FDI

1. INDIAN INVESTMENT IN
ABROAD- FDI
PRESENTED BY:
ARCHANA

2. CONTENT
 INTRODUCTION
 CLASSIFICATION OF FDI
 REGULATORY AUTHORITIES
 INDIAN POLICY FRAMEWOR
 BENEFITS OF FDI
 PROBLEMS WITH FDI

3. WHAT IS FDI?
 Foreign direct investment (FDI) refers to
cross –border investment made by a
resident in one economy (the direct
investor) with the objective of establishing
a lasting interest in an enterprise (the direct
investment enterprise) that is resident in a
country than that of the direct investor

4. CLASSIFICATION OF FDI
TYPES OF FDI
BY DIRECTION BY TARGET
BY MOTIVE
INWARD GREENFIELD INVEST
MENT
RESOURCE
SEEKING
OUTWARD
Horizontal and Vertical
FDI
MKT & Efficiency
Seeking

5. NEED FOR FOREIGN
CAPITAL
 Domestic capital is inadequate for purpose
of economic growth
 During the period in which the capital
market is in the process of development ,
foreign capital is essential as a temporary
measure
 Foreign capital brings with it other scare
productive factors; technical know how,
business experience and knowledge.

6. Authorities dealing with FI
 Foreign investment promotion board
(FIPB)
 Expedite clearance process.
 Periodically review implementation of
cleared proposal
 Review general and sectoral policy
guidelines
 Undertake investment promotion activities.

7.  Secretariat for industrial assistance (sia)
 Acts of gateway to industrial investment in
India.
 Assist entrepreneurs and investors in
setting up projects
 Liaise with govt. bodies seek necessary
clearance

8.  Foreign investment implementation
authority (FIIA).
 Quick implementation of FDI approval.
 Resolution of operational difficulties faced
by foreign investors.
 Gather feedback from foreign investors

9.  Other authorities involved:
 Investment commission
 Project approval board
 RBI OF INDIA

10. Government policy
 Foreign investment is allowed in all areas
except following sectors where foreign
investment is prohibited.
 Atomic energy
 Agriculture (except floriculture, horticulture,
seed development etc.)
 Lottery business/gambling and betting.
 Plantations (except tea plantations)

11. MOBILIZATION OF FUNDS
Different options for Indian corporate,
 Investment through GDRs and ADRs
 Mobilization of funds through preference
shares.
 Mobilization of funds through external
commercial borrowings.
 Foreign currency exchangeable bonds.

12. PRIMARY REASONSS FOR FDI
INVESTMENT IN INDIA
 Local market demand – 68%
 Low cost operations -29%
 Ease of making FDI- 29%
 Labour availability -29%
 Entry of other players 24%
 Political Stability 24%
 Time zone advantage- 14%

13. Benefits of FDI
 Play a complementary role in overall capital
formation
 Employment generation and productivity
enhancement
 Encourages the transfer of management skills,
intellectual property and technology.
 Improves Forex position of the country.
 Promotion of the competition within the local
input market.
 Development of human capital resources.

14.  Increase in exports
 Increases tax revenues

15. Problem with FDI
 A company may lose out on its ownership
to an overseas company.
 Govt. has less control over the functioning
of the company that is functioning as the
wholly owned subsidiary of an overseas
comp.
 FDI entering and taking the control of
already established market, where local
companies are meeting the requirement of
the market.

16.  Invest in machinery and intellectual
property, not in wages
 Large giants can set up monopolies in
highly profitable sector.