Final Draft- FDI Project DLA

A STUDY RELATING TO FOREIGN DIRECT
INVESTMENT AND ITS IMPACT ON
PHARMACEUTICAL,INFRASTRUCTURE AND FAST
MOVING CONSUMER GOODS
A Report submitted in partial fulfillment of the requirements for the
Degree of Bachelor of Commerce in CHRIST UNIVERSITY.
Submitted by
Mr. Damodhar Janarthanan
Register Number- 1310609
Ms. Lisha Murali
Register Number-1310656
Mr. Aravind Swamy
Register Number-1310661
Under the Guidance of
Prof. Jerlin Jose,

CERTIFICATE BY HOD
This is to certify that Mr. DamodharJanarthanan; Register Number: 1310609,
Ms. Lisha Murali; Register Number: 1310656, Mr. Aravind Swamy; Register
Number: 1310661 are bona fide students of B.Com F&A program studying in
this UNIVERSITY. They have prepared and submitted a project titled “A Study
Of Foreign Direct Investment & The Indian Economy” in partial fulfillment for
the requirement of Bachelor of Commerce Program of Christ University, for the
academic year 2015-2016.
Place: Bangalore Prof. Biju Toms
HOD
Date: Department of Professional Studies

CERTIFICATE BY GUIDE
This is to certify that this project titled “A Study Of Foreign Direct Investment
& The Indian Economy” submitted to Christ University in partial fulfilment for
the requirement of Bachelor of Commerce and is an original and independent
work carried out by Mr. DamodharJanarthanan; Register Number: 1310609,
Ms. Lisha Murali; Register Number: 1310656, Mr. Aravind Swamy; Register
Number: 1310661 Under my guidance and supervision.
This has not been previously formed the basis of the award of any degree,
diploma of other similar title of recognition.
Place: Bangalore Jerlin Jose
Assistant Professor
Date: Department of Professional studies.

DEPARTMENT OF PROFESSIONAL STUDIES, CHRIST UNIVERSITY
HOSUR ROAD BANGALORE – 560029.
(2015-16)
Declaration
I, DamodharJanarthanan; (Register Number: 1310609) hereby declare that this
project titled “A Study Of Foreign Direct Investment & The Indian Economy ”
is an original project study, conducted under the guidance of Prof. Jerlin Jose,
Department of Professional Studies, Christ University.
I further declare that this has not been previously formed the bases of the award
of any degree, diploma or other similar title of recognition.
Place: Bangalore Damodhar Janardhanan
Date: 1310609

Declaration
I, Lisha Murali; (Register Number: 1310656) hereby declare that this project
titled “A Study Of Foreign Direct Investment & The Indian Economy ” is an
original project study, conducted under the guidance of Prof. Jerlin Jose,
Place: Bangalore Lisha Murali
Date: 1310656

Declaration
I, Aravind Swamy; (Register Number: 1310661) hereby declare that this project
titled “A Study Of Foreign Direct Investment & The Indian Economy ” is an
original project study, conducted under the guidance of Prof. Jerlin Jose,
Place: Bangalore Aravind Swamy
Date: 1310661

ACKNOWLEDGEMENT
The writing of this research project has been one of the most
significant challenges we have ever had to face.
We Thank The Almighty For His Guiding Presence Throughout This
Project.
We thank Christ University & the Department of Professional Studies
for giving us this challenging opportunity to complete our Bachelor’s
degree.
We are grateful to Prof. Jerlin Jose for his guidance on the successful
completion of this research project.
We are indebted to our Coordinator, Prof. Ravi Thangjam for helping
us complete the project on time
Most importantly, we thank our parents for their encouragement &
profound understanding.

TABLE OF CONTENTS
SL NO. CONTENTS PAGE
NO.
I Certificate By HOD
II Certificate By Guide
III Declaration
IV Acknowledgement
V Abstract
1. Introduction 11
1.1 An Overall View 14
1.2 India Post Reform Era 15
1.3 Main Objectives Of FDI 16
2. Review Of Literature 17
3. Research Methodology 25
3.1 Objective Of Research 27

3.2 Collection Of Data 27
3.3 Limitations Of Research 27
3.4 Analytical Tools 28
4. Data Analysis 29
4.1 Nifty 50 30
4.1.1 Table showing Avg rate of
return of Nifty 50
30
4.1.2 Line graph on annual growth
rate
31
4.1.3 Regression Analysis 31
4.1.4 Anova Analysis 32
4.2 Nifty FMCG 32
return of Nifty FMCG
33
rate
33

4.3 Nifty Pharma 35
return of Nifty Pharma
35
rate
36
4.4 Nifty Infra 37
return of Nifty Infra
38
rate
38
4.5 Combined Analysis 40
5. Findings & Suggestions 42

6. Conclusions 44
7. Bibliography 46

ABSTRACT
Foreign Direct Investment is one and only major instrument of attracting International Economic
Integration in any economy. It serves as a link between investment and saving. Many developing
countries like India, are facing the deficit of savings. This problem can be solved with the help of
Foreign Direct Investment. Foreign investment helps in reducing the defect of BOP. The flow of foreign
investment is a profit making industry like Pharmaceuticals ,Infrastructure ,FastmovingConsumerGoods
The present study is based on the objectives like (a) to know the requirement of amount of foreign
investment by India, for its economic Development and (b) to analyze the trend and role of FDI .To
analyze all these objectives data has been gathered through secondary sources like reports and
publication of Govt. and RBI relating to foreign Investment.Foreign investment flows are supplementing
the scare domestic investments in developing countries particularly in India. Further this paper
recommends that we should welcome the inflow of foreign investment because it enable us to achieve
our cherished goal like making favorable the balance of payment, rapid economic development, removal
of poverty, and internal personal disparity in the development and also it is very much convenient and
favorable for Indian economy
A cumulative and an exhaustive study of the three sector of FDI in India starting from the introduction of
FDI in the country, impact in Nifity50 and impact of FDI on the chosen sector

