Beruflich Dokumente
Kultur Dokumente
By -
Abrar Ahmad Ansari
MBA, IInd Sem.
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Definition:
FDI is equity funds invested in other nations.
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Advantages:
Own policies towards R & D
Various benefits offered by the host governments
Select the best location
Latest models of the buildings
It can avoid the cultural shock
Economic growth of the world
Utilization of world resources
Opportunity and challenge to domestic business
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Disadvantages:
Non-availability of land in the location of
company
Longer gestation period
Need to follow the rules and regulations
Leads to commercial and political colonialism
Exploits human resource
Leads under employment in host country
National sovereignty at stake
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Determinants:
Sustaining high level of investment
Technological development
Transportation costs
Market imperfection
Competition
Stage of the country
Location advantage
Product life cycle
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Indian Government’s Policies
Towards FDI:
No discrimination between foreign and Indian
capital
Full opportunities to earn profits
Guarantee of compensation
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Types of Foreign Direct Investment
FDIs can be broadly classified into two types:
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Inward FDIs
Here, investment of foreign capital occurs in local resources.
The factors propelling the growth of Inward FDI comprises,
• Tax breaks,
• Relaxation of existent regulations,
• Loans on low rates of interest and specific grants.
The idea behind this is that, the long run gains from such a
funding far outweighs the disadvantage of the income loss
incurred in the short run. Flow of Inward FDI may face
restrictions from factors like restraint on ownership and
disparity in the performance standard.
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Outward FDIs
An outward-bound FDI is backed by the government
against all types of associated risks.
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Outward FDI faces restrictions under a host of factors as
described below:
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Foreign Direct Investment In Different
Sectors
FDI IN HOTEL & TOURISM:
100% FDI is permissible in the sector on the automatic route.
NON-BANKING FINANCIAL COMPANIES:
49% FDI is allowed from all sources on the automatic route subject to
guidelines issued from RBI from time to time.
INSURANCE SECTOR:
FDI up to 26% in the Insurance sector is allowed on the automatic route
subject to obtaining licence from Insurance Regulatory & Development
Authority (IRDA)
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TELECOMMUNICATION SECTOR:
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
ISPs with gateways, radio-paging and end-to-end bandwidth, FDI is
permitted up to 74% with FDI, beyond 49% requiring Government
approval.
TRADING COMPANIES:
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 100% FDI is permitted.
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POWER SECTOR:
Up to 100% FDI allowed in respect of projects relating to
electricity generation, transmission and distribution, other
than atomic reactor power plants.
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
SSI’s IN INDIA:
Recently, India has allowed Foreign Direct Investment up to
100% in many manufacturing industries which were
designated as Small Scale Industries.
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ROADS,HIGHWAYS,PORTS & HARBORS:
FDI up to 100% under automatic route is permitted in projects
for construction and maintenance of roads.
POLLUTION CONTROL & MANAGEMENT:
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 CENTRES & BPO’s
FDI up to 100% is allowed subject to certain conditions.
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Special Facilities & Rules For NRI’s &
OCB’s
NRI's and OCB's are allowed the following special facilities:
Direct investment in industry, trade, infrastructure etc.
Up to 100% equity with full repatriation facility for capital and dividends in the
following sectors:
All the various types of infrastructure a country like health or education, may be
benefited by foreign direct investment.
Foreign direct investment is also used for the purpose of educating the unskilled
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labor force that is present in a country.
India Further Opens Up Key Sectors For
Foreign Investment
FDI in Civil aviation up to 74% will now be allowed through the automatic
route for non-scheduled and cargo airlines, as also for ground handling
activities.
100% FDI in aircraft maintenance and repair operations has also been
allowed. But the big one, allowing foreign airlines to pick up a stake in
domestic carriers has been given a miss again.
India has decided to allow 26% FDI and 23% FII investments in commodity
exchanges, subject to the proviso that no single entity will hold more than
5% of the stake.
Also keeping India's civilian nuclear ambitions in mind, India has also 19