fdi (PowerPoint) by shiram14


									Portfolio investment
Investment that does not involve obtaining a degree of control
in a company

Foreign Direct Investment
Purchase of physical assets or a significant amount of the ownership
(stock) of a company in another country to gain a measure of
management control
                 Investing in India

                               Prior Permission
                               Prior Permission
                                 Prior Permission
  Automatic Route
  Automatic Route
  Automatic Route                   (FIPB)

General Rule
General Rule
General Rule                By Exception
                            By Exception
No prior permission
No prior permission
 No prior permission        Prior Government
                            Prior Government
 required                   Approval needed.
                            Approval needed.
Inform Reserve Bank
Inform Reserve Bank
 Inform Reserve Bank        Decision generally
                            Decision generally
within 30 days of
within 30 days of
 within 30 days of          within 4-6 weeks
                            within 4-6 weeks
inflow/issue of shares
inflow/issue of shares
 inflow/issue of shares
   Increase investment level and thereby income & employment
   Increase tax revenue of government
   Facilitates transfer of technology
   Encourage managerial revolution through professional
   Increase exports and reduce import requirements
   Increase competition and break domestic       monopolies
   Improves quality and reduces cost of inputs
   Flow to high profit areas rather than main concern areas
   Through their power and flexibility, MNC can undermine
    economic autonomy and control
   Sometimes interferes in the national politics
   Sometimes engage in unfair and unethical trade practices
   Sometimes result in minimizing / eliminating competition and
    create monopolies or oligopolistic structures
                         Year                   India(Amount US $ Billion)

                           2001                               4.02

                           2002                               6.13

                           2003                               5.03

                           2004                               4.32

                           2005                               6.05

                           2006                              8.961

                           2007*                             17.59

*Jan.- Nov.
Source- 1. http://siteresources.worldbank.org/CHINAEXTN/Resources/chinaei.pdf
         2. www.rbi.org.in
         FDI equity limit-                FDI requiring prior
         Automatic route                      approval
   Insurance – 26%                     Defense production – 26%
   Domestic airlines – 49%             FM Broadcasting - 20%
   Telecom services- Foreign           News and current affairs- 26%
                                        Broadcasting- cable, up-
    equity 74%                           linking – 49%
   Private sector banks- 74%           Trading- wholesale cash and
   Mining of diamonds and               carry, export trading, etc.,
    precious stones- 74%                Tea plantation – 100%
   Exploration and mining of coal      Development of airports-
    and lignite for captive              100%
                                        Courier services- 100%
    consumption- 74%
 Engineering & Manufacturing sectors

 Roads & Highways, Ports and Harbors

 Industrial model towns/industrial parks

 Hotels & Tourism

 Pollution Control and Management

 Advertising & Film industry

 Power generation (hydro-electric, coal/lignite, oil or gas based)

 Information Technology including E-Commerce
   Profitability: Attract where return on investment is higher
   Costs of production: Encouraged by lower costs of production like
    raw materials, labor .
   Economic Conditions: Market potential, infrastructure, size of
    population, income level etc
   Government policies: Policies like foreign investment, foreign
    collaboration, remittances, profits, taxation, foreign exchange control,
    tariffs etc.
   Political factors: Political stability, nature of important political
    parties and relations with other countries.
   Foreign Institutional Investors (FIIs) are allowed to invest in the primary
    and secondary capital markets in India through the portfolio investment
    scheme (PIS). Under this scheme, FIIs/NRIs can acquire shares/debentures
    of Indian companies through the stock exchanges in India
List of companies in which FII investment is allowed upto
limits fixed by companies as indicated against their
1     Amtek Auto Ltd (74%)

2     Advanta India Limited 49%

3     Amtek India Ltd (74%)

4     Ahmednagar Forgings Ltd (74%)

5     Anant Raj Industries Ltd. (40%)

6     ANG Auto Ltd (49%)

7     Apollo Hospitals (74%)

8     Aptech Ltd (74%)

9     Arshiya International Limited (49%)

10    Bombay Rayon Fashions Ltd (40%)
  Foreign Institutional Investors(FIIs) in India

    Year           1995-96     1996-97     1997-98     1998-99 1999-2000 2000-01        2001-02     2002-03     2003-04    2004-05      2005-06 2006-07(P)
                    2009        1926         979         -390       2,135      1847       1505        377       10,918       8,686       9,926    3,225
(US $ Milloin)

*Represents inflow of funds (net) by Foreign Institutional Investors (FIIs).

Source:-RBI Bulletin of 13th Feb 2008.

Net inflows by foreign institutional investors (FIIs) aggregated to US $ 26.8 billion during the current financial year so far (up to
January 11, 2008). The number of FIIs registered with the SEBI increased from 997 at end-March 2007 to 1,219 at end-December
   The main objective of the study is to know about in which sector the
    industries are invest our money FDI or FII.
   To identify factors which inhibit higher FDI or FII flows and suggest
    remedial steps.
   To examine policy reforms towards mergers and acquisition for attracting
    FDI or FII
   To suggest changes in institutional apparatus and organizations, both in
    Centre and States, for attracting the FDI or FII flows.
   The result of all these efforts are encouraging: the inflow of
    foreign capital has been steadily rising year to year so that FDI is
    better then FII
   Investors based in many countries have taken
    advantage of the India-Mauritius bilateral tax treaty
    to set up holding companies in Mauritius which
    subsequently invest in India, thus reducing their tax
   By industry, the largest destinations for FDI are
    electrical equipment (including computer software
    and electronics), services, telecommunication &

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