1.0 INTRODUCTION
The most striking developments during the last twenty years is the spectacular growth of FDI
in the Indian economic landscape is the growth of global FDI ; FDI is an important and vital
component of development strategy in both developed and developing nations and policies
are designed to result an inward flows. In fact, FDI provides a economic gain scenario to
both the foreign and the home economy. Both countries are directly interested in inviting
FDI, because they benefit a lot from such type of venture. The home countries want to take
advantage of the vast markets opened by industrial growth which yields economic benefit on
a later period. On the other hand the ‘host’ countries want to get technological and
managerial skills and the supplement domestic savings and foreign exchange. Developing
nations accepted FDI as a sole visible solution for all their scarcities and help them in their
economic development.
1.1 An Overall View
History of FDI in India can be traced back with the setup of 'East India Company ' of Britain;
before independence major amount of FDI came from East India Company. 'British
companies' setup their units in mining sector and in those sectors that suits their own
economic gains and Interest. After Second World War, Japanese companies entered Indian
market and enhanced their trade with India by routing their investments to India.
Further, after Independence issues relating operations of MNCs, gained attention of the
policy makers, keeping in thought the national interests the policy makers designed the FDI
policy aiming to acquiring advanced technology in order mobilize foreign exchange resource.
The first Prime Minister of India considered foreign investment as necessary not only to
supplement domestic capital but also to get scientific, technical, and industrial knowledge. In
Accordance with economic and political regimes there have been changes in the FDI policy.
The Industrial policy of 1965 allowed MNCs to venture Indian economy through technical
collaboration. However, the country faced two major crises in the form of foreign exchange
and financial resource mobilization during the second five year plan Therefore, the
government of India adopted a liberal perspective by permitting a lot of frequent equity
participation to foreign enterprises, and to just accept equity capital in technical
collaborations. the govt. additionally provides several incentives like tax concessions,
simplification of licensing procedures and de- reserving some industries like medicine,
aluminum, serious electrical equipment’s, fertilizers, etc in order to additionally boost the
FDI inflows within the country. This liberal perspective of government towards foreign
capital lures investors from other advanced countries like USA, Japan, and European country,
etc. however as a result of vital outflow of foreign reserves within the type of remittances of
dividends, profits, royalties etc, the govt. has got to adopt tight policy in 1970s. Throughout
this period the govt. adopted a selective and extremely restrictive policy as towards as foreign
capital, type of FDI and ownerships of foreign corporations was involved. Government setup
Foreign Investment Board and enacted foreign exchange Regulation Act so as to control flow
of foreign capital and FDI flow to India. The soaring oil costs continued low exports and
deterioration in Balance of Payment position throughout Eighties forced the govt. to create

necessary changes within the policy. it is during this era the govt. encourages FDI, permit
MNCs to control in India. Thus, leading to the partial liberalization of Indian Economy. The
government introduces reforms within the industrial sector, aiming towards increasing ability,
efficiency and growth in trade through a stable, pragmatic and non-discriminatory policy for
FDI flow.
In fact, the early nineties, Indian economy faced severe Balance of payment crisis. Exports
began to experience serious difficulties. There was a marked increase in crude oil costs owing
to the gulf war. The crippling external debts were debilitative the economy. India was left
with a lot of quantity of exchange reserves which finance its 3 weeks of imports. The
outflowing of foreign currency that was deposited by the Indian NRI’s gave an additional jolt
to Indian economy. The Balance of Payment reached at Rs. ( -) 4471 crores. Inflation reached
at its highest level of 13%. Foreign reserves of the country stood at Rs.11416 crores. The
continuing political uncertainty within the country throughout this period adds more to
worsen the case. As a result, India’s credit rating fell within the international marketplace for
each short- term and long- term borrowing. of these developments place the economy at that
point on the verge of default in respect of external payments liability. In this essential face of
Indian economy the then minister of finance of India Dr. Manmohan Singh with the
assistance of World Bank and IMF introduced the macro – economic stabilization and
structural adjustment program. As a result of these reforms India open its door to FDI inflows
and adopted a lot of liberal policy so as to revive the boldness of foreign investors.
Further, beneath the new foreign investment policy Government of India recognized FIPB
(Foreign Investment Promotion Board) whose main operation was to ask and facilitate
foreign investment through single window system from the Prime Minister’s office. The
foreign equity cap was raised to 51 % for the present companies. Government had allowed
the use of foreign brand names for domestically made merchandise that was restricted earlier.
India conjointly became the member of MIGA (Multilateral Investment Guarantee Agency)
for protection of foreign investments. Government lifted restrictions on the operations of
MNCs by editing the FERA Act 1973. New sectors like mining, banking,
telecommunications, road construction and management were open to foreign investors as
well to private sector.
1.2 FDI INFLOWS IN INDIA IN POST REFORM ERA
India’s economic reforms way back in 1991 has generated strong interest in foreign investors
and turning India into one of the favorite destinations for global FDI flows. According to
A.T. Kearney1, India ranks second in the World in terms of attractiveness for FDI. A.T.
Kearney’s 2007 Global Services Locations Index ranks India as the most preferred
destination in terms of financial attractiveness, people and skills availability and business
environment. Similarly, UNCTAD’s76 World Investment Report, 2005 considers India the
2nd most attractive destination among the TNCS. The positive perceptions among investors
as a result of strong economic fundamentals driven by 18 years of reforms have helped FDI
inflows grow significantly in India. The FDI inflows grow at about 20 times since the
opening up of the economy to foreign investment. India received maximum amount

