,011 7,191 6,903 62,974 5%
PHARMACEUTICALS (1,123) (1,279) (1,154) (12,751)
6. AUTOMOBILE 8,384 9,027 9,379 57,575 5%
INDUSTRY (1,537) (1,517) (1,539) (11,351)
7. CHEMICALS (OTHER 1,596 4,738 2,830 48,063 4%
THAN FERTILIZERS) (292) (878) (470) (10,137)
8. POWER 2,923 6,519 3,317 45,972 4%
(536) (1,066) (550) (9,450)
Sector 2012-13 2013-14 2014-15 Cumulativ % age to
Ran ( April - (April- (April- e total
ks March) March) Novembe Inflows Inflows (In
r, (April 00 - terms of

33
 November US$)
14)
9. METALLURGICAL 7,878 3,436 1,323 39,572 4%
INDUSTRIES (1,466) (568) (219) (8,294)
10 HOTEL & TOURISM 17,777 2,949 3,288 39,496 3%
(3,259) (486) (544) (7,662)
( Source : secondary data )
Interpretation - In the table 4.2 shows service sectors is attracting highest fdi equity
inflows tan other sectors because of Indian government gives 100% fdi & other
incentives .

4.3 FDI EQUITY INFLOWS (MONTH-WISE) DURING THE CALENDAR YEAR

2014: In this table shows fdi equity inflows (month-wise) during the calendar year 2014
(Table no. 4.3)

Amount of FDI Equity inflows

34
 Calendar Year 2014 (In Rs. Crore) (In US$ mn)
(Jan.-Dec.)
1. 13,589 2,189
2. 12,557 2,017
3. 21,558 3,533
4. 10,290 1,705
5. 21,373 3,604
6. 11,508 1,927
7. 21,022 3,500
8. 7,783 1,278
9. 16,297 2,678
10. 16,288 2,655
11. 9,486 1,537
Year 2014 (up to November, 161,751 26,623
2014) #
Year 2013 (up to November, 122,664 20,936
2013) #
%age growth over last year ( + ) 32 % ( + ) 27 %

(Source : secondary data)

Interpretation -In the above table 4.3 shows that the fdi equity inflows in the year
2013was 122,664 (In Rs. Crore) and the year 2014 was 122,664(In Rs. Crore) due to
changes in return on investment and other environmental factors. The % growth FDI
over last year increase by ( + ) 32 %.
4.4 SHARE OF TOP INVESTING COUNTRIES FDI EQUITY INFLOWS
(Financial years):
Amount Rupees in crores (US$ in million)
In this table shows the share of top investing countries fdi equity inflows (financial
years).( Table no. 4.4)
1. MAURITIUS 51,654 29,360 31,336 401,821 35 %
(9,497) (4,859) (5,205) (83,730)
2. SINGAPORE 12,594 35,625 22,698 148,504 12 %
(2,308) (5,985) (3,747) (29,193)
3. U.K. 5,797 20,426 5,971 106,856 9%
(1,080) (3,215) (998) (21,761)
4. JAPAN 12,243 10,550 7,789 88,433 7%

35
 (2,237) (1,718) (1,289) (17,557)
5. NETHERLAND 10,054 13,920 14,690 70,988 6%
S (1,856) (2,270) (2,429) (13,665)
6. U.S.A. 3,033 4,807 8,248 63,978 6%
(557) (806) (1,358) (13,286)
7. CYPRUS 2,658 3,401 2,837 38,567 3%
(490) (557) (470) (7,916)
8. GERMANY 4,684 6,093 3,725 35,331 3%
(860) (1,038) (615) (7,134)
9 FRANCE 3,487 1,842 3,229 21,935 2%
(646) (305) (530) (4,409)
10. SWITZERLAND 987 2,084 1,116 14,264 1%
(180) (341) (184) (2,892)
TOTAL FDI 121,907 147,518 114,047 1,158,477 - -
INFLOWS (22,423) (24,299) (18,884) (236,586)
FROM ALL
COUNTRIE
S*
(Source : secondary data)
Interpretation - In the table shows the share of top investing country in India is
MAURITIUS by investing 35 % fdi in equity because of Indian government gives more
initiative to foreign investors and restrict the barriers.

4.5 STATEMENT ON RBIS REGIONAL OFFICES (WITH STATE COVERED)

RECEIVED FDI EQUITY INFLOWS -
In this table statement on RBI regional offices (with state covered) received fdi equity
inflows .

