Foreign Direct Investment in india

ECONOMICS ASSIGNMENT [FOREIGN DIRECT INVESTMENT (FDI) IN INDIA ]
FazlaniAltius Business School [Batch : 2013-2015] Page 1
ECONOMICS ASSIGNMENT
“FOREIGN DIRECT INVESTMENT (FDI)
IN INDIA”
BY:
“GROUP 6”
NAVNEET CHAUDHARY
NIKESH BISWAL
SAGAR SINGH
MUTHU AYYANAR
JAIRAJ VAIDYA

CONTENT:
PARTICULAR PAGE NO.
A. INTRODUCTION 4
B. FOREIGN DIRECT INVESTMENT (FDI) FLOWS TO INDIA 5
C. WHO CAN INVEST IN INDIA 6
D. ENTITIES FOR FDI 7
E. ENTRY ROUTES FOR FDI 8
F. GUIDELINES FOR CONSIDERATION OF FDI PROPOSALS BY FIPB 9
G. TREND IN FDI FLOWS 11
H. TRENDS IN FDI FLOWS TO INDIA 13
1. Cumulative FDI flows into India (2000-2013) 14
2. Financial Year-Wise FDI inflow Data 20
I. STATEMENTONCOUNTRY-WISEFDI EQUITY INFLOWS 22
J. STATEMENTONSECTOR-WISEFDI EQUITY INFLOWS 25
K. INDIAN ECONOMY
1. Recent Trends in Indian Economy 27
2. Growth in Gross Domestic Product 28
3. Economic Survey 2012-13 29
L. POTENTIAL FOR INVESTMENT IN INDIA 30
M. ADVANTAGE IN INDIA 32
1. Indian Economy 33
2. Agriculture Sector 33
3. Industry Sector 33
4. Services Sector 33
N. FDI POLICY FRAMEWORK
1. FDI Policy Framework in India 34
2. FDI Policy: The International Experience 37
3. Cross-Country Comparison of FDI Policies – Where does India stand? 41
O. FDI FLOWS TO INDIA IN RECENT PERIOD 44
P. APPROVAL FOR FDI IN LIMITED LIABILITY PARTNERSHIP FIRM 54

Q. SECTOR FOR FDI
1. FDI in Agriculture 55
2. FDI in Mining 57
3. FDI in Manufacturing 59
4. FDI in Power 59
5. FDI in Defence 60
6. FDI in Civil Aviation Sector 62
7. FDI in Banking- Public Sector 63
8. FDI in Credit Information Companies (CIC) 64
9. FDI in Broadcasting 65
10. FDI in Commodity Exchanges 66
11. FDI in Real Estate & Development of Townships 67
12. FDI in Industrial Park 70
13. FDI in Insurance 71
14. FDI in Infrastructure Company in the Securities Market 71
15. FDI in Non-Banking Finance Companies (NBFC) 72
16. FDI in Petroleum & Natural Gas Sector 74
17. FDI in Print Media 75
18. FDI in Telecommunication 76
19. FDI in Trading 79
20. FDI in Courier services 81
21. FDI in Retail sector 82
R. ECONOMIC INDICATORS 83
S. TOP10FDIEQUITYINFLOWCASES 85
T. CONCLUSION 95
U. LIST OF INVESTMENT PROMOTION AGENCIES IN INDIA STATE-WISE 97
V. REFERENCES 106

A. INTRODUCTION
India has been ranked at the second place in global foreign direct investments in 2010 and will continue to
remain among the top five attractive destinations for international investors during 2010-12 period, according
to United Nations Conference on Trade and Development (UNCTAD) in a report on world investment
prospects titled, 'World Investment Prospects Survey 2009-2012'.
The 2010 survey of the Japan Bank for International Cooperation released in December 2010, conducted
among Japanese investors, continues to rank India as the second most promising country for overseas business
operations.
A report released in February 2010 by Leeds University Business School, commissioned by UK Trade &
Investment (UKTI), ranks India among the top three countries where British companies can do better business
during 2012-14.
According to Ernst and Young's 2010 European Attractiveness Survey, India is ranked as the 4th most
attractive foreign direct investment (FDI) destination in 2010. However, it is ranked the 2nd most attractive
destination following China in the next three years.
Moreover, according to the Asian Investment Intentions survey released by the Asia Pacific Foundation in
Canada, more and more Canadian firms are now focusing on India as an investment destination. From 8 per
cent in 2005, the percentage of Canadian companies showing interest in India has gone up to 13.4 per cent in
2010.
India attracted FDI equity inflows of US$ 2,014 million in December 2010. The cumulative amount of FDI
equity inflows from April 2000 to December 2010 stood at US$ 186.79 billion, according to the data released
by the Department of Industrial Policy and Promotion (DIPP).
The services sector comprising financial and non-financial services attracted 21 per cent of the total FDI equity
inflow into India, with FDI worth US$ 2,853 million during April-December 2010, while telecommunications
including radio paging, cellular mobile and basic telephone services attracted second largest amount of FDI
worth US$ 1,327 million during the same period. Automobile industry was the third highest sector attracting
FDI worth US$ 1,066 million followed by power sector which garnered US$ 1,028 million during the financial
year April-December 2010. The Housing and Real Estate sector received FDI worth US$ 1,024 million.
During April-December 2010, Mauritius has led investors into India with US$ 5,746 million worth of FDI
comprising 42 per cent of the total FDI equity inflows into the country. The FDI equity inflows in Mauritius is
followed by Singapore at US$ 1,449 million and the US with US$ 1,055 million, according to data released by
DIPP.