of FDI from developing economies.
1.3 Main Objectives of FDI in India
When a firm controls (or have a powerful say in) another firm situated abroad, e.g. by owing
over 100% of its equity. Foreign investment plays a major role in development of Indian
economy. Many countries give several incentives for attracting the foreign direct investment
(FDI). Need for * of FDI depends on saving and investment rate in any country Foreign
Direct investment acts as a bridge to meet the gap between investment and saving. in the
method of economic development foreign capital helps the domestic saving constraint and
supply access to the superior technology that promotes potency and productivity of the
present production capability and generate new production chance.
1. Sustaining A High Level Of Investment: Since the underdeveloped countries need to
industrialize themselves within a brief amount of time, it becomes necessary to boost the
amount of investment considerably. this requires, in turn, a high level of savings.
However, because of general poverty of masses, the savings are often terribly low. Resulting*
emerges a resource gap between investment and savings. This gap must be filled through
foreign capital.
2. Technological Gap - The under developed countries have very low level of technology as
compared to the advanced countries. but they possess strong urge for industrialization to
develop their economies and to wriggle out of the low level equilibrium trap in which they're
caught.
This raises the necessity for importing technology from advanced countries. Such technology
sometimes comes with foreign capital when it assumes the form of private foreign investment
or foreign collaboration. in the Indian case technical help received from abroad has helped in
filling the technological gap through the following three ways:
(a) Provision for expert services
(b) Training of Indian personnel
(c) Education research and coaching establishment within the country
3. Exploitation Of Natural Resources - variety of underdeveloped countries possesses vast
natural resources that await exploitation. These countries themselves don't possess the desired
technical ability and experience to accomplish this task. As a consequence, they have to rely
upon foreign capital to undertake the exploitation of their mineral wealth.
4. Undertaking The Initial Risk - several beneath developed countries suffer from acute
private entrepreneurs. This creates obstacles within the programs of industrialization. an
argument advanced in favor of the foreign capital is that it undertakes the risk of investment
in host countries and therefore provides the much-needed impetus to the process of
industrialization.

Once the programmed of manufacture gets started with the initiative of foreign capital,
domestic industrial activity starts picking up as more and more of the host country enter the
industrial field.
5. Development Of Basic Economic Infrastructure - it has been observed that the domestic
capital of the under developed countries is usually too inadequate to make up the economic
infra structure of its own. so these countries need the help of foreign capital to undertake this
task.
6. Improvement In Balance Of Payments Position - in the initial phase of the economic
development, the under developed countries want a lot of larger imports (in the form of
machinery, capital goods, industrial raw materials, spares and components), then they will
probably export. As a result, the balance of payments usually turns adverse. This creates a
spot between the earnings and foreign exchange. Foreign capital presents short run solution to
the problem.

2.1 Dr.M.Shahul Hameedu (2014); Foreign Direct Investment, the Indian
scenario
Globalization and liberalization brings lots of new innovative products to the world, Foreign
Direct Investment is the one among this, also there are number of different forms of FDI is
available currently. Recently, Government of India allowed FDI in different sectors of Indian
economy. But several opposition parties are making it a political issue in parliament on these
policy decisions and amendments. With a view to infuse globally acceptable best practices,
modern management skills and latest technology, it has been decided to allow foreign
investment in India. The objective of the present study is to provide a skeleton on foreign
direct investment with the scene of different sectors. It also point out the sector-wise
distribution of FDI inflow to know about which has concerned with the chief share. The
present study is based on secondary data collected from different sources. This paper also
tries to find out the scenario and role and Scope of Foreign Direct Investment in India.
2.2 Sumbul Fatima, Zia Afroz (2008); FOREIGN DIRECT INVESTMENT
(FDI) INFLOWS IN INDIA: ITS TRENDS AND SCOPE
Researcher: Indian Economy has adopted the LPG (Liberalization, Privatization and
Globalization) in the year 1991, which has brought dramatic changes into the Indian
Economy impacting its economic growth and its relationship with the outside world. Indian
being one of the most emerging economies of the world, various developmental plans and
schemes has been adopted by Government of India to attract the investments from the other
countries giving a way to FDI inflows. The main focus of this paper is to throw light on the
country wise and sector wise inflows of FDI in India as well as to bring into the knowledge of
the scope of FDI in the Indian context. As regards country wise FDI inflows in India,
Mauritius holds the highest rank with 37% of total FDI inflows. The Sector attracting highest
FDI Equity inflows has been the Services Sector including both financial and non-financial. It
can also be seen that FDI also open opportunities in bringing advance technology, creating
more employment and healthy competition etc. in India.
2.3 Dr. Jasbir Singh, Ms. Sumita Chadha, Dr. Anupama Sharma (2012);
Role of Foreign Direct Investment in India: An Analytical Study
International Economic Integration plays a vital role in Economic Development of any
country. Foreign Direct Investment is one and only major instrument of attracting
International Economic Integration in any economy. It serves as a link between investment
and saving. Many developing countries like India are facing the deficit of savings. This
problem can be solved with the help of Foreign Direct Investment. Foreign investment helps
in reducing the defect of BOP. The flow of foreign investment is a profit making industry like
insurance, real estate and business services and serving as a catalyst for the growth of

economy in India. The present study is based on the objectives like (a) to know the
requirement of amount of foreign investment by India, for its economic Development and (b)
to analyze the trend and role of FDI & FIIs in improving the quality and availability of goods
has been beyond doubt. To analyze all these objectives data has been gathered through
secondary sources like reports and publication of Govt. and RBI relating to foreign
Investment. After analyzing all the facts it may be concluded that maximum global foreign
investment’s flows are attracted by the developed countries rather than developing and under
developing countries. Foreign investment flows are supplementing the scare domestic
investments in developing countries particularly in India. Further this paper recommends that
we should welcome the inflow of foreign investment because it enable us to achieve our
cherished goal like making favorable the balance of payment, rapid economic development,
removal of poverty, and internal personal disparity in the development and also it is very
much convenient and favorable for Indian economy.
2.4 Murali Patibandla (2012); Foreign Direct Investment in India’s Retail
Sector: Some Issues
Foreign direct investment (FDI) plays an important role in India’s growth dynamics. There
are several examples of the benefits of FDI in India. FDI in the retail sector can expand
markets by reducing transaction and transformation costs of business through adoption of
advanced supply chain and benefit consumers, and suppliers (farmers). This also can result in
net gains in employment at the aggregate level. This paper brings forth a few conceptual
issues and analysis of qualitative information, data and stylized facts on these issues.
2.5 Bhavya Malhotra (2014); Foreign Direct Investments: Impact on Indian
Economy
With the initiation of globalization, developing countries, particularly those in
Asia, have been witnessing a immense surge of FDI inflows during the past
two decades. Even though India has been a latecomer to the FDI scene
compared to other East Asian countries, its considerable market potential and
a liberalized policy regime has sustained its attraction as a favorable
destination for foreign investors. This research paper aims to examine the
impact of FDI on the Indian economy, particularly after two decades of
economic reforms, and analyzes the challenges to position itself favorably in
the global competition for FDI. The paper provides the major policy
Implications from this analysis, besides drawing attention on the complexities
in interpreting FDI data in India.

