FDI IN INDIA

IN 1990
INTRODUCTION……

REFORMS IN 1990
FDI TRENDS AND COMPOSITION

INDIA VS CHINA

TECHNOLOGY SPILLOVERS AND

BARGAINING POWER IN THIS MARKET

BRAND NAMES

FDI POLICY
INTODUCTION

• FDI

•India followed restricted trade policy

• Foreign investment is allowed only in designated

industries

• FERA stipulated foreign companies to hold equity up to

40%
• Such policies are believed to retard domestic technical
capability and loss of export opportunities
REFORMS IN 90’S
• Shift in strategy

• FDI is seen as source of capital, technology

and managerial skills

• Permitted foreign investments in almost all the

sectors
• Fiscal and Administrative reforms

• Financial sector reforms

• International trade and investment

reforms

• Industrial sector reforms

• Infrastructure reforms

• Agricultural reforms

• Privatization reforms
TRENDS

• The inflows increased from 500 crores to 55000 crores in five

years
• The top investing countries are USA, Mauritius, UK, South
Korea, Japan etc
• Sectors are
Power generation
Tele communications
Service sector
Food processing
Chemicals etc
Sector-wise FDI inflows in India from April 2000 – Dec 2009

Industrial Sectors in IndiaAmount of FDI % of total

inflows FDI inflows
Rs. Millions
Service Sector 1015269 21.63
Computer Software and Hardware 423529 9.02
Telecommunication 398094 8.48
Housing and Real Estate 352550 7.51
Construction Activities 327195 6.97
Power 200993 4.28
Automobile Industry 197634 4.21
Metallurgical Industry 131178 2.79
Pertoleum and Natural Gas 112617 2.40
Chemicals 108251 2.31
Electrical Equipments 94888 2.02
Trading 87001 1.85
Hotel and Tourism 80355 1.71
Information and Broadcasting 79569 1.70
Cement and Gypsum Products 74579 1.59
Drugs and Pharmaceuticals 72533 1.55
Agriculture 71231 1.52
Consultancy 68354 1.46
Ports 66675 0.93
Ranking of Sector-wise FDI Inflows in India since April 2000 – Dec2009

Industrial Sectors in India Ranks

Service Sector 1
Computer Software and Software 2
Telecommunication 3
Housing and Real Estate 4
Construction Activities 5
Power 6
Automobile Industry 7
Metallurgical Industry 8
Pertoleum and Natural Gas 9
Chemicals 10
Electrical Equipments 11
Trading 12
Hotel and Tourism 13
Information and Broadcasting 14
Cement and Gypsum Products 15
Drugs and Pharmaceuticals 16
Agriculture 17
Consultancy 18
Ports 19
Ranks Country 2007-08 2008-09 2009-10 2010-11 Cumulative %age to total
(April- (April- (April- (for April Inflows Inflows
March) March) March) ‘10) (April ‘00 to (in terms of
April ‘10) US $)
1. MAURITIUS 44,483 50,794 49,633 2,528 213,434 43 %
(11,096) (11,208) (10,376) (568) (47,808)
2. SINGAPORE 12,319 15,727 11,295 1,933 47,080 9%
(3,073) (3,454) (2,379) (434) (10,625)
3. U.S.A. 4,377 8,002 9,230 404 37,593 (8,369) 7%
(1,089) (1,802) (1,943) (91)
4. U.K. 4,690 3,840 3,094 265 26,263 (5,944) 5%
(1,176) (864) (657) (59)
5. NETHERLAN 2,780 3,922 4,283 312 20,438 4%
DS (695) (883) (899) (70) (4,557)
6. JAPAN 3,336 1,889 5,670 1,455 18,350 4%
(815) (405) (1,183) (327) (4,041)
7. CYPRUS 3,385 5,983 7,728 123 17,900 4%
(834) (1,287) (1,623) (28) (3,927)
8. GERMANY 2,075 2,750 2,980 102 12,571 3%
(514) (629) (626) (23) (2,822)
9. FRANCE 583 2,098 1,437 184 7,102 1%
(145) (467) (303) (41) (1,571)
10. U.A.E. 1,039 1,133 3,017 31 7,054 1%
(258) (257) (629) (7) (1,556)
TOTAL FDI INFLOWS * 98,664 123,025 123,378 9,854 526,357 -
(24,581) (27,331) (25,888) (2,214) (117,943)

RBI BULLETIN
India Vs China…

• Even though our inflows are increased tremendously

we are far behind of china
• It is due to failure of Indian reforms
• Reasons for our failure
Reforms
Infrastructure
Technology
Facilities
Skilled labor etc
Technology spillovers

• FDI is considered as a source of technology

• It may not be all the times

• It depends on extent of value addition in host economy

• FMCG leads to minimal externality

• Automobile industry can increase technical capability

Loss in bargaining power..

• Many dominant international firms with their power in

technology has weakened domestic players bargaining
power

•Considering their finanancial and technical strengths many

foreign firms took managerial control over domestic
companies and increased their stake

• They found it as an inexpensive way to acquire new

companies
Brand names..

• It takes some time to create such intangible asset

• It acts as a competitive advantage
• Brand consciousness has started form 1990’s

Cola bought its competitors

Pepsi bought Mangola, Dukes etc

• These proved to be a costly mistake for India

FDI POLICIES

• FDI is seen as integral part of National development

•Foreign investment is freely permitted in all the sectors

excluding some such as agriculture, retail trade, real
estate etc

• 100% in power trading, processing, development of

new airports, laying of natural gas pipelines, petroleum
infrastructure and warehousing of coffee and rubber
• Limit for telecoms services firms have been raised from 49
per cent to 74 per cent.
• Retailing industry in India is allowing 51% FDI in single
brand outlet
•Prohibited Sectors

i. Gambling and betting

ii.Lottery Business
iii.Atomic Energy
iv. Retail Trading
v.Agricultural or plantation activities of Agriculture
Questions:

• Name any five top investing sectors in India?

• What are the main reasons for not attracting fdi ?

• What is the reason for sudden increase in fdi ?

• What is our current rank in FDI investments ? Which countr

did India overtake to reach that position?

• How we can reach number one? What are our advantages

Thank u