FDI in INDIA

GROUP MEMBERSAmeya Gandhi (13)

Pratik Jain(16)
Priy Chheda(46)
Pranali Bavkar(2)
Rohit Maingi(19)
Rushil Gupta(65)
Sunmeet Matta(22)

Gurpreet kaur(15)
Vikramjeet Singh Solar(48)
Hardik Gala(12)
Harshal Panchal(29)
Arshad Ck(54)
Jagjit Kaur Wasan(44)

22/9/2013

What is FDI..?
Foreign direct investment(FDI) It is a direct investment into production or

business in a country by an individual or

company in another country.
It can be either by buying a company in
the target country or by expanding
operations of an existing buisness in that
country.

22/9/2013

Overview of FDI Inflows

6000
5000
4000
3000
US $ million
2000
1000
0

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Sector-wise Distribution
Services Sector

6%

Computer Software &

hardware

6% 4% 4% 3%

Telecommunications
Housing & real Estate

10%
31%
11%

Construction Activities
Power

12%

Automobile Industry
13%

Metallurgical Industries
Petroleum & Natural Gas

Chemicals
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Top Investing Countries

Mauritius
Singapore
4% 4% 3% 2%
2%
5%

USA
UK

7%

Netherlands

9%

Japan
11%

Cyprus

53%

Germany
UAE

France
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FDI Benefits
Economic
Growth
Linkages
and
spillover to
domestic
firms
Technology
diffusion
and
6 knowledge

Trade

Employment
and skill
levels
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SECTORIAL ANALYSIS

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MANUFACTURIN
G SECTOR

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 Ranked

2
most favored
destination
Current
Scenario
nd

for

foreign investments after China

India ranks among the top 12 producers of
manufacturing value added (MVA).
In textiles, the country is ranked 4th

after

China, USA and Italy.

In electrical machinery and apparatus, it is
ranked 5th.

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Current Scenario
6th position in the basic metals category
7th in chemicals and chemical products
10th

in

leather,

leather

products,

refined

petroleum products and nuclear fuel

12th

in machinery and equipment and motor

vehicles.

10

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Foreign Direct Investment (FDI) up to

100% is permitted in all manufacturing
activities except:-

Defense
Industry

11

Cigars &
Cigarette
manufactu
ring

Where the
foreign
investor
has an
existing
joint
venture in
India in
the same
field.
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Where
more than
24%
foreign
equity is
proposed
to be
inducted
for
manufactu
re of
itemsrese
rved
forSmall
Scale

12

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13

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14

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FICCI Study in Indian Manufacturing Sector:

Salient Points

Attracted only
$3.4 billion of
FDI in
manufacturin
g on an
average every
year from
2000 to 2008

15

67% of
Chinas total
FDI comes in
the
manufacturin
g sector
compared to
37% in case of
India (even
100% FDI in
most
manufacturin
g sectors)

Acc to FICCI
Action plan,
India can
attract
$12billion of
FDI in the
manufacturin
g sector per
annum

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Sub-Sectors where FDI is

negligible
Indias share in outward FDI stock is negligible
(Chemicals, Automobiles, Food Processing, Electrical &
Electronic Equipment, Metals and Machinery
Equipment)
Sectors like Industrial Machinery, Agricultural

Machinery, Ship Building, Medical & Surgical

Devices and Computer Hardware
Rather India imports these items.

16

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FDI Inflows for Selected Sectors in

India (Jan 2000 to September 2008)
Sector

FDI Inflows ($ million)

Ship Building

59.15

Industrial Machinery

283.77

Agricultural Machinery

148.37

Earth Moving Machinery

134.51

Medical
and
Surgical 140.77
Appliances
Computer hardware
99.7
Defence

17

0.15
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FICCIs Suggestions

FDI Policy
should aim at
incentivizing
maximum
value
addition

Rationalizing
complex
regulatory
procedures
and reducing
delays in the
project
approvals.