2.6 K. R. Kaushik, Dr. Kapil Kumar Bansal (2012); Foreign Direct
Investment in Indian Retail Sector Pros and Cons
Researcher: On 20th September, 2012 the Government of India has approved 51% FDI in
Multiband retail and 100% (revised) in Single Brand retail sector through Government Route
with some riders. Govt. of India is firm to implement the FDI in multi Brand Retail’
Agitation and Bandhs have been called by some political parties. Prime Minister of India has
explained to the Nation the necessity and obligation under WTO agreement to allow FDI in
Retail Sector. There is a mixed response about FDI in retail sector. Still some of the states are
either not in favor of the FDI or indecisive on the issue as they feel that FDI in retail is
harmful to local retailers in India. Everyone has the reasons for supporting or opposing the
issue. Retail is one of the largest sectors of Indian economy the unorganized retail sector in
India occupies 97% of the retail business and the rest 3% is contributed by the organized
sector. The unorganized retail sector contributes about 13% to the GDP and absorbs 6% of
our labor force. Hence the issue of displacement of labor consequent to FDI Retail Sector is
of primal importance in India. Also there is divided opinion on the impact of FDI in the retail
sector in India, Some say that FDI in the retail sector in India will lead to economic growth
and creation of new jobs along with rural infrastructure development But the other view point
is that mass scale job loss will happen particularly in manufacturing sector with the entry of
the big MNCs like Wal-Mart and Carrefour, Metro PLC and IKEA etc. This paper highlights
Definition of Retail; Background & Division of Retail Industry, FDI Policy with Regard to
Retailing in India, Foreign Investor’s Concern Regarding FDI in Retail sector, SWOT
Analysis of Indian retail Sector, Govt.’s view point and Conclusion.
2.7 Abhishek Vijaykumar Vyas (2015); An Analytical Study of FDI in India
Foreign Direct investment plays a very important role in the development of the nation.
Sometimes domestically available capital is inadequate for the purpose of overall
development of the country. Foreign capital is seen as a way of filling in gaps between
domestic savings and investment. India can attract much larger foreign investments than it
has done in the past.
The study also highlights country wise approvals of FDI inflows to India and the FDI inflows
in different sector for the period April 2000 to June 2015. The study based on Secondary data
which have been collected through reports of the Ministry of Commerce and Industry,
Department of Industrial Promotion and Policy, Government of India, Reserve Bank of India,
and World Investment Report. The study concludes that Mauritius emerged as the most
dominant source of FDI contributing. It is because the India has Double Taxation Avoidance
Agreement (DTAA) with Mauritius and most of the foreign countries like to invest in service
sector.

2.8 R. ANITHA (2012); FOREIGN DIRECT INVESTMENT AND
ECONOMIC GROWTH IN INDIA
It is very much vital in the case of underdeveloped and developing countries. A typical
characteristic of these developing and underdeveloped economies is the fact that these
economies do not have the needed level of savings and income in order to meet the required
level of investment needed to sustain the growth of the economy. In such cases, foreign direct
investment plays an important role of bridging the gap between the available resources or
funds and the required resources or funds. It plays an important role in the long-term
development of a country not only as a source of capital but also for enhancing
competitiveness of the domestic economy through transfer of technology, strengthening
infrastructure, raising productivity and generating new employment opportunities. In India,
FDI is considered as a developmental tool, which helps in achieving self-reliance in various
sectors and in overall development of the economy. India after liberalizing and globalizing
the economy to the outside world in 1991, there was a massive increase in the flow of foreign
direct investment. The paper tries to examine the various set of factors which influence the
flow of FDI Identifying the causes for low inflow and suggestive remedial measures to
increase the flow of FDI in India with that of other developing nations in the world.
2.9 R.B. Teli (2014); A Critical Analysis of Foreign Direct Investment
Inflows in India
In this paper the researcher analysis the FDI inflows in India. This study is based on
secondary data and period of the study is from 1991 to 2012. Total FDI inflows have been
raised from US $ 133 Million in 1991-92 to US $ 27841 Million in the year 2008-09 and the
share of direct foreign investment through approvals in equity etc. stood at 65.79% and that
of portfolio investment was 34.21%. Projections show that total FDI inflows will be US $
46098 Million in 2015-16. Mauritius and Singapore tops in FDI inflows and the FDI inflows
in service sector were in highest position. They have positive impact on the related economic
indicators on Indian Economy. GOI should attract more FDI through favorable policies and
avoid uncertainties.
2.10 Girish Garg (2013); An Economic Analysis of Foreign Direct
Investment in Retail Sector in India
India has been placed at first position in the category of countries with the best opportunity
for investment in retail sector. The increasing disposable incomes among the Indian middle
class and increasing young population have been cited as the main reasons for such attractive
optimism. Retailing in India is one of the pillars of its economy and accounts for 14 to 15
percent of its GDP. The Indian retail market is estimated to be US $450 billion and one of the
top five retail markets in the world by economic value. India is one of the fastest growing
retail markets in the world, with 1.2 billion people.