B. FOREIGN DIRECT INVESTMENT (FDI) FLOWS TO INDIA
FDI inflows to India remained sluggish, when global FDI flows to EMEs had recovered in 2010-11, despite
sound domestic economic performance ahead of global recovery. The paper gathers evidence through a panel
exercise that actual FDI to India during the year 2010-11 fell short of its potential level (reflecting underlying
macroeconomic parameters) partly on account of amplification of policy uncertainty as measured through
Kauffmann‟s Index.
FDI inflows to India witnessed significant moderation in 2010-11 while other EMEs in Asia and Latin
America received large inflows. This had raised concerns in the wake of widening current account deficit in
India beyond the perceived sustainable level of 3.0 per cent of GDP during April-December 2010. This also
assumes significance as FDI is generally known to be the most stable component of capital flows needed to
finance the current account deficit. Moreover, it adds to investible resources, provides access to advanced
technologies, assists in gaining production know-how and promotes exports.
A perusal of India‟s FDI policy vis-à-vis other major emerging market economies (EMEs) reveals that though
India‟s approach towards foreign investment has been relatively conservative to begin with, it progressively
started catching up with the more liberalized policy stance of other EMEs from the early 1990s onwards, inter
alia in terms of wider access to different sectors of the economy, ease of starting business, repatriation of
dividend and profits and relaxations regarding norms for owning equity. This progressive liberalization,
coupled with considerable improvement in terms of macroeconomic fundamentals, reflected in growing size of
FDI flows to the country that increased nearly 5 fold during first decade of the present millennium.
Though the liberal policy stance and strong economic fundamentals appear to have driven the steep rise in FDI
flows in India over past one decade and sustained their momentum even during the period of global economic
crisis (2008-09 and 2009-10),the subsequent moderation in investment flows despite faster recovery from the
crisis period appears somewhat inexplicable. Survey of empirical literature and analysis presented in the paper
seems to suggest that these divergent trends in FDI flows could be the result of certain institutional factors that
dampened the investors „sentiments despite continued strength of economic fundamentals. Findings of the
panel exercise, examining FDI trends in 10 select EMEs over the last 7 year period, suggest that apart from
macro fundamentals, institutional factors such as time taken to meet various procedural requirements make
significant impact on FDI inflows.
This paper has been organized as follows: Section 1 presents trends in global investment flows with particular
focus on EMEs and India. Section 2 traces the evolution of India‟s FDI policy framework, followed by cross-
country experience reflecting on India‟s FDI policy vis-à-vis that of select EMEs. Section 3 deals with
plausible explanations of relative slowdown in FDI flows to India in 2010-11 and arrives at an econometric
evidence using panel estimation. The last section presents the conclusions.

C. WHO CAN INVEST IN INDIA
1. A non-resident entity (other than a citizen of Pakistan or an entity incorporated in Pakistan) can invest in India,
subject to the FDI Policy. A citizen of Bangladesh or an entity incorporated in Bangladesh can invest in India
under the FDI Policy, only under the Government route.
2. NRIs resident in Nepal and Bhutan as well as citizens of Nepal and Bhutan are permitted to invest in the
capital of Indian companies on repatriation basis, subject to the condition that the amount of consideration for
such investment shall be paid only by way of inward remittance in free foreign exchange through normal
banking channels.
3. OCBs have been derecognized as a class of Investors in India with effect from September 16, 2003. Erstwhile
OCBs which are incorporated outside India and are not under the adverse notice of RBI can make fresh
investments under FDI Policy as incorporated non-resident entities, with the prior approval of Government of
India if the investment is through Government route; and with the prior approval of RBI if the investment is
through Automatic route.
4. (i) An FII may invest in the capital of an Indian Company under the Portfolio Investment Scheme which
limits the individual holding of an FII to 10% of the capital of the company and the aggregate limit for FII
investment to 24% of the capital of the company. This aggregate limit of 24% can be increased to the
sectorial cap/statutory ceiling, as applicable, by the Indian Company concerned by passing a resolution by
its Board of Directors followed by passing of a special resolution to that effect by its General Body. The
aggregate FII investment, in the FDI and Portfolio Investment Scheme, should be within the above caps.
(ii) The Indian company which has issued shares to FIIs under the FDI Policy for which the payment has
been received directly into company‟s account should report these figures separately under item no. 5 of
Form FC-GPR (Annex-1-A) (Post-issue pattern of shareholding) so that the details could be suitably
reconciled for statistical/monitoring purposes.
(iii) A daily statement in respect of all transactions (except derivative trade) have to be submitted by the
custodian bank in floppy / soft copy in the prescribed format directly toRBI to monitor the overall
ceiling/sectorial cap/statutory ceiling.
5. No person other than registered FII/NRI as per Schedules II and III of Foreign Exchange Management
(Transfer or Issue of Security by a Person Resident Outside India) Regulations of FEMA 1999, can
invest/trade in capital of Indian Companies in the Indian Stock Exchanges directly i.e. through brokers like a
Person Resident in India.
6. A SEBI registered Foreign Venture Capital Investor (FVCI) may contribute up to 100% of the capital of an
Indian Venture Capital Undertaking (IVCU) and may also set up a domestic asset management company to
manage the fund. All such investments can be made under the automatic route in terms of Schedule 6 to
Notification No. FEMA 20. A SEBI registered FVCI can also invest in a domestic venture capital fund
registered under the SEBI (Venture Capital Fund) Regulations, 1996. Such investments would also be subject
to the extant FEMA regulations and extant FDI policy including sectorial caps, etc. SEBI registered FVCIs are
also allowed to invest under the FDI Scheme, as non-resident entities, in other companies, subject to FDI
Policy and FEMA regulations.