( Table no. 4.5)

S RBIs - State covered 2012- 2013-14 2014- Cumulativ %age to total
No. Regional 13 ( April - 15 e Inflows
Office2 ( April March) (April- Inflows (in terms
- Novem (April 00 of US$)
March ber, -

36
 ) 2014) November
14)
1 MUMBAI MAHARASHT 47,359 20,595 22,080 336,169 30
RA, DADRA & (8,716) (3,420) (3,657) (70,414)
NAGAR
HAVELI,
DAMAN &
DIU
2 NEW DELHI DELHI, PART 17,490 38,190 19,606 226,377 19
OF UP AND (3,222) (6,242) (3,239) (45,775)
HARYANA
3 CHENNAI TAMIL NADU, 15,252 12,595 15,812 81,218 7
PONDICHERR (2,807) (2,116) (2,607) (15,803)
Y
4 BANGALORE KARNATAKA 5,553 11,422 9,132 69,999 6
(1,023) (1,892) (1,498) (14,174)
S RBIs - State covered 2012- 2013-14 2014- Cumulativ %age to total
No. Regional 13 ( April - 15 e Inflows
Office2 ( April March) (April- Inflows (in terms
- Novem (April 00 of US$)
March ber, -
) 2014) November
14)
5 AHMEDABA GUJARAT 2,676 5,282 4,110 48,492 4
D (493) (860) (678) (10,188)
6 HYDERABA ANDHRA 6,290 4,024 6,535 47,449 4
D PRADESH (1,159) (678) (1,082) (9,728)
7 KOLKATA WEST 2,319 2,659 858 14,021 1
BENGAL, (424) (436) (142) (2,884)
SIKKIM,
ANDAMAN &
NICOBAR
ISLANDS
8 CHANDIGAR CHANDIGAR 255 562 218 6,345 0.6

37
 H` H, PUNJAB, (47) (91) (36) (1,328)
HARYANA,
HIMACHAL
PRADESH
9 JAIPUR RAJASTHAN 714 233 3,212 6,770 0.5
(132) (38) (537) (1,260)
10. BHOPAL MADHYA 1,208 708 600 6,095 0.5
PRADESH, (220) (119) (100) (1,215)
CHATTISGAR
H
11 KOCHI KERALA, 390 411 516 5,247 0.4
LAKSHADWE (72) (70) (85) (1,066)
EP
S. RBIs - State covered 2012- 2013-14 2014- Cumulativ %age to total
No. Regional 13 ( April - 15 e Inflows
Office2 ( April March) (April- Inflows (in terms
- Novem (April 00 of US$)
March ber, -
) 2014) November
14)
12 PANAJI GOA 47 103 206 3,863 0.3
(9) (17) (34) (822)
13 KANPUR UTTAR 167 150 279 2,043 0.2
PRADESH, (31) (25) (46) (418)
UTTRANCHA
L
14 BHUBANESH ORISSA 285 288 51 1,957 0.2
WAR (52) (48) (9) (397)
15 GUWAHATI ASSAM, 27 4 9 361 0
ARUNACHAL (5) (0.6) (1) (80)
PRADESH,
MANIPUR,
MEGHALAYA,
MIZORAM,

38
 NAGALAND,
TRIPURA
16 PATNA BIHAR, 41 9 49 248 0
JHARKHAND (8) (1) (8) (47)
17 JAMMU JAMMU & 0 1 25 26 0
KASHMIR (0) (0.2) (4) (4)
1 18 REGION NOT INDICATED3 21,833 50,283 30,750 301,266 100.00
(4,004) (8,245) (5,122) (60,861)

S. RBIs - State 2012- 2013-14 2014-15

No. Region covered 13 ( April - (April-November,
al ( April March) 2014)
Office2 -
March
)
19 RBIS-NRI SCHEMES 0 0 0 533 -
(from 2000 to 2002) (121)
GRAND TOTAL 121,90 147,518 114,04 1,158,477 -
7 (24,299) 7 (236,586)
(22,424 (18,884
) )
(Source : secondary data)
Interpretation - In the table shows that the highest FDI in Mumbai is 30 % because of
more of industries , infrastructure facilities & capital market are located.