After months of discussion with various hurdles on 14 September, 2012 the cabinet approved
the foreign direct investment in retail in India allowed 100% FDI in Single Brand and 51%
FDI in Multiple brand with many preconditions. The minimum FDI limit has been set at $100
million. Half of any investment has to make in infrastructure like cold-storage chains and
warehouses. With at least 30% of the goods to be sold will have to source from local
producers.
This Research Paper makes a modest attempt of developing an insight as to what are the
trends in the Indian Retail Industry and to the benefits and drawbacks of FDI in this sector. It
has also focused on whether this policy will be beneficial for the Indian Economy as a whole
or not.
2.11 Iyare Sunday O, Bhaumik Pradip K, Banik Arindam (2010);
“Explaining FDI Inflows to India, China and the Caribbean: An Extended
Neighborhood Approach”
It’s find out that FDI flows are generally believed to be influenced by economic indicators
like market size, export intensity, institutions, etc, irrespective of the source and destination
countries. This paper looks at FDI inflows in an alternative approach based on the concepts of
neighborhood and extended neighborhood. The study shows that the neighborhood concepts
are widely applicable in different contexts particularly for China and India, and partly in the
case of the Caribbean. There are significant common factors in explaining FDI inflows in
select regions. While a substantial fraction of FDI inflows may be explained by select
economic variables, country – specific factors and the idiosyncratic component account for
more of the investment inflows in Europe, China, and India.
2.12 Alhijazi, Tahya Z (2009); “Developing Countries and Foreign Direct
Investment”
It analyzed the pros and cons of FDI for developing countries and other interested parties.
This thesis scrutinizes the regulation of FDI as a means to balance the interests of the
concerned parties, giving an assessment of the balance of interests in some existing and
potential FDI regulations. The study also highlights the case against the deregulation of FDI
and its consequences for developing countries. The study concludes by formulating
regulatory FDI guidelines for developing countries.
2.13 CONCLUSIONS
 The above review of literature helps in identifying the research issues and gaps for the
present study. The foregoing review of empirical literature confirms/highlights the
following facts

 Institutional infrastructure and development are the main determinants of FDI inflows
in the European transition economies. Institutional environment (comprising both
institutional strategies and policies of organizations relating to these institutions) plays
critical role in reducing the transaction costs of both domestic and cross border
business activity.
 FDI plays a crucial role in employment generation/ preservation in Central Europe.
 It is found that bigger diversity of types of FDI lead to more diverse type’s of
spillovers and skill transfers which proves more favorable for the host economy.
 It is also found that apart from market size, exports, infrastructure facilities,
institutions, source and destination countries, the concept of neighborhood and
extended neighborhood is also gaining importance especially in Europe, China and
India.
 In industrial countries high labor costs encourage outflows and discourage inflows of
FDI. The principle determinants of FDI in these countries are IT – related
investments, trade and cross – border mergers and acquisitions.
 It is observed that countries pursuing export – led growth strategies reaps enormous
benefits from FDI.
 The main determinants of FDI in developing countries are inflation, infrastructural
facilities, debts, burden, exchange rate, FDI spillovers, stable political environment
etc.
 It is found that firms in cluster gain significantly from FDI in their region, within
industry and across other industries in the region.
 It is also observed that FDI have both short – run and long – run effect on the
economy. So, regulatory FDI guidelines must be formulated in order to protect
developing economies from the consequences of FDI flows.
2.14 Research Gaps & Research Issues
The above review of literature proves beneficial in identifying the research issues and
the research gaps, which are mainly the edifices on which the objectives of the present study
are based on. There is hardly any study in India which has taken macroeconomic variables
like foreign exchange reserves, total trade, financial position, research and development
expenditure while assessing the determinants and impact of FDI on Indian economy. The

present study tries to include these above said variables in assessing the determinants and
impact of FDI in India at the macro – level.
Further, there is hardly any study in India, which documents the trends and patterns of
FDI at world level, Asian level and Indian level. Thus, the present study is an endeavor to
discuss the trends and patterns of FDI, its determinants and its impact on Indian economy.
The present study differs from the early studies in many ways and enriches the existing
literature in the following ways:
Firstly, it has included variables other than the variables included by other scholars.
Secondly, the present study documents the trends and patterns of FDI at World, Asian
and Indian level.
Thirdly, the present study tries to highlight the changing attitude of developing
countries towards FDI and attitude change of developed countries towards developing
countries in understanding their contribution in contemporary international relations and
development process.
Fourthly, the study presents the experiences of first and second generation of
economic reforms on Indian economy.

3.1 Objectives Of Research
 To study the current status of FDI.
 To analyze the FMCG sector, the Infrastructure sector and the Pharmaceutical sector.
 To study the impact of FDI in India.
3.2 Collection of Data
Data collected is of two types: Primary Data and Secondary Data
Primary data have been computed on our own selecting data’s from the year 2010 until 2015.
The data have been computed using excel sheets and through different statistical tools to
compute the daily returns of stocks, the average returns of stocks, and to
Secondary data is one of the parts of research methodology through which information about
the project can be collected. The required data have been collected from various sources
which are as follows
 World Investment Reports
 Asian Development Bank’s Reports
 various Bulletins of Reserve Bank of India
 publications from Ministry of Commerce, Govt. of India
 Economic and Social Survey of Asia and the Pacific
 United Nations
 Asian Development Outlook,
 Country Reports on Economic Policy
 Trade Practice Bureau of Economic
 Business Affairs
 US Department of State
 And from websites of World Bank, IMF, WTO, RBI, UNCTAD, EXIM Bank, etc.
3.3 Limitation of Research
All the economic / scientific studies are faced with various limitations and this study is no
exception to the phenomena. The various limitations of the study are:
 At various stages, the basic objective of our research is suffered due to inadequacy of
time series data from related agencies. But they were minimal to an extent for
chapter-4 Data Analysis as we used the help of relative data’s of the 3 sectors in
order to come to our conclusion based on our research.
 We also faced problem s with sufficient homogenous data we had from different
sources. For example, the time series used for different variables, the averages are

used at certain occasions. Therefore, the trends, growth rates and estimated
regression coefficients may deviate from the true ones.
 The assumption that FDI was the only cause for development of Indian economy in
the post liberalized period is debatable. No proper methods were available to
segregate the effect of FDI to support the validity of this assumption
 FDI is not the only source of impact on the Indian Economy.
3.4 ANALYTICAL TOOLS
For analysis purposes, we have used the concept of Hypothesis Testing through the
techniques of ANNOVA and the correlation between FDI Inflow, Nifty 50 and the chosen 3
sectors.
Hypothesis Testing:
Hypothesis testing basically means drawing assumptions. Hypothesis testing is done only to
validate Null Hypothesis (Ho). There are 2 types to Hypothesis testing which are as follows
a) Null Hypothesis – Ho: There is no relationship between the FDI Inflow and the
Market index of Bombay Stock Exchange.
b) Alternative Hypothesis – H1: There is a relationship between the FDI Inflow and the
Market Index of Bombay Stock Exchange.
For our research purposes we have taken the significant level of 5% (Error up to 5% is
invariable) and the Confidence level being 95%.
Interpretation:
Based on 5% significant level,
Ho will be rejected if the pvalue is less than 0.05
Ho will be accepted if the pvalue is more than 0.05