D. ENTITIES FOR FDI
1. FDI in an Indian Company
(i) Indian companies including those which are micro and small enterprises (MSEs) can
issue capital against FDI.
2. FDI in Partnership Firm / Proprietary Concern:
(i) A Non-Resident Indian (NRI) or a Person of Indian Origin (PIO) resident outside India can invest
bywayof contribution to the capital of a firm or a proprietary concern in India on non-
repatriation basis provided:
(a) Amount is invested by inward remittance or out of NRE/FCNR(B)/NRO account
maintained with Authorized Dealers / Authorized banks.
(b) The firm or proprietary concern is not engaged in any agricultural/plantation or real estate
business or print media sector.
(c) Amount invested shall not be eligible for repatriation outside India.
(ii) Investments with repatriation benefits: NRIs/PIO may seek prior permission of Reserve Bank for
investment in sole proprietorship concerns/partnership firms with repatriation benefits. The
applicationwill be decided in consultation with the Government of India.
(iii) Investment by non-residents other than NRIs/PIO: A person resident outside India other than
NRIs/PIOmay make an application and seek prior approval of Reserve Bank for making
investment by way of contribution concern or any association of persons in India. The application
will be decided in consultationwith the Government of India.
(iv) Restrictions: An NRI or PIO is not allowed to invest in a firm or proprietorship concern engaged
in any and immovable property with a view to earning profit or earning income there from) or
engaged in Print Media.
3. FDI in Venture Capital Fund (VCF): FVCIs are allowed to invest in Indian Venture Capital Undertakings
(IVCUs) /Venture Capital Funds (VCFs) /other companies, as stated in paragraph 3.1.6 of this Circular. If
a domestic VCF is set up as a trust, a person resident outside India (non-resident entity/individual
including an NRI) cannot invest in such domestic VCF under the automatic route of the FDI scheme and
would be allowed subject to approval of the FIPB. However, if a domestic VCF is set-up as an
incorporated company under the Companies Act, 1956, then a person resident outside India (non-resident
entity/individual including an NRI) can invest in such domestic VCF under the automatic route of FDI
Scheme, subject to the pricing guidelines, reporting requirements, mode of payment, minimum
capitalization norms, etc.
4. FDI in Trusts:
FDI in Trusts other than VCF is not permitted.
5. FDI in other Entities:
FDI in resident entities other than those mentioned above is not permitted.

E. ENTRY ROUTES FOR FDI
1. Investments can be made by non-residents in the equity shares/fully, compulsorily and Mandatorily
convertible debentures/ fully, compulsorily and mandatorily convertible preference shares of an Indian
company, through two routes:
(i) The Automatic Route: under the Automatic Route, the non-resident investor or the Indian
company doesnot require any approval from the RBI or Government of India for the investment.
(ii) The Government Route: under the Government Route, prior approval of the Government ofIndia
through Foreign Investment Promotion Board (FIPB) is required. Proposals for foreign
investment under Government route as laid down in the FDI policy from time to time, are
considered by the Foreign Investment Promotion Board (FIPB) in Department of Economic
Affairs (DEA), Ministry of Finance.

F. GUIDELINES FOR CONSIDERATION OF FDI PROPOSALS BY FIPB:
The following guidelines are laid down to enable the FIPB to consider the proposals for FDI and formulate its
recommendations.
1. All applications should be put up before the FIPB by its Secretariat within 15 days and it should be
ensured that comments of the administrative ministries are placed before the Board either prior to/or in the
meeting of the Board.
2. Proposals should be considered by the Board keeping in view the time frame of thirty (30) days for
communicating Government decision.
3. In cases in which either the proposal is not cleared or further information is required in order to obviate
delays presentation by applicant in the meeting of the FIPB should be resorted to.
4. While considering cases and making recommendations, FIPB should keep in mind the sectorial
requirements and the sectorial policies vis-à-vis the proposal (s).
5. FIPB would consider each proposal in its totality.
6. The Board should examine the following while considering proposals submitted to it for
consideration:
(i) Whether the items of activity involve industrial licence or not and if so the considerations for
grant of industrial licence must be gone into.
(ii) Whether the proposal involves any export projection and if so the items of export and the
projected destinations.
(iii)Whether the proposal has any strategic or defence related considerations.
7. While considering proposals the following may be prioritized:
(i) Items falling in infrastructure sector.
(ii) Items which have an export potential.
(iii) Items which have large scale employment potential and especially for rural people.
(iv) Items which have a direct or backward linkage with agro business/farm sector.
(v) Items which have greater social relevance such as hospitals, human resource development, life
saving drugs and equipment.
(vi) Proposals which result in induction of technology or infusion of capital.
8. The following should be especially considered during the scrutiny and consideration of
proposals:
(i) The extent of foreign equity proposed to be held (keeping in view sectoral caps if any.
(ii) Extent of equity from the point of view whether the proposed project would amount to a holding
company/wholly owned subsidiary/a company with dominant foreign investment (i.e. 76% or
more) joint venture.
(iii) Whether the proposed foreign equity is for setting up a new project (joint venture or otherwise) or
whether it is for enlargement of foreign/NRI equity or whether it is for fresh induction of foreign
equity/NRI equityin an existing Indian company.
(iv) In the case of fresh induction offerings/NRI equity and/or in cases of enlargement of foreign/NRI
equity, in existing Indian companies whether there is a resolution of the Board of Directors
supporting the saidinduction/enlargement of foreign/NRI equity and whether there is a
shareholders agreement or not.

