FOREIGN DIRECT INVESTMENT

(FDI)
.
MADE BY:
PAYAL DHINGRA
ANUPRIYA AGARWAL
ANMOL SHARMA
YASHITA GUPTA
PGDM 1ST YEAR
SECTION C

CONTENTS

Meaning
Types of FDI
Factors required to attract FDI
Areas where FDI not allowed
Advantages and disadvantages of FDI
Approval of FDI
Areas where FDI is allowed
FDI share in each sector
FDI in different states
Conclusion

MEANING
A foreign direct investment (FDI) is an

investment made by a company or entity

based in one country in another country.
It is considered to be the lifeblood for

developing nations.
It provides opportunity for technological

transfer and upgradation.

CONTD.
It helps in market accessibility for both host

and home countries.

It helps in invention and innovation of

international markets.

NEED OF FDI
India needs FDI for reasons such as:
Sustaining high level of investment for
development.
Fulfill the technological gap.
Development of natural resources.

TYPES OF FDI
Mergers and acquisitions:
Primary type of FDI involving transfer of existing

assets from local firms to foreign firms.

Assets and operation of firms from different

countries are combined to establish a new legal

entity (cross border merger).
Control of assets and operations is transfered to

foreign company by its local affiliate company

(cross border acquisition).

CONTD.
Horizontal FDI
Investment in the same industry as a firm operates
at home.
Vertical FDI
Industry abroad provides inputs for a firms
domestic production processes (backward
vertical).
Industry abroad sells the output of a firms

domestic production processes (forward vertical).

FACTORS REQUIRED TO ATTRACT

FDI
Low cost but qualified and skilled labour pool.
Long term market potential.
Access to natural resources.
Stability of economic and political

environment.
Geography

AREAS WHERE FDI IS NOT

ALLOWED
FDI is not permitted in the following sectors:
Chit funds
Manufacturing of cigars, tobacco etc.
B2C e-commerce

CONTD.
Lottery business.
Activities/sectors not open to private sector.

ADVANTAGES OF FDI
Increase in domestic employment.
New technology and know how transfer.
Increased capital investment.
Regional and sectoral development.
Positive influence on balance of payment.

DISADVANTAGES OF FDI
Industrial sector dominance in the domestic

market.
Technological dependence on foreign

technology sources.

APPROVAL OF FDI
FDI in India are approved through the following
routes:
Approval by RBI.
The FIPB (Foreign Investment Promotion

Board).
CCFI route.

AREAS WHERE FDI IS

ALLOWED

Infrastructure
Automotives
Pharmaceuticals
Services
Railways
Chemicals
Textiles
Airlines
Defence

FDI IN SOME MAJOR

SECTORS
SECTOR
Agriculture

PERCENTAGE OF FDI
100

Defence

49-100

Insurance

49-74

Education

100

Print media

26

Stock exchange

49

FM radio

26

Pension

49

Pharmaceutical

100

TOTAL FDI IN SOME MAJOR

SECTORS
Defence
In defence the government has allowed foreign investment upto
49
percent under automatic route earlier under government approval route.
Networks
FDI limits hiked in teleports , DTH and cable networks to 100 percent with
government approval required beyond 49 percent.
Banking
In banking, the government has introduced full fungibility, meaning FIIs/ FPIs/
QFIs can now invest up to the sectoral limit of 74 per cent subject to the
condition that there is no change in control and management of the private
bank. Manufacturers have been allowed to sell their products through ecommerce without government approval.

Infrastructure
10% of India's GDP is based on construction activity.
Indian government has plans to invest $1 trillion on
infrastructure from 20122017. 40% of this $1 trillion
is to be funded by private sector.
Automotive
FDI in automotive sector was increased by 89%
between April 2014 to February 2015. India is 7th
largest producer of vehicles in the world with 17.5
million vehicles annually.

Pharmaceuticals
Indian pharmaceutical market is 3rd largest in terms of
volume and 13th largest in terms of value. Indian pharma
industry is expected to grow at 20% compound annual
growth rate from 2015 to 2020.100% FDI is permitted in this
sector.
Service
FDI in service sector was increased by 46% in 201415.
Service sector includesbanking insurance ,outsourcing ,
research & development, courier and technology testing.FDI
limit in insurance sector was raised from 26% to 49% in
2014.

Railways
100% FDI is allowed under automatic route in
most of areas of railway like High speed train,
railway electrification, passenger terminal,
mass rapid transport systems etc.MumbaiAhemdabad high speed corridor project is
single largest railway project in India, other
beingCSTM-panvel suburban corridor. Foreign
investment more than90,000
crore(US$13billion) is expected in these
projects.

Chemicals
Chemical industry of India earned revenue of
$155160 billion in 2013.100% FDI is allowed in
Chemical sector under automatic route. Except
Hydrocynic acid, Phosgene, Isocynates and
their derivatives, production of all other
chemicals is de-licensed in India. India's share
in global specialty chemical industry is
expected to rise from 2.8% in 2013 to 67% in
2023.

Textiles
Textile is one major contributor to India's
export. Nearly 11% of India's total export is
textile. This sector has attracted about $1647
million from April 2000 to May 2015. 100% FDI
is allowed under automatic route. During year
201314, FDI in textile sector was increased by
91%. Indian textile industry is expected reach
up to $141 billion till 2021.

Airlines
Foreign investment in a scheduled or regional
air transport service or domestic scheduled
passenger airline is permitted to 100,with FDI
up to 49% permitted under automatic route and
beyond 49% through government approval.

STATE WISE FDI

Maharashtra and National Capital region(NCR)

have cornered 49% of the total FDI inflows into

the country since April 2000.
Maharashtra attracted maximum foreign inflows

at $70.41 billion , about 30 per cent of total FDI

inflows during April 2000- November 2014.
The National Capital Region including parts of UP

and haryana , received $45.77 billion FDI during

this period.

CONTD.
NCR accounted for 19% of countrys total FDI.
Tamil Nadu attracted third highest FDI worth

$15.80 billion during the period followed by

Karnataka (USD 14.17 billion), Gujarat (USD
10.18 billion), Andhra Pradesh (USD 9.72
billion).

CONTD.
Karnataka received FDI amounting $3,266.48

million during November 2015.

Delhi along with Haryana, Maharastra ,

Gujarat together attracted more than 70% of

total FDI inflows in India in last 15 years.
States like Jharkhand, Bihar , M.P,

Chhattisgarh have not been able to attract

directly for investment in different sectors.

CONCLUSION
Foreign Direct Investments has opened wide

range of doors for trading in India. Products of

higher quality will be manufactured in India.
India by inviting FDI can introduce high notched

technology in various sectors. which can help

India in reducing manufacturing cost.
More of foreign companies will bring more of job

opportunities as more of factories and retail outlet

are going to open.

THANK YOU!