Our data analysis is based on the information we collected for the Top Nifty 50 stocks, Nifty
Infra, Nifty FMCG and Nifty Pharmaceuticals and computed their daily returns, yearly
returns and found out their relationship with Nifty using Hypothesis testing and its tools of T-
test, ANNOVA and computed the results based on correlation
From the below analysis the FDI Inflow in an economy carries a very positive uptrend for
any of the sectors irrespective of the amount of investment made. 2014 and 2015 has drawn a
great amount of FDI around the globe.
4.0 NIFTY 50
Introduction
The Nifty50 index is a NSE’s stock market index for the Indian Equity Market. Nifty
diversifies 50 stock index’s accounting for 22 sectors of the economy. Nifty is used for
various purposes like index based derivatives, index funds and benchmarking fund portfolios.
It covers all the 22 sectors at once and provides a complete exposure for investment managers
of the Indian market in one portfolio. Nifty50 index is considered to be the largest single
financial product in India, with an ecosystem comprising: exchange traded funds, exchange-
traded futures and options, other index funds and OTC derivatives. The NIFTY 50 is a free
float market capitalization weighted index. The index was initially calculated on full market
capitalization methodology. From June 26, 2009, the computation was changed to free float
methodology.
4.0.2 TABLE SHOWING AVERAGE RETURN OF NIFTY50 FOR PAST
5 YEARS
YEAR AVERAGE RETURN
2010-2011 0.000419
2011-2012 -0.0003
2012-2013 0.000301
2013-2014 0.000709
2014-2015 0.001008

-0.0004
-0.0002
0
0.0002
0.0004
0.0006
0.0008
0.001
0.0012
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015
Nifty 50 Growth
Nifty 50 growth
4.0.3 LINE GRAPH DEPICTING ANNUAL GROWTH OF NIFTY50
(2010-2015)
The above table and graph shows the average returns of NIFTY50 as a whole computed using
the data collected from National Stock Exchange for the past five years (2010 -2015) daily
return average.
After computing the average return, it is evident that the flushing in of Foreign Direct
Investment has boosted the market to a considerable rate showing a constant increase in the
average annual return of the market.
4.0.4 REGRESSION ANALYSIS
Regression
Statistics
Multiple R 0.222787
R Square 0.049634
Adjusted R
Square -0.42555
Standard Error 7364.08
Observations 4
PROBABILITY
OUTPUT
Percentile 34847
12.5 34298
37.5 36046
62.5 44877
87.5 46556

4.0.5 ANOVA ANALYSIS
df SS MS F
Significance
F
Regression 1 5664403.126 5664403 0.104452095 0.777213406
Residual 2 108459349.6 54229675
Total 3 114123752.8
Coefficie
nts
Standard
Error t Stat P-value
Lower
95%
Upper
95%
Lower
95.0%
Upper
95.0%
Interc
ept
41486.7
4386
4895.112
436
8.475
136
0.01363
8007
20424.77
497
62548.7
1274
20424.77
497
62548.7
1274
0.000
419
-
2427226
.68
7510204.
458
-
0.323
19
0.77721
3406
-
3474102
8.39
2988657
5.03
-
3474102
8.39
2988657
5.03
4.1 NIFTY FMCG
4.1.1 Introduction
According to third quarter of the calendar year 2015 (Q3) India’s consumer confidence
continues to be the highest all over the world compared to the other countries. India has
continuously achieved the highest consumer confidence for the last 8 quarters. The FMCG
sector has seen a gain of 11% over the last decade. The major growth drivers for the
consumer market are:
a) Policies & regulatory frameworks such as relaxation of license rules by the
Government of India.
b) Approval of 51 per cent foreign direct investment (FDI) in multi-brand.
c) 100 per cent in single-brand retail.
d) 100 per cent Foreign Direct Investment (FDI) in the electronics hardware-
manufacturing sector through the automatic route.

0
0.0005
0.001
0.0015
0.002
0.0025
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015
NIFTY FMCG GROWTH
Series 1
4.1.2 TABLE SHOWING AVERAGE RETURN OF NIFTY FMCG FOR
PAST 5 YEARS
4.1.3 LINE GRAPH DEPICTING ANNUAL GROWTH OF NIFTY
FMCG (2010-2015)
Year Average
2010-2011 0.00196151
2011-2012 0.00096424
2012-2013 0.00170532
2013-2014 0.00057184
2014-2015 0.00063767

The above table and graph shows the average returns of NIFTY FMCG as a whole computed
using the data collected from National Stock Exchange for the past five years (2010 -2015)
daily return average.
In the above graph, irrespective of the FDI inflow the policies and decisions of the
government has certainly boosted its growth in the last 3 years but largely there isn’t much of
money inflow in the economy breakdown around the globe. The recent Walmart example in
India has setup shocking example for many of the retail players.
PROBABILITY OUTPUT
Percentile 34847
12.5 34298
37.5 36046
62.5 44877
87.5 46556
Coefficie
nts
Standard
Lower
95%
Upper
95%
Lower
95.0%
Upper
95.0%
Interce
pt
45566.25
192
8037.440
429
5.669
249
0.02973
2844
10983.9
3692
80148.5
6693
10983.9
3692
80148.5
6693
0.00196
151
-
5281680.
325
7518279.
096
-
0.702
51
0.55511
5797
-
3763022
4.4
2706686
3.75
-
3763022
4.4
2706686
3.75
Regression Statistics
Multiple R 0.444884203
R Square 0.197921954
Adjusted R Square
-
0.203117069
Observations 4
df SS MS F
Significance
F
Regression 1 22587596.14 22587596 0.493522931 0.555115797
Residual 2 91536156.61 45768078
Total 3 114123752.8