39
4.6 STATEMENT ON SECTOR-WISE FDI EQUITY INFLOWS
In this table shows statement on sector-wise fdi equity inflows.
(Table no.4.6)
S.No Amount of FDI Inflows %age with
total
Sector FDI
Inflows (+)
(In Rs (In US$
crore) million)

1 SERVICES SECTOR* 196,758.65 41,307.13 17.47

2 CONSTRUCTION 112,796.94 24,009.03 10.15
DEVELOPMENT: Townships,
housing, built-up infrastructure
and construction-development
projects
3 TELECOMMUNICATIONS 81,445.68 16,634.55 7.03
4 COMPUTER SOFTWARE & 64,911.14 13,678.93 5.78
HARDWARE
5 DRUGS & 62,973.48 12,751.12 5.39
PHARMACEUTICALS
6 AUTOMOBILE INDUSTRY 57,575.16 11,351.26 4.80
7 CHEMICALS (OTHER THAN 48,063.27 10,137.35 4.29
FERTILIZERS)
8 POWER 45,971.95 9,450.06 4.00
9 METALLURGICAL 39,572.31 8,294.08 3.51
INDUSTRIES
10 HOTEL & TOURISM 39,496.34 7,661.60 3.24
11 TRADING 36,624.62 6,909.34 2.92
12 PETROLEUM 31,626.60 6,515.72 2.76
Amount %age with %age with
S.No of FDI total total
Sector Inflows FDI Inflows FDI
(+) Inflows (+)
(In Rs (In US$
crore) million)

40
14 INFORMATION & 18,396.47 3,769.78 1.59
BROADCASTING
(INCLUDING PRINT MEDIA)
15 ELECTRICAL EQUIPMENTS 18,051.24 3,746.78 1.58
16 NON-CONVENTIONAL 18,041.99 3,444.67 1.46
ENERGY
17 INDUSTRIAL MACHINERY 16,792.28 3,254.92 1.38
18 CEMENT AND GYPSUM 14,617.13 3,084.29 1.30
PRODUCTS

19 CONSTRUCTION 14,077.23 2,806.76 1.19

(INFRASTRUCTURE)
ACTIVITIES
20 CONSULTANCY SERVICES 13,652.49 2,745.54 1.16
21 MISCELLANEOUS 12,752.93 2,691.75 1.14
MECHANICAL &
ENGINEERING INDUSTRIES
22 HOSPITAL & DIAGNOSTIC 13,026.27 2,546.67 1.08
CENTRES
23 FERMENTATION 11,182.77 2,110.90 0.89
INDUSTRIES
24 AGRICULTURE SERVICES 8,601.32 1,740.19 0.74
Amount %age with %age with
S.No of FDI total total
Sector Inflows FDI Inflows FDI
(+) Inflows (+)
(In Rs (In US$
crore) million)

26 PORTS 6,730.91 1,637.30 0.69

27 MINING 8,200.41 1,627.03 0.69
28 TEXTILES (INCLUDING 7,433.11 1,511.23 0.64
DYED,PRINTED)
29 ELECTRONICS 6,705.40 1,409.84 0.60
30 SEA TRANSPORT 6,531.73 1,366.52 0.58

41
31 PRIME MOVER (OTHER 6,295.94 1,200.31 0.51
THAN ELECTRICAL
GENERATORS)
32 EDUCATION 5,047.80 974.81 0.41
33 PAPER AND PULP 4,296.96 905.45 0.38
(INCLUDING PAPER
PRODUCTS)
34 MEDICAL AND SURGICAL 4,529.88 874.54 0.37
APPLIANCES
35 SOAPS, COSMETICS & 4,417.47 846.73 0.36
TOILET PREPARATIONS
36 MACHINE TOOLS 3,458.95 703.04 0.30
37 CERAMICS 3,124.69 668.03 0.28
38 RAILWAY RELATED 3,425.07 634.06 0.27
COMPONENTS
39 FERTILIZERS 2,915.52 543.12 0.23
40 AIR TRANSPORT 2,594.35 542.55 0.23
Amount %age with %age with
S.No of FDI total total
Sector Inflows FDI Inflows FDI
(+) Inflows (+)
(In Rs (In US$
crore) million)

42 DIAMOND,GOLD 2,302.60 472.40 0.20

ORNAMENTS
43 GLASS 2,265.49 443.63 0.19
44 PRINTING OF BOOKS 2,212.61 427.88 0.18
(INCLUDING LITHO
PRINTING INDUSTRY)
45 AGRICULTURAL 2,122.07 413.04 0.17
MACHINERY
46 COMMERCIAL, OFFICE & 1,447.36 298.26 0.13
HOUSEHOLD EQUIPMENTS
47 RETAIL TRADING (SINGLE 1,549.92 275.38 0.12
BRAND)
48 EARTH-MOVING 1,137.02 234.52 0.10

42
 MACHINERY
49 SCIENTIFIC INSTRUMENTS 952.67 170.65 0.07
51 TEA AND COFFEE 489.53 107.08 0.05
(PROCESSING &
WAREHOUSING COFFEE &
RUBBER)
52 TIMBER PRODUCTS 446.09 87.31 0.04
53 DYE-STUFFS 417.28 74.38 0.03
54 PHOTOGRAPHIC RAW FILM 273.76 67.29 0.03
AND PAPER
Amount %age with %age with
S.No of FDI total total
Sector Inflows FDI Inflows FDI
(+) Inflows (+)
(In Rs (In US$
crore) million)

