1. FOREIGN DIRECT INVESTMENT
(FDI)

2. INTRODUCTION
FDI is one of the most important
sources of foreign investment in
developing countries like India . It is
seen as a means to supplement
domestic investment for achieving a
higher level of growth and
development .

3. MEANING
FDI stands for Foreign Direct Investment, a
component of a country's national financial
accounts. Foreign direct investment is
investment of foreign assets into domestic
structures, equipment, and organizations. It
does not include foreign investment into the
stock markets. Foreign direct investment is
thought to be more useful to a country than
investments in the equity of its companies
because equity investments are potentially "hot
money" which can leave at the first sign of
trouble, whereas FDI is durable and generally
useful whether things go well or badly

4. Classification of FDI inflow from
investors point of view
 Market seeking : The investors are attached
by the size of the local market , which
depends on the income of the country and its
growth rate.
 Lower cost : Investors are most cost-
conscious . They are influenced by
infrastructure facilities and labour costs.
 Location and other factors : Technology
status of a country , brand name , goodwill
enjoyed by the local firms , favorable location
, openness of the economy , policies of the
government and intellectual property
protection granted by the government are
some of the factors that attract investors to
undertake investments .

5. WHAT F.D.I REQUIRS ?
Important factors which foreign investors take into
consideration when entering a country are:
 Reliable access to economic information.
 The level of corruption.
 Stability of political and business environment .
 Ability to meet and comply with internationality
acceptable standards and norms .
 Character of local market (size , growth , potential)
or the distance and the access to neighboring
markets.
 The existence of good and quality infrastructure.

6. F.D.I Permitted in the following
forms of investments.
 Through financial collaborations.
 Through joint ventures and technical
collaboration.
 Through capital markets via euro issues.
 Through private placements or preferential
allotment.

7. FDI is not permitted in the
following industrial sectors
 Areas and ammunition .
 Atomic energy .
 Railway transport.
 Coal and Lignite.
 Mining of iron , manganese , chrome
, gypsum , gold , diamonds , copper , and
zinc .

8. APPROVAL OF FDIs
FDI in India are approved through two
routes:
 Automatic Approval by RBI.
 The FIPB Route

9. AUTOMATIC APPROVAL OF RBI
The RBI accords approval within two weeks
to all proposals involving:
 Foreign equity up to 50% in 3 categories
relating to mining activities(list 2);
 Foreign equity up to 51% in 48 specified
industries(list 3) ;
 Foreign equity up to 74% in 9 categories(list
4); and
 Where list 4 includes items also listed in list
3, 74% participation shall be allowed.

10. The FIPB Route
The FIPB was constituted to promote
foreign direct investment in India.
FIPB stands for Foreign Investment
Promotion Board which approve all
other cases where the parameters of
automatic approval are not met.
Normal processing time is 4 to 6
weeks. Its approach is liberal for all
sectors and all types of proposals and
rejection are few.

11. Factors that Attracts FDIs in India
I. India has a well developed network and financial
institutions and an organized capital market open to
foreign institutional investors that attracts them to
undertake investments.
II. Indian skills and competence is used as a base for
carrying out production activities and export to neighbor
countries.
III. For the last few years there has been political stability in
the country.
IV. India enjoy good reputation among other countries as a
honoring of its commitments about repayment obligations
, remittance of dividends etc
V. India has vast potential of unskilled labor available at
cheap rates as compared to other countries, and vast
natural resources that attract foreign investors.

12. Factors that Discourage FDIs
 High rates of taxation
 Lack of infrastructure facilities
 Favoritisms in the selection of investment
 Complicated legal framework of
rules, regulations, procedures for foreign
direct investment into India.
 Lack of transparency.

13. FDI investments allowed in the following 19
NBFC activities shall be as per levels indicated
below:
 Merchant banking
 Underwriting
 Portfolio Management Services
 Investment Advisory Services
 Financial Consultancy
 Stock Broking
 Asset Management
 Venture Capital
 Custodial Services
 Factoring

14. FDI investments allowed in the following
19 NBFC activities shall be as per levels
indicated below: (Continued)
 Credit Reference Agencies
 Credit rating Agencies
 Leasing & Finance
 Housing Finance
 Foreign Exchange Brokering
 Credit card business
 Money changing Business
 Micro Credit
 Rural Credit

15. 100% FDI Allowed in Following
sectors.
 Hotel & Tourism
 Power Sector
 Drugs and Pharmaceuticals
 Roads, Highways, Ports and Harbors
 Pollution Control and Management
 Call centers
 Business Process Outsourcing
 Manufacturing Industries Designated as
small scale Industries.