4.2 NIFTY PHARMA
4.2.1 Introduction
The pharmaceuticals market of India is considered to be the third largest in terms of volume
and thirteen largest in terms of value as per the report submitted by Equity Master. India as a
nation enjoys a vital position in the Global Pharmaceuticals Market. Our country has built
potential engineers and scientists to steer the industry ahead to an even higher level. Major
initiatives taken by the government to promote the pharmaceutical sector in India are as
follows:
a) Department of Pharma has planned to launch a venture capital by funding 1000 crores
to startups for their research and development in the pharma and biotech industry.
b) Telangana has proposed to set its state as India's largest integrated pharmaceutical
city.
c) The Department of Pharmaceuticals has set up an inter-ministerial co-ordination
committee in India, which helps them to periodically review, coordinate and facilitate
the resolution of the issues and roadblocks faced by the Indian pharmaceutical
companies and use necessary techniques in order to resolve the issues and roadblocks
faced by the department.
4.2.2 TABLE SHOWING AVERAGE RETURN OF NIFTY PHARMA
FOR PAST 5 YEARS
Year Average
2010-2011 0.00045026
2011-2012 -0.00020135
2012-2013 0.0011178
2013-2014 0.00112934
2014-2015 0.00285512

-0.0005
0
0.0005
0.001
0.0015
0.002
0.0025
0.003
0.0035
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015
NIFTY PHARMA
Series 1
PHARMA (2010-2015)
The above table and graph shows the average returns of NIFTY PHARMA as a whole
computed using the data collected from National Stock Exchange for the past five years
(2010 -2015) daily return average.
From the above analysis it is certain that there has been a tremendous increase in earnings in
the last 5 years in the pharmaceuticals sector. Few of the notable companies that was a part of
pharma revolution in India are GSK, Ranbaxy, Sun-Pharma and Aurobindo Pharma.
Multiple R 0.017764
R Square 0.000316
Adjusted R Square -0.49953
Observations 4
PROBABILITY OUTPUT
Percentile 34847
12.5 34298
37.5 36046
62.5 44877
87.5 46556

df SS MS F
Significance
F
Regression 1 36014.63309 36014.63 0.00063135 0.982235562
Residual 2 114087738.1 57043869
Total 3 114123752.8
Coefficie
nts
Standard
Lower
95%
Upper
95%
Lower
95.0%
Upper
95.0%
Interce
pt
40551.3
6118
5694.983
296
7.120
541
0.01915
8092
16047.82
575
65054.8
966
16047.82
575
65054.8
966
0.00045
026
-
87421.4
599
3479229.
24
-
0.025
13
0.98223
5562
-
1505733
6.65
1488249
3.73
-
1505733
6.65
1488249
3.73
4.3 NIFTY INFRASTRUCTURE
4.3.1 Introduction
Infrastructure sector in India is one of the key drivers for the Indian economy. The
infrastructure sector in India is highly responsible for progressing India’s overall
development and it very well enjoys an intense focus from the Government for initiating
policies that would ensure time-bound creation of world class infrastructure in the country.
Infrastructure sector includes power, bridges, dams, roads and urban infrastructure
development.
During the first half of 2014, the infrastructure sector remained clogged up with policy-
paralysis, the expectations for the infrastructure sector ran unreasonably high in the second
half. This sector was still undergoing financial stress with land acquisition of new projects
that remained unsolved. With this kind of backdrop, the expectations from the Budget 2015
for the infrastructure sector should be cautiously optimistic, and not euphoric. If in the year
2015 is used well for preparing the ground, comparatively there could be a significant
investment uptick in 2016. Few top expectations of Infrastructure sector from Budget 2015
are as follows:
a) Tendering of EPC contracts for road projects has started, but private investment can
return only as financial stress gets addressed.
b) The Sagamala initiative was highlighted in the budget 2015 with the main focus on its
port connectivity and its funding.
c) Smart Cities scheme, or next version of National Urban Renewal Mission, were long
overdue, and as per discussed in the budget , the list of smart cities were announced
very recently.
d)Harmonization of regulations across SEZs, NIMZs, EPZs, SIRs, etc, with a truly
competitive tax regime, remains tobe a key requirement for the infrastructure sector.

-0.0015
-0.001
-0.0005
0
0.0005
0.001
0.0015
0.002
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015
NIFTY INFRASTRUCTURE
Series 1
4.3.2 TABLE SHOWING AVERAGE RETURN OF NIFTY
INFRASTRUCTURE FOR PAST 5 YEARS
PHARMA (2010-2015)
Year Average
2010-2011 0.00016824
2011-2012 -0.00119541
2012-2013 -0.00077538
2013-2014 -0.00121026
2014-2015 0.00183523

The above table and graph shows the average returns of NIFTY INFRASTRUCTURE as a
whole computed using the data collected from National Stock Exchange for the past five
years (2010 -2015) daily return average.
The recent drop in the oil prices have certainly been a great help to cut down on the operation
cost for the companies and has drawn doors open for companies to do domestic project,
turnkey project at a very compete able price.
But at the same time, it is understood that if the drastic price drop of oil continues Indian
Infra companies may not enjoy revenue from Middle East in terms of construction contracts.
df SS MS F
Significance
F
Regression 1 18594990.7 18594991 0.38930664 0.596345349
Residual 2 95528762.05 47764381
Total 3 114123752.8
Coefficie
nts
Standard
Lower
95%
Upper
95%
Lower
95.0%
Upper
95.0%
Interce
pt
41017.2
9516
3575.555
454
11.47
159
0.00751
3406
25632.92
172
56401.6
686
25632.92
172
56401.6
686
0.00016
824
1703185
.151
2729706.
515
0.623
944
0.59634
5349
-
1004179
4.04
1344816
4.34
-
1004179
4.04
1344816
4.34
Multiple R 0.403654651
R Square 0.162937077
Adjusted R Square
-
0.255594384
Observations 4
PROBABILITY OUTPUT
Percentile 34847
12.5 34298
37.5 36046
62.5 44877
87.5 46556