(v) In the case of induction of fresh equity in the existing Indian companies and/or enlargement of
foreign equity in existing Indian companies, the reason why the proposalhas been made and the
modality forinduction/enhancement (i.e. whether by increase of paid up capital/authorized
capital, transfer of shares(hostile or otherwise) whether by rights issue, or by what modality.
(vi) Issue/transfer/pricing of shares will be as per SEBI/RBI guidelines.
(vii) Whether the activity is an industrial or a service activity or a combination of both.
(viii) Whether the items of activity involves any restriction by way of reservation for the Micro &
SmallEnterprises sector.
(ix) Whether there are any sectorial restrictions on the activity.
(x) Whether the proposal involves import of items which are either hazardous/banned or detrimental
to environment (e.g. import of plastic scrap or recycled plastics).
9. No condition specific to the letter of approval issued to a non-resident investor would be changed or
additional condition imposed subsequent to the issue of a letter of approval. This would not prohibit
changes in general policies and, regulations applicable to the industrial sector.

G. TREND IN FDI FLOWS
Widening growth differential across economies and gradual opening up of capital accounts in the emerging
world resulted in a steep rise in cross border investment flows during the past two decades. This section briefly
presents the recent trends in global capital flows particularly to emerging economies including India.
1. Global Trends in FDI Inflows
During the period subsequent to dotcom burst, there has been an unprecedented rise in the cross-border flows
and this exuberance was sustained until the occurrence of global financial crisis in the year 2008-09. Between
2003 and 2007, global FDI flows grew nearly four -fold and flows to EMEs during this period, grew by about
three-fold. After reaching a peak of US$ 2.1 trillion in 2007, global FDI flows witnessed significant
moderation over the next two years to touch US$ 1.1 trillion in 2009, following the global financial crisis. On
the other hand, FDI flows to developing countries increased from US$ 565 billion in 2007 to US$ 630 billion
in 2008 before moderating to US$ 478 billion in 2009.
The decline in global FDI during 2009 was mainly attributed to subdued cross border merger and acquisition
(M&A) activities and weaker return prospects for foreign affiliates,which adversely impacted equity
investments as well as reinvested earnings. According to UNCTAD, decline in M&A activities occurred as the
turmoil in stock markets obscured the price signals upon which M&As rely. There was a decline in the number
of green field investment cases as well, particularly those related to business and financial services.
From an institutional perspective, FDI by private equity funds declined as their fund raising dropped on the
back of investors‟ risk aversion and the collapse of the leveraged buyout market in tune with the deterioration
in credit market conditions. On the other hand, FDI from sovereign wealth funds (SWFs) rose by 15 per cent in
2009. This was apparently due to the revised investment strategy of SWFs - who have been moving away from
banking and financial sector towards primary and manufacturing sector, which are less vulnerable to financial
market developments as well as focusing more on Asia.
As the world economic recovery continued to be uncertain and fragile, global FDI flows remained stagnant at
US $ 1.1 trillion in 2010. According to UNCTAD‟s Global Investment Trends Monitor (released on January
17, 2011), although global FDI flows at aggregate level remained stagnant, they showed an uneven pattern
across regions – while it contracted further in advanced economies by about 7 per cent, FDI flows recovered
by almost 10 per cent in case of developing economies as a group driven by strong rebound in FDI flows in
many countries of Latin America and Asia. Rebound in FDI flows to developing countries has been on the
back of improved corporate profitability and some improvement in M&A activities with improved valuations
of assets in the stock markets and increased financial capability of potential buyers.
Improved macroeconomic conditions, particularly in the emerging economies, which boosted corporate profits
coupled with better stock market valuations and rising business confidence augured well for global FDI
prospects. According to UNCTAD, these favourable developments may help translate MNC‟s record level of
cash holdings (estimated to be in the range of US$ 4-5 trillion among developed countries‟ firms alone) into
new investments during 2011. The share of developing countries, which now constitutes over 50 per cent in
total FDI inflows, may increase further on the back of strong growth prospects. However, currency volatility,
sovereign debt problems and potential protectionist policies may pose some risks to this positive outlook.
Nonetheless, according to the Institute of International Finance (January 2011), net FDI flows to EMEs was
projected to increase by over 11 per cent in 2011. FDI flows into select countries are given in Table 1.

Table 1 : Countries with Higher Estimated Level of FDI Inflows than India in 2010
Amount (US$ billion) Variation (Percent)
2007 2008 2009 2010
(Estimates)
2008 2009 2010
(Estimates)
World 2100.0 1770.9 1114.2 1122.0 -
15.7
-
37.1
0.7
Developed
Economies
1444.1 1018.3 565.9 526.6 -
29.5
-
44.4
-6.9
United States 266.0 324.6 129.9 186.1 22.0 -
60.0
43.3
France 96.2 62.3 59.6 57.4 -
35.2
-4.3 -3.7
Belgium 118.4 110.0 33.8 50.5 -7.1 -
69.3
49.4
United Kingdom 186.4 91.5 45.7 46.2 -
50.9
-
50.1
1.1
Germany 76.5 24.4 35.6 34.4 -
68.1
45.9 -3.4
Developing
Economies
564.9 630.0 478.3 524.8 11.5 -
24.1
9.7
China 83.5 108.3 95.0 101.0 29.7 -
12.3
6.3
Hong Kong 54.3 59.6 48.4 62.6 9.8 -
18.8
29.3
Russian
Federation
55.1 75.5 38.7 39.7 37.0 -
48.7
2.6
Singapore 35.8 10.9 16.8 37.4 69.6 54.1 122.6
Saudi Arabia 22.8 38.2 35.5 - 67.5 -7.1 -
Brazil 34.6 45.1 25.9 30.2 30.3 -
42.6
16.6
India 25.0 40.4 34.6 23.7 61.6 -
14.4
-31.5
Source: World Investment Report, 2010 and Global Investment Trends Monitor,
UNCTAD.