16. 51% FDI allowed in following
sectors .
 Trading .
49% FDI allowed in following
sectors .
• Private sector Banking .
• Telecommunication .

17. FDI Inflows in 2005-06 (In US $ mn)

18. FDI Inflows in India vis-à-vis
Developing Countries

19. FDI inflows into India from Japan

20. Total Foreign Investment Inflows in
US$ Million

21. SHARE OF TOP INVESTING COUNTRIES FDI
EQUITY INFLOWS (Financial year-wise):
Amount Rupees in crores (US$ in
Ranks Country million)
2010-11 2011-12
(April-March) (for April 2011)
1 MAURITIUS 31,855 4,332
(6,987) (976)
2 SINGAPORE 7,730 5,214
(1,705) (1,175)
3 U.S.A. 5,353 80
(1,170) (356)
4 U.K. 3,434 19
(755) (4)
5 NETHERLANDS 5,501 172
(1,213) (39)
6 CYPRUS 4,171 754
(913) (170)
7 JAPAN 7,063 1,043
(1,502) (235)
8 GERMANY 908 231
(200) (52)
9 U.A.E. 1,569 91
(341) (21)
9 FRANCE 3,349 977
(734) (220)
Total 88,520 13,846
(19,427) (3,121)

22. SECTORS ATTRACTING HIGHEST FDI
EQUITY INFLOWS:
Amount Rupees in crores (US$ in million
Rank Sector 2010-11 2011-12
s (April-March) (for April2011)
1 SERVICES SECTOR 15,776 2,922
(financial & non-financial) (3,353) (658)
2 COMPUTER SOFTWARE & HARDWARE 3,571 425
(784) (95)
3 TELECOMMUNICATIONS 7,546 205
(radio paging, cellular mobile, basic telephone (1,665) (46)
services)
4 HOUSING & REAL ESTATE 5,149 167
(1,127) (38)
5 CONSTRUCTION ACTIVITIES 5,077 (1,125) 1,381
(including roads & highways) (311)
6 POWER 5,709 1,136
(1,252) (256)
7 AUTOMOBILE INDUSTRY 6,008 (1,331) 1,182
(266)
8 METALLURGICAL INDUSTRIES 5,055 229
(1,105) (52)
9 PETROLEUM & NATURAL GAS 2,621 28
(574) (6)
10 CEHMICALS 1,810 152
(other than fertilizers) (398) (34)

23. FDI EQUITY INFLOWS DURING FINANCIAL
YEAR 2009-10:
Financial Year 2011 Amount of FDI inflows*
( Jan-Dec )
(In Rs. Crore) In US$ mn)
1 January 2011 4,725 1,042
2 February 2011 5,785 1,274
3 March 2011 4,833 1,074
4 April 2011 13,846 3,121
2011 (Up to April 2011) # 29,189 6,511
2010 (Up toApril2010) 32,535 7,147
%age growth over last year (-)10% (---)09%

24. FDI EQUITY INFLOWS (WITH COMPANY-WISE
DETAILS) AVAILABLE 2000-2009:
1 Cumulative amount of Rs. 5,94,569 US$ 1,32,837
FDI inflows crore million
(from August 1991 to
April 2011)
2 Amount of FDI inflows Rs. 13,846 US$ 3,121
during 2010-11 crore million
(from April 2011)*

25. News Relating to FDI
 India FDI Inflow Dips 25% In 11 Months Of 2010-2011-
April 25 ,2011
 India Allows 100% FDI in Several Key Sectors –April 7
,2011
 India Releases Third Consolidated FDI Policy – April
5,2011
 TRAI raises FDI limit for DTH, FM radio – June 30 ,2011
 Real Estate FDI Worries may continue this Year -
October 12, 2011
 FDI in Multi Brand Retail will Increase Investment
Opportunities in Organised Retail Sector -September
26, 2011
 Changes in FDI Norms can Dampen Foreign
Investments- Experts
 Govt Rules out Change in FDI Norms for Banks

26. EFFORTS BY
PARTIK BANSAL

27. THANK YOU