1. Managerial
economics-II
presentation
Topic :-Foreign Direct
Investment(FDI)

2. Stewar
t
Bh
av
esh
Mo
nit
Kave
shna
Sor
ab
h
Vi
ka
s
Ari
f
Ch
ai

3. Overview
of
the
project

4. WHAT IS FDI ?
 Foreign 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.
 Include investments made to acquire lasting interest in
enterprises operating outside of the economy of the
investor.
 They are usually non volatile in nature.
 Preferred over other forms of external finance because
they are non debt creating.
 Their returns usually depends on the performance of
the project.

5. WHY FDI?

7. Benefits
Economic
Growth
Linkages and
spillover to
Trade
domestic
firms
Technology
Employment
diffusion and
and skill
knowledge
levels
transfer

8. Limitations
Fluctuation in Compromising
value of home Inflation with
currency soveigernity
Greater
Environment competition
and natural for small and
cost. infant
industries

9. Investing in India –
Entry Routes
 Foreign Company has the following options to set up
business operations in India :

10. 100% FDI
Permitted
In India

11. Arms and
ammunition.
Housing and
Atomic
Real Estate
Energy.
Business
Agricultural
or plantation
FORBIDDEN Railway
activities TERRITORIES Transport.
Lottery Coal and
Business lignite.
Mining

12. Liberal,
largest
democracy,
political
stability
India An
FDI
Destination
Highest
rates of
return on
investment

13. World's fourth
largest
economy &
second largest
pharmaceutical
industry
Contd………..

14. Factors affecting
FDI
Profitability
Costs Of Production
Economic Conditions
Government Policies
Political Factors

15. Impact of FEMA on
FDI
 As the third-largest economy India is a preferred destination for
foreign direct investments (FDI).
 India’s recently liberalized FDI policy permits up to a 100% FDI
stake in ventures.
 Industrial policy reforms have substantially reduced industrial
licensing requirements, removed restrictions on expansion and
facilitated easy access to foreign technology and FDI.
 During past few years number of changes was approved on the FDI
policy to remove the cap in most of the sectors. Restrictions will be
relaxed in sectors as diverse as civil aviation, construction
development, industrial parks, commodity exchanges, petroleum
and natural gas, credit-information services, Mining etc.

16. Contd……….
 The future of Indian economy is brighter because of its huge
human resources, rapidly upcoming service sector, availability of
large number of competent professionals, vast market for every
product, increasing impact of consumerism, absence of controls
and licenses, interest of foreign entrepreneurs in India and
existence of four hundred million middle class people.
 Today, India provides highest returns on FDI than any other
country in the world.
 Overall we can say that FEMA had a great influence on Economic
growth of the country & it will remain for the coming years as
well.

17. FDI policy in India
 FDI is not allowed in the sectors of arms and
ammunitions, atomic energy, railway system,
extraction of coal and lignite and mining
industry
 In infra-structure development, FDI is allowed
up to 100% equity participation, with the
capping amount as Rs.1500 crores
 In finance sector, FDI is allowed up to 40%
 In telecom industry, FDI is allowed up to 49%

18. IMPACT OF FDI IN

INDIA of growth and
Enabled India to achieve a high degree
development.
 A number of projects have been announced in areas such as
electricity generation, distribution and transmission, as well
as the development of roads and highways, with opportunities
for foreign investors.
 The Indian national government also provided permission to
FDIs to provide up to 100% of the financing required for the
construction of bridges and tunnels, but with a limit on
foreign equity of INR 1,500 crores, approximately $352.5m.

19. Sectors attracting highest FDI equity
2%
inflows
2% SERVICES SECTOR
3%
COMPUTER SOFTWARE&
4% HARDWARE
21% TELE- COMMUNICATIONS
4%
HOUSING & REAL ESTATES
CONSTRUCTION ACTIVITIES
7%
POWER
AUTOMOBILE INDUSTRY*
9% METALLURGICAL INDUSTRIES
8%
PETROLEUM & NATURAL GAS
8%
CHEMICALS

20. The Trends In FDI Inflow To India
Since 1991
27329
25609
24573
15725
5975 5772
4222
165 393 654 1374 2141 2770
3682 3083
2439 2908 3134 2634 3754
US $

21. REGIONS NOT INDICATED
PATNA
GUWHATI
KANPUR
BHUBANESHWAR
BHOPAL
COCHI
Regional disparities
JAIPUR
PANAJI
in
FDI equity inflows
CHANDIGARGH
KOLKATTA
HYDERABAD
CHENNAI
AHEMADABAD
BANGLORE
NEW DELHI
MUMBAI
0% 5% 10% 15% 20% 25% 30% 35%

22. Th
an