H. TRENDS IN FDI FLOWS TO INDIA
With the tripling of the FDI flows to EMEs during the pre-crisis period of the 2000s, India also received large
FDI inflows in line with its robust domestic economic performance. The attractiveness of India as a preferred
investment destination could be ascertained from the large increase in FDI inflows to India, which rose from
around US$ 6 billion in 2001-02 to almost US$ 38 billion in 2008-09. The significant increase in FDI inflows
to India reflected the impact of liberalisation of the economy since the early 1990s as well as gradual opening
up of the capital account. As part of the capital account liberalisation, FDI was gradually allowed in almost all
sectors, except a few on grounds of strategic importance, subject to compliance of sector specific rules and
regulations. The large and stable FDI flows also increasingly financed the current account deficit over the
period. During the recent global crisis, when there was a significant deceleration in global FDI flows during
2009-10, the decline in FDI flows to India was relatively moderate reflecting robust equity flows on the back
of strong rebound in domestic growth ahead of global recovery and steady reinvested earnings (with a share of
almost 25 per cent) reflecting better profitability of foreign companies in India. However, when there had been
some recovery in global FDI flows, especially driven by flows to Asian EMEs, during 2010-11, gross FDI
equity inflows to India witnessed significant moderation. Gross equity FDI flows to India moderated to US$
20.3 billion during 2010-11 from US$ 27.1 billion in the preceding year.
Table 2: Equity FDI Inflows to India
(Percent)
Sectors 2006-
07
2007-
08
2008-
09
2009-
10
2010-
11
Sectoral shares (Percent)
Manufactures 17.6 19.2 21.0 22.9 32.1
Services 56.9 41.2 45.1 32.8 30.1
Construction, Real estate and mining 15.5 22.4 18.6 26.6 17.6
Others 9.9 17.2 15.2 17.7 20.1
Total 100.0 100.0 100.0 100.0 100.0
Equity Inflows (US$ billion)
Manufactures 1.6 3.7 4.8 5.1 4.8
Services 5.3 8.0 10.2 7.4 4.5
Construction, Real estate and mining 1.4 4.3 4.2 6.0 2.6
Others 0.9 3.3 3.4 4.0 3.0
Total Equity FDI 9.3 19.4 22.7 22.5 14.9
From a sectoral perspective, FDI in India mainly flowed into services sector (with an average share of 41 per
cent in the past five years) followed by manufacturing (around 23 per cent) and mainly routed through
Mauritius (with an average share of 43 per cent in the past five years) followed by Singapore (around 11 per
cent). However, the share of services declined over the years from almost 57 per cent in 2006-07 to about 30
per cent in 2010-11, while the shares of manufacturing, and „others‟ largely comprising „electricity and other
power generation‟ increased over the same period (Table 2). Sectoral information on the recent trends in FDI
flows to India show that the moderation in gross equity FDI flows during 2010-11 has been mainly driven by
sectors such as „construction, real estate and mining‟ and services such as „business and financial services‟.
Manufacturing, which has been the largest recipient of FDI in India, has also witnessed some moderation
(Table 2).

I. CUMULATIVEFDIFLOWSINTOINDIA(2000-2013):
A. TOTALFDIINFLOWS(fromApril, 2000toMarch, 2013):
1. CUMULATIVEAMOUNTOF FDIINFLOWS
(Equityinflows+„Re-investedearnings‟+„Othercapital‟)* -
US$290,078 million
2. CUMULATIVEAMOUNTOFFDI EQUITY INFLOWS
(excluding,amountremittedthroughRBI‟s-NRI Schemes)
Rs. 896,38 crore US$193,282 million
B. FDIINFLOWSDURINGFINANCIALYEAR 2012-13(fromApril, 2012to March,2013):
1. TOTAL FDI INFLOWSINTOINDIA
(Equityinflows+„Re-investedearnings‟+„Othercapital‟)
(asper RBI‟sMonthly bulletindated: 13.05.2013).
- US$36,860 million
2. FDI EQUITY INFLOWS Rs. 121,907 crore US$22,423 million
C. FDIEQUITYINFLOWS(MONTH-WISE) DURINGTHE FINANCIALYEAR2012-13:
Financial Year2012-13
(April-March)
AmountofFDIEquityinflows
(InRs.Crore) (InUS$mn)
1. April,2012 9,620 1,857
2. May, 2012 7,229 1,327
3. June, 2012 6,971 1,244
4. July,2012 8,182 1,475
5. August,2012 12,578 2,264
6. September,2012 25,552 4,679
7. October,2012 10,295 1,942
8. November, 2012 5,798 1,058
9. December, 2012 6,012 1,100
10
.
January,2013 11,719 2,157
11
.
February,2013 9,654 1,795
12
.
March, 2013 8,297 1,525
2012-13(uptoMarch, 2013) # 121,907 22,423
2011-12(up to March, 2012)# 165,146 35,121
%age growthover lastyear (-)28% (-)38%