-0.0015
-0.001
-0.0005
0
0.0005
0.001
0.0015
0.002
0.0025
0.003
0.0035
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015
FMCG
PHARMA
INFRA
4.4 Combined Data Analysis Of All The 3 Sectors
For our research project, Three vital industries out of the twenty-two sectors have been taken
into consideration to supplement a stable analysis past 5 years growth analysis is been taken
into consideration (2010-2015). From our study it is clearly seen that there is a positive co-
relation between the inflow of FDI and growth of specified sectors.
The industries which are taken into consideration are Pharmaceuticals, Infrastructure and Fast
Moving Consumer Goods. It is also to be noted that for a considerable amount of FDI inflow
in the economy, government policies and patterns play a pivotal role in shaping the sectors
growth. It is also noted, the present government in the year 2015(March-2015 to December-
2015) has brought a tremendous FDI inflow in the economy.

 .0Based on our hypothesis analysis we have found the relation between FDI Inflow
(Between 2010-2015) and Nifty50 to be pvalue of 0.01363 which below 0.05. Hence,
Null Hypothesis (Ho) shall be rejected and there is a relation between the FDI Inflow
and the market index of BSE and the correlation is -0.19766
 Based on our hypothesis analysis we have found the relation between FDI Inflow
(Between 2010-2015) and Nifty FMCG to be pvalue of 0.02973 which below 0.05.
Hence, Null Hypothesis (Ho) shall be rejected and there is a relation between the FDI
Inflow and Nifty FMCG and the correlation is -0.58478692
(Between 2010-2015) and Nifty Pharmaceuticals to be pvalue of 0.01915 which
below 0.05. Hence, Null Hypothesis (Ho) shall be rejected and there is a relation
between the FDI Inflow and Nifty Pharmaceuticals and the correlation is
0.113752367
(Between 2010-2015) and Nifty Infrastructure to be pvalue of 0.00751 which below
0.05. Hence, Null Hypothesis (Ho) shall be rejected and there is a relation between
the FDI Inflow and the market index of BSE and the correlation is 0.285350755
 More pro-active government policies has gone hand in hand with the FDI inflow from
the analysis that we have done for our research project based on the three sectors that
we’ve selected.
 There has been a jump of 61.6% in terms of FDI inflows(From 21.6 billion from 2014
to 34.9 billion in 2015)
 A high inflow of FDI flushed into an economy will always help in India’s balance of
payments and stabilizes the domestic currency, rupee.
 From our research we found that government of India amended the FDI policy
regarding construction development sector. The policy includes easing of area
restriction norms, reduction of minimum capitalization and easy exit from the project.
 The analysis from 2010-2015 in the area of construction sector, has shown
tremendous growth thus, validating the above point.

6.0 CONCLUSIONS
It is apparent from the above discussion that FDI is a predominant and vital factor in
influencing the process of Indian economic development. The study attempts to analyse the
important three sector of FDI in India. The study works out the trends and patterns, main
determinants and investment flows to India. The study also examines the role of FDI on
economic growth in India for the FY 2000-2015. It was during July 1991 India opened its
doors to private sector and liberalized its economy .Increase in competition for FDI inflows
particularly among the developing nations china, India. The shift of the power centre from the
western countries to the Asia sub leading to highest manufacturing countries .In the financial
year 2014-2015 the new government has raised an whooping amount of 34.9 billion dollars
and has given a new peak to the Nifty50.

BIBLIOGRAPHY
1. Ministry of Finance, Report of the economic survey, Government of India, New Delhi (2003-04).
2. Weisskof T E (1972), “The Impact of Foreign Capital Inflow on Domestic Savings in
Underdeveloped Countries”, Journal of Interna-tional Economics, Vol. 2, pp. 25-38.
3. Sahoo D Mathiyazhagan M K and Parida P (2002), “Is Foreign Direct Investment an Engine of
Growth?”, Evidence from the Chinese Economy, Savings and Development, Vol. 4, pp. 419-439.
4. Nayak D N (1999), “Canadian Foreign Direct Investment in India: Some Observations”, Political
Economy Journal of India, Vol. 8, pp. 51-56.
5. Srivastava S (2003), “What is the True Level of FDI Flows to India?”, Economic and Political
Weekly, Vol. 19, pp. 1201-1209.
6. Basu P, Nayak N C and Vani A (2007), “Foreign Direct Investment in India: Emerging Horizon”,
Indian Economic Review, Vol. 25, pp. 255-266.
7. Weisskof T E (1997), “The Impact of Foreign Capital inflow on Domestic Savings in
Underdeveloped Countries”, Journal of Interna-tional Economics, Vol. 2, pp. 25-38.
8. Swapna S. Sinha (2007):” Comparative Analysis of FDI in China and India: Can Laggards
Learn from Leaders?”, www.bookpump.com/dps/pdf-b/1123981b.pdf
9. Garrick Blalock (2006): “Technology adoption from Foreign Direct Investment and
Exporting: Evidence from Indonesian Manufacturing”, www.informaworld.com
10. Union Budget (2007-08), Finance Minister’s Speech in Parliament.
11. Reserve Bank of India (RBI), Handbook of Statistics on Indian Economy, RBI, Mumbai
12. Secretariat for Industrial Assistance (SIA), Department of Industrial Policy and Promotion,
Ministry of Commerce and Industry, Government of India, various issues.
13. Ministry of Finance, Department of Economic Affairs, Government of India
14. Annual Survey of Industries, Ministry of Statisitics and Programme Implementation, Government
of India, various issues.
15. A.S.Shiralashetti & S.S.Huger, ICFAI Journal of Managerial Economics, Vol.VII No.1
16. http://www.dipp.nic.in/
17. http://www.fdi.gov.in/
18. http://www.rbi.org.in/
19. http://www.sebi.com

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