18

A concrete
and
comprehensiv
e Action plan

Incentivize
technology
transfer by
adopting
Swap
Technology
for Market
policy

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FDI IN SERVICE SECTOR

19

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India's large service industry accounts for

more than 50% of the country's GDP.

It makes up more than 25% Employment
Service sectors like telecommunication, IT

enabled services, insurance, air transport

are becoming prominent

20

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Reasons for growth in Services

Sector
Introduction of Manmohanomics
in 1991
Growing presence of transnational

corporations and the technological progress.

Liberalization of many service sectors

activities (telecom, transport, finance etc.)

21

22/9/2013

FDI contribution to Services Sector

Attracted $3.12 billion FDI in the first

seven months of 2009-10

22 per cent of the total FDI inflows of

$17.64 billion in the April-October for

service sector
In 2008-09, attracted the maximum FDI

worth USD 6.11 billion.

22

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FDI Policy in Services Sector

100% FDI is permitted for many service

sectors
like(Real estate, Construction, Hotels, tourism, films,
IT - enabled services, Consultancy, Medical,
Education, Advertising, etc)

23

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Restricted sectors in Services

Atomic Energy, Lottery Business, Gambling

and Betting, Business of Chit Fund, and

any activity/sector that is not opened to
private sector investment.
Besides the above, FDI is not allowed in
plantations.

24

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Current issues with FDI in Services Sector

Very weak linkages of service sector with

the Indian economy (only few cities)

Requires highly skilled workers
Employee Welfare in time of crisis

25

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FDI in Agriculture
Allowed up to
100%

Pilot
programme for
Contributes
delivering
19% to the GDP
subsidy directly
to farmer

26

22/9/2013

FDI in
Agriculture.Developments
To connect 66,800 habitations
To construct 1,46,000Km of new rural roads
To Upgrade and modernize 1,94,000Km of

existing rural roads

To provide corpus of Rs. 8000 crore RIDF(rural
infrastructure development fund)

27

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FDI in Retail.WHY INDIA?

Low share of organized retailing
Increase in disposable income and

customer aspiration or demand.

Increase in expenditure for luxury items.

28

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FDI in Retail.Benefits
Generate huge employment
Increased investment in technology
The huge tax revenue generated.
The consumer gains from the wide variety of

choices and a more diversified basket.

The indirect benefits like better roads, online

marketing, expansion of telecom sector etc. Will

give a big push to other sectors like
agriculture, small and medium 22/9/2013
size enterprises.

29

FDI in Real Estate

Second-most favoured destination for FDI

in the world
Norms to allow 100% FDI in Mar 2005 .
100 acre criterion to 25 acre criterion.

30

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FDI in Real Estate.Why Invest??

India produces an estimated 2 million new

graduates
Presence in the list of top 500 sectors
complied by US taking into consideration of
the growth rate.
Real estate investments in Indiayield
huge dividends.

31

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Tourism
Raised to $120 million.
Major source of employment.
Third largest earner of foreign exchange.
Private investments through public private

partnership.
100% FDI permitted.

32

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Need for FDI in Tourism

Foreign tourist arrivals are expected to

grow to 10 million by 2010-12

Estimated that tourism in India could
contribute Rs.8,50,000 crores to the GDP
by 2020

33

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Reasons for low FDI

High Taxes
Highest import duty on imported liquor

used in hotels
Service Tax on Tour Operators
Inland Air Travel Tax

34

22/9/2013

FDI Policies in India(overview)

FDI Policy permits FDI up to 100 % from foreign/NRI

investorwithout prior approval in most of the sectors.

Known as the automatic route.
The FDI policies in INDIA are formulated on 4
parameters:
-Increased capital flow.
-Improved technology.
-Management expertise.
-Access to international markets.
Hence 100% inflow was allowed in sectors like Power,
Renewable energy , Agriculture, mining etc.
Also sectors like insurance and defence have a cap of
35 and the banking sector has cap22/9/2013
26%
of 49%.

Some of the Major Investing

Countries

36

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Final Recommendations

37

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Conclusions

38

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THANK
YOU

39

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