56 BOILERS AND STEAM 314.80 63.33 0.03

GENERATING PLANTS
57 SUGAR 267.39 55.90 0.02
58 GLUE AND GELATIN 204.29 36.68 0.02
59 COAL PRODUCTION 119.19 27.73 0.01
60 MATHEMATICAL,SURVEYI 39.80 7.98 0.00
NG AND DRAWING
INSTRUMENTS
61 DEFENCE INDUSTRIES 24.36 4.94 0.00
62 COIR 22.05 4.07 0.00
63 MISCELLANEOUS 40,356.42 8,648.59 3.66
INDUSTRIES
SUB-TOTAL 1,157,944. 236,465.19 100.00
00
64. RBIS- NRI SCHEMES (2000- 533.06 121.33 -
2002)

GRAND TOTAL 1,158,477. 236,586.52 -

06
(Source : secondary data)

43
 Interpretation - In this table 4.6 shows that the highest sector-wise fdi equity inflows
in service sector because of higher rate of returns, availability of labours in minimum
price & low risk.

CHAPTER 5
FINDINGS ,SUGGESTIONS & CONCLUSION -

Findings
1. The highest sector-wise fdi equity inflows in service sector.
2. The highest FDI in Mumbai is 30 %
3. The share of top investing country in India is MAURITIUS by investing 35 % FDI in
equity.
4. The percentages of growth in FDI over last year increase by ( + ) 23 % in 2015.

Suggestions -
1. Reduce project level compliance burden on foreign investors
2. Provide greater clarity to foreign investor community
3. Ensure that foreign capital is not blocked in un-productive
4. Present necessary exit options to the foreign investors

Conclusion-

FDI, thus on one hand helps in increasing the output through usage of advanced
technology and management techniques and on the other it is a threat to local companies
in the country. Government should take steps in the direction of integrating foreign
investors with local businesses. This will help in overall economic development as well
as preservation of countrys heritage. MNCs should be allowed to set up in such a manner
that they help increase the standard of living of our country instead of sole profit making.

44
CHAPTER NO.6
REFERNCES & BIBLOGRAPHY-
REFERENCES
1. Chaturvedi Ila,(2011) "Role of FDI in Economic Development of India: Sectoral
Analysis" International Conference on Technology and Business Management, Jaipuria
Institute of Management, Ghaziabad
2. Goel Shashank, Kumar K. Phani , Rao Samasiva (2012), Trends and Patterns of Fdi in
India and its Economic Growth Asian Journal of Research in Business Economics and
Management vol. No.2(4)
3. K S Chalapati Rao, M R Murti, K V K Ranganathan, (1999)"Foreign Direct
Investments in the Post- Liberlization Period- An Overview", Journal of Indian School of
Political Economy, vol. (4), no. 11
4. Madem Srinu, Gudla Sandeep, Rao K Bhaskara,(2012)," Fdi Trends during the Last
Decade and its Effect on Various Sector in India", International Journal of Scientific and
Research Publications, vol. (12), no. 2

5. N.J. Sebastian, (2010), "Fdi in India and its growth linkages", National council of
applied economic research, Department of Industrial policy and promotion
6. R. Anitha (2012)" Foreign Direct Investment and Economic Growth in India"
International Journal of Marketing, Financial Services & Management Research, vol. (8),
no. 1
7. R. Nagaraj (2003)," Foreign Direct Investments in India in the 1990s Trends and
Issues", Economic and Political Weekly, vol. (38), no. 17, pp. 1701-1712
8. Sahni Priyanka(2012), " Trends and Determinants Of Foreign Direct Investment in
India: An Empirical Investigation", International Journal of Marketing and Technology,
vol. (8), no. 2
9. Singh Jasbir, Chadha Sumita, Sharma Anupama (2012) ,"Role of Foreign Direct
Investment in India: An Analytical Study" , International Journal Of Engineering and
Science, vol. no. 1(5), pp 34-42

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Websites
10. http:// en.wikipedia.org/wiki/fdi
11. www.ibef.org/india-at-a-glance/foreign-direct-investment.aspx
12. www.fdi.in/ https://www.iaccindia.com/userfiles/files/FDI%20Manual%20-
%20Policy...
13. dipp.nic.in/English/Archive/FDI_Manual/FDI_Manual_text_Latest.pdf

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