D. FDIEQUITYINFLOWS(MONTH-WISE) DURINGTHE CALENDAR YEAR 2013:
Calendar Year 2013
(Jan.-Dec.)
Amount of FDI Equity inflows
(In Rs. Crore) (In US$ mn)
1. January, 2013 11,719 2,157
2. February, 2013 9,654 1,795
3. March, 2013 8,297 1,525
Year 2013 (up to March, 2013) # 29,670 5,477
Year 2012 (up to March, 2012) # 29,354 5,844
%age growth over last year ( + ) 01 % ( - ) 06 %
Note: Country &Sectorspecificanalysisisavailablefromtheyear2000onwards, asCompany-
wisedetailsareprovidedbyRBI fromApril,2000onwards only.
*Dataon „Re-investedearnings‟ &„Othercapital‟ , are theestimateson anaveragebasis, basedupondata for the
previoustwoyears, published by RBI in monthlybulletindated: 10.12.2012.
#Figuresareprovisional, subject toreconciliationwith RBI,Mumbai.
^Inflows forthemonthofMarch,2012areasreportedbyRBI, consequent to the adjustmentmadein
thefiguresofMarch, „11,August,‟ 11andOctober,„11.

E. SHARE OFTOP INVESTINGCOUNTRIESFDIEQUITYINFLOWS(Financialyears):
AmountRupeesincrores
(US$in million)
Ranks Country 2010-11
(April -
March)
2011-12
(April -
March)
2012-13
(April –
March)
Cumulative
Inflows(April
‟ 00– March‟13)
%age tototal
Inflows (interms
ofUS $)
1. MAURITIUS
31,855
(6,987)
46,710
(9,942)
51,654
(9,497)
341,125
(73,666) 38%
2. SINGAPORE
7,730
(1,705)
24,712
(5,257)
12,594
(2,308)
90,182
(19,460) 10%
3. U.K.
12,235
(2,711)
36,428
(7,874)
5,797
(1,080)
80,459
(17,549) 9%
4. JAPAN
7,063
(1,562)
14,089
(2,972)
12,243
(2,237)
70,094
(14,550) 8%
5. U.S.A.
5,353
(1,170)
5,347
(1,115)
3,033
(557)
50,923
(11,121) 6%
6. NETHERLANDS
5,501
(1,213)
6,698
(1,409)
10,054
(1,856)
42,378
(8,965) 5%
7. CYPRUS
4,171
(913)
7,722
(1,587)
2,658
(490)
32,328
(6,889) 4%
8. GERMANY
908
(200)
7,452
(1,622)
4,684
(860)
25,512
(5,480) 3%
9 FRANCE
3,349
(734)
3,110
(663)
3,487
(646)
16,865
(3,573) 2%
10. U.A.E.
1,569
(341)
1,728
(353)
987
(180)
11,307
(2,422) 1%
TOTALFDIINFLOWSFR
OM
ALLCOUNTRIES*
97,320
(21,383)
165,146
(35,121)
121,907
(22,423)
896,913
(193,403) -
*Includes inflows underNRI SchemesofRBI.
Note: (i) Cumulativecountry-wiseFDI equityinflows (from April,2000toMarch,2013)areat–
Annex-„A‟
(ii) %ageworkedout inUS$terms&FDIinflowsreceivedthroughFIPB/SIA+RBI‟ sAutomatic
Route+acquisitionof existing sharesonly.

F. SECTORSATTRACTINGHIGHESTFDI EQUITY INFLOWS:
Amount
inRs.crores(US$inmilli
on)
Ranks Sector 2010-11
(April -
March)
2011-12
(April -
March)
2012-13
(April –
March)
Cumulative
Inflows
(April ‟ 00–
March‟ 13)
%agetototal
Inflows
(Intermsof
US$)
1. SERVICES SECTOR ** 15,054
(3,296)
24,656
(5,216)
26,306
(4,833)
172,275
(37,235) 19%
2. CONSTRUCTION
DEVELOPMENT:
TOWNSHIPS,HOUSING,BUILT-
UP INFRASTRUCTURE
7,590
(1,663)
15,236
(3,141)
7,248
(1,332)
101,049
(22,080) 11%
3. TELECOMMUNICATIONS
(radio paging, cellular mobile,
basic telephone services)
7,542
(1,665)
9,012
(1,997)
1,654
(304)
58,732
(12,856)
7%
4. COMPUTER SOFTWARE&
HARDWARE
3,551
(780)
3,804
(796)
2,656
(486)
52,774
(11,691) 6%
5. DRUGS&PHARMACEUTICALS 961
(209)
14,605
(3,232)
6,011
(1,123)
48,880
(10,318) 5%
6. CHEMICALS(OTHER THAN
FERTILIZERS)
10,612
(2,354)
18,422
(4,041)
1,596
(292)
40,496
(8,881) 5%
7. AUTOMOBILE INDUSTRY 5,864
(1,299)
4,347
(923)
8,384
(1,537)
39,170
(8,295) 4%
8. POWER 5,796
(1,272)
7,678
(1,652)
2,923
(536)
36,137
(7,834) 4%
9. METALLURGICAL
INDUSTRIES
5,023
(1,098)
8,348
(1,786)
7,878
(1,466)
34,814
(7,507)
4%
10 HOTEL&TOURISM 1,405
(308)
4,754
(993)
17,777
(3,259)
33,260
(6,631) 3%
Note: (i) **ServicessectorincludesFinancial,Banking,Insurance,Non-Financial/Business,Outsourcing,
R&D,Courier,Tech.TestingandAnalysis
(ii) CumulativeSector-wiseFDIequityinflows (fromApril,2000toMarch,2013) are at-Annex-„B‟ .
(iii) FDISectoraldatahasbeenrevalidated/reconciledinlinewiththeRBI,whichreflectsminor
changesintheFDI figures(increase/decrease)ascomparedtotheearlier publishedsectoral data.

