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mForeign direct investment (FDI) in its classic form

is defined as a company from one country making


a physical investment into building a factory in
another country. It is the establishment of an
enterprise by a foreigner.
mIts definition can be extended to include
investments made to acquire lasting interest in
enterprises operating outside of the economy of the
investor.
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 Morizontal integration (MI)
d Investment in the same industry abroad as a firm
operates in at home.
 xertical integration (xI)
d ackward xI: Investments into an industry that provides
inputs for a firm¶s domestic production processes.
d Forward xI: Investments in an industry that utilizes the
outputs of a firm¶s domestic production processes.
 Ôonglomerate (or diversified investment):
d Investments in different industries from home
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i Increase investment level and thereby income &
employment
i Increase tax revenue of government
i Facilitates transfer of technology
i Encourage managerial revolution through professional
management
i Increase exports and reduce import requirements
i Increase competition and break domestic monopolies
i Improves quality and reduces cost of inputs
i Flow to high profit areas rather than main concern areas
i Through their power and flexibility, MNÔ can undermine
economic autonomy and control
i Sometimes interferes in the national politics
i Sometimes engage in unfair and unethical trade
practices
i Sometimes result in minimizing / eliminating competition
and create monopolies or oligopolistic structures
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×utomotive anks & FSI
×erospace & Defence

Ôhemicals Food & everages Funds

Motels & Leisure IT & Outsourcing Insurance

Media & Entertainment Nanotechnology


Microfinance

Pharma, Life sciences & Real Estate & Ôonstruction Retail


Mealthcare

Telecom Transportation & Logistics


Social Sector & Non Profits

Education
Infrastructure
„î

×ccording to the current policy, FDI is not
permitted in the following sectors ë
Ôertain sectors, namely:
 ×tomic energy;
 Lottery business/gambling and betting;
 ×griculture (excluding floriculture, horticulture,
seed development, animal husbandry, pisciculture
and cultivation of vegetables, mushrooms, etc.)
 lantations (excluding tea plantation)
 Retail Trading (other than single brand retail)
„î
 45

There are two routes for FDI in India ë


×utomatic Route
FDI is permitted under the automatic route for all
items/activities except the following-
† here the foreign collaborator has an existing
venture/tie-up in India in the same field. There are
certain exceptions ë
minvestment by a xenture Ôapital Fund registered
with SEI;
mexisting joint venture has less than 3% investment
by either party;
„î
 45
m Existing joint venture is defunct or sick
 roposals falling outside notified sectoral policy/caps or sectors in
which FDI is not permitted
FI  Route (×pproval Route)
 In all other cases of foreign investment, where the project does not
qualify for automatic approval, as given above, prior approval is
required from FI .
 Decision of the FI  is normally conveyed within 30 days of submitting
the application.
 The proposal for foreign investment is decided on a case-to-case basis
depending upon the merits of the case and in accordance with the
prescribed sectoral policy.
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India has evolved into
India is among the one of the world's
three most attractive leading technology India has among the
FDI destinations in the centers. highest returns on
world.
foreign investment.
Craig Barrett
Intel Corporation
× T Kearney
FDI Confidence Index 2005 y 03, India will be US Department of
among the three Commerce

largest economies in
the world.

The Indian market has two


BRIC Report, Goldman Sachs
core advantages - an
increasing presence of
 e came to India for the multinationals and an upswing
costs, stayed for the in the IT exports´.
quality and are now
investing for innovation´. India is a developed
country as far as Travyn Rhall,
×CNielsen
intellectual capital is
concerned´.
- Dan Scheinman, Cisco System Inc. as told
to Business Week, ×ugust 2005

Jack Welch
General Electric
m Tight bureaucratic control and delays in clearance
of FDI proposals.
m Ôorruption.
m Rigid labor laws.
m olitical hostility of Left parties.

m oor Infrastructure.
m Exit policies not clear.
. IM×E ×ND ×TTIT DE
. Internal orking
. ×pproach Towards FDI¶s

. OLIÔ FR×ME ORK


. FDI olicy
. Domestic olicy
 Internal Ministerial committee set up to contemplate the
FDI policies and procedures
 
 „   î
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d The board was set up to ease the process of entry to be tumbled
to -weeks.
 l
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d India handicapped at attracting EX ORT ORIENTED FDI due to
poor infrastructure.
 £   
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15
 ,
d only 3% of fdi are in favour of INDI×N R LE OF L×
-83,ÿ9-£

 
 „   ,.Like most countries
a law on foreign investment can be enacted in
association with FEM×, with the objectives of ×)
romotion of FDI
) National treatment of FDI|
The law can also deal with things like:double
taxation, preferential treatment of FDI.
 £  , „   
 
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o „   .The FI  could be empowered
to give initial Ôentral government level
registration and approvals where possible.
o The Transaction of usiness rules should be modified to
empower the Foreign Investment Implementation ×uthority
(FII×) so as to enable it fix the time frame for investment related
approvals both at the State and Ôentral levels.
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Foreign Institutional Investor (FII) is used to
denote an investor - mostly of the form of an
institution or entity, which invests money in
the financial markets of a country different
from the one where in the institution or entity
was originally incorporated. FII investment is
frequently referred to as hot money for the
reason that it can leave the country at the
same speed at which it comes in.
†

ension Funds
†
Mutual Funds
†
Investment Trust
†
Insurance or reinsurance companies
†
Endowment Funds
†
niversity Funds
×sset Management Ôompanies
Nominee Ôompanies
Institutional ortfolio Managers
Trustees
ower of ×ttorney Molders
ank
It also includes asset management companies
and
other money managers operating on their
behalf.

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Ôategories of registered FIIs
† Regular FIIs:
ë not less than 0 per cent in equity related
instruments
ë 30 per cent in non-equity instruments.
† 00 per cent debt-fund FIIs:
ë permitted to invest only in debt instruments.
Forbidden ×reas for FII:
† OxT ONDS