G. STATEMENT ONRBI‟SREGIONALOFFICES (WITHSTATECOVERED) RECEIVEDFDI
EQUITYINFLOWS(fromApril, 2000toMarch, 2013):
Amount Rupeesin crores
(US$inmillion)
S.
No.
RBI‟ s - Regional
Office
State covered 2010-11
(April -
March)
2011-12
(April -
March)
2012-13
(April –
March)
Cumulative
Inflows(April‟ 00
– March‟13)
%age to
total Inflows
(in terms of
US$)
1 MUMBAI MAHARASHTRA,
DADRA& NAGAR
HAVELI,
DAMAN &DIU
27,669
(6,097)
44,664
(9,553)
47,359
(8,716)
293,494
(63,337)
33
2 NEWDELHI DELHI, PARTOF
UPAND
HARYANA
12,184
(2,677)
37,403
(7,983)
17,490
(3,222)
168,581
(36,294)
19
3 CHENNAI TAMIL NADU,
PONDICHERRY
6,115
(1,352)
6,711
(1,422)
15,252
(2,807)
52,810
(11,081)
6
4 BANGALORE KARNATAKA 6,133
(1,332)
7,235
(1,533)
5,553
(1,023)
49,445
(10,784)
6
5 AHMEDABAD GUJARAT 3,294
(724)
4,730
(1,001)
2,676
(493)
39,100
(8,650)
4
6 HYDERABAD ANDHRA
PRADESH
5,753
(1,262)
4,039
(848)
6,290
(1,159)
36,891
(7,968)
4
7 KOLKATA WEST BENGAL,
SIKKIM,
ANDAMAN
&NICOBAR
ISLANDS
426
(95)
1,817
(394)
2,319
(424)
10,504
(2,306)
1
8 CHANDIGARH CHANDIGARH,
PUNJAB,
HARYANA,
HIMACHAL
PRADESH
1,892
(416)
624
(130)
255
(47)
5,564
(1,201)
1
9 BHOPAL MADHYA
PRADESH,
CHATTISGARH
2,093
(451)
569
(123)
1,208
(220)
4,787
(997)
0.5
10. KOCHI KERALA,
LAKSHADWEEP
167
(37)
2,274
(471)
390
(72)
4,321
(911)
0.5
11 PANAJI GOA 1,376
(302)
181
(38)
47
(9)
3,554
(771)
0.4
12 JAIPUR RAJASTHAN 230
(51)
161
(33)
714
(132)
3,325
(685)
0.4
13 KANPUR UTTAR
PRADESH,
UTTRANCHAL
514
(112)
635
(140)
167
(31)
1,614
(347)
0.2
14 BHUBANESHW
AR
ORISSA 68
(15)
125
(28)
285
(52)
1,617
(341)
0.2

15 GUWAHATI ASSAM,
ARUNACHAL
PRADESH,
MANIPUR,
MEGHALAYA,
MIZORAM,
NAGALAND,
TRIPURA
37
(8)
5
(1)
27
(5)
348
(78)
0
16 PATNA BIHAR,
JHARKHAND
25
(5)
123
(24)
41
(8)
190
(37)
0
17 REGION NOTINDICATED 29,344
(6,447)
53,851
(11,399)
21,833
(4,004)
220,233
(47,494)
24.6
SUB.TOTAL 97,320
(21,383)
165,146
(35,121)
121,907
(22,424)
896,380
(193,282)
100.00
18 RBI‟S-NRI SCHEMES
(from2000to 2002)
0 0 0 533
(121)
-
GRANDTOTAL 97,320
(21,383)
165,146
(35,121)
121,907
(22,423)
896,913
(193,403)
-
Note: 1. Includes „equity capital components‟ only.
2. The Region-wise FDI inflows are classified as per RBI‟ s – Regional Office received FDI inflows,
furnished by RBI, Mumbai.
3 Represents, FDI inflows through acquisition of existing shares by transfer from residents to non
residents. For this, RBI Regional wise information is not provided by Reserve Bank of India.

Sr.
No.
Financial Year
(April-March)
FOREIGN DIRECT INVESTMENT (FDI) Investment
by F II‟ s
Foreign
Institutiona
l Investors
Fund
(net)
Equity Re-
invested
earnings
+
Other
capital
+
FDI FLOWS INTO
INDIAFIPB Route/
RBI‟ s
Automatic
Route/
Acquisition
Route
Equity
capitalof
unicorpora
ted bodies
#
TotalFDI
Flows
%age
growth
over
previous
year
(in US$
terms)
FINANCIAL YEARS2000-01to2012-13 (up toMarch,2013)
1. 2000-01 2,339 61 1,350 279 4,029 - 1,847
2. 2001-02 3,904 191 1,645 390 6,130 (+) 52 % 1,505
3. 2002-03 2,574 190 1,833 438 5,035 (-) 18 % 377
4. 2003-04 2,197 32 1,460 633 4,322 (-) 14 % 10,918
5. 2004-05 3,250 528 1,904 369 6,051 (+) 40 % 8,686
6. 2005-06 5,540 435 2,760 226 8,961 (+) 48 % 9,926
7. 2006-07 15,585 896 5,828 517 22,826 (+) 146 % 3,225
8. 2007-08 24,573 2,291 7,679 300 34,843 (+) 53 % 20,328
9. 2008-09 31,364 702 9,030 777 41,873 (+) 20 % (-) 15,017
10. 2009-10 (P) (+) 25,606 1,540 8,668 1,931 37,745 (-) 10 % 29,048
11. 2010-11 (P) (+) 21,376 874 11,939 658 34,847 (-) 08 % 29,422
12. 2011-12 (P) 34,833 1,022 8,206 2,495 46,556 (+) 34 % 16,812
13. 2012-13 (P)
(up toMarch, 2013)
21,825 1,059 11,025 2,951 36,860 - 27,583
CUMULATIVE TOTAL
(fromApril,2000toMarch‟201
3)
194,966 9,821 73,327 11,964 290,078 - 144,654
II. FINANCIALYEAR-WISE FDIINFLOWSDATA:
A. AS PER INTERNATIONALBESTPRACTICES:
(DataonFDIhavebeenrevised since2000-01withexpended coverage toapproach International Best Practices)
(AmountUS$million)
Source: (i) RBI‟ sBulletinMay,2013dt.13.05.2013(TableNo. 34–FOREIGN INVESTMENT
INFLOWS).
(ii) Inflows undertheacquisitionofshares inMarch, 2011, August,2011&October,2011, include
netFDI on accountof transferofparticipatinginterest from Reliance IndustriesLtd.to BP
Exploration(Alpha).
(iii) RBI had included SwapofSharesofUS$3.1billion underequitycomponentsduring December
2006.
(iv) Monthlydataon componentsof FDI asperexpended coverageare not available. Thesedata,
therefore,arenot comparablewithFDI dataforpreviousyears.
(v) FiguresupdatedbyRBI upto March,2013.
„#‟ Figures forequitycapital ofunincorporatedbodiesfor 2010-11are estimates. (P) All figures areprovisional
“+”Datainrespect of„Re-investedearnings‟ &„Othercapital‟ forthe years 2009-10,2010-11&2012-13are
estimated as average of previoustwoyears.
B. DIPP‟S–FINANCIALYEAR-WISE FDI EQUITYINFLOWS:

(Asper DIPP‟sFDIdatabase–equity capital components only):
Sr.No
s
Financial Year
(April –March)
AmountofFDI Inflows %agegrowth over
previous year
(intermsofUS$)
FINANCIALYEARS2000-01to2012-13(upto
March, 2013)
InRscrores InUS$ million
1. 2000-01 10,733 2,463 -
2. 2001-02 18,654 4,065 (+) 65%
3. 2002-03 12,871 2,705 (-)33%
4. 2003-04 10,064 2,188 (-) 19%
5. 2004-05 14,653 3,219 (+) 47%
6. 2005-06 24,584 5,540 (+) 72%
7. 2006-07 56,390 12,492 (+)125%
8. 2007-08 98,642 24,575 (+)97%
9. 2008-09 „*‟ 142,829 31,396 (+)28%
10. 2009-10# 123,120 25,834 (-)18%
11. 2010-11# 97,320 21,383 (-) 17%
12. 2011-12# ^ 165,146 35,121 (+) 64%
13. 2012-13#
(fromApril,2012to March, 2013)
121,907 22,423 -
CUMULATIVETOTAL
(fromApril,2000to March, 2013)
896,913 193,404 -
Note: (i) Includingamountremittedthrough RBI‟ s-NRI Schemes(2000-2002).
(ii) FEDAI (Foreign ExchangeDealers AssociationofIndia) conversion ratefromrupeestoUS dollar
applied,onthe basisofmonthlyaverage rate providedby RBI (DEPR),Mumbai.
#Figures fortheyears 2009-10,2010-11,2011-12&2012-13(fromApril,2012toAugust,2012)areprovisional
subject to reconciliation with RBI.
^Inflows forthemonth ofMarch,2012areasreportedby RBI, consequent to the adjustmentmadein the figures
ofMarch,„11,August, ‟ 11and October,„11.
*‟ Anadditional amount ofUS$4,035millionpertaining totheyear2008-09,since reported byRBI,has been
included in FDI databasefromFebruary, 2012.

I. STATEMENTONCOUNTRY-WISEFDI EQUITY INFLOWS
APRIL,2000TO MARCH,2013
Sr.
No.
Country AmountofForeignDirect InvestmentInflows %agewith total
FDI Inflows (+)(InRscrore) (InUS$million)
1 Mauritius 341,124.86 73,666.11 38.11
2 Singapore 90,182.32 19,460.35 10.07
3 UnitedKingdom 80,458.61 17,548.55 9.08
4 Japan 70,094.45 14,550.29 7.53
5 U.S.A 50,922.68 11,121.11 5.75
6 Netherlands 42,378.39 8,965.08 4.64
7 Cyprus 32,328.14 6,889.33 3.56
8 Germany 25,512.17 5,480.30 2.84
9 France 16,864.63 3,572.99 1.85
10 UAE 11,307.02 2,422.47 1.25
11 Switzerland 11,064.28 2,367.02 1.22
12 Spain 6,960.69 1,463.19 0.76
13 SouthKorea 5,821.17 1,231.55 0.64
14 Italy 5,258.45 1,169.48 0.61
15 HongKong 4,769.75 1,028.74 0.53
16 Sweden 4,604.83 982.37 0.51
17 Caymen Islands 3,755.52 877.74 0.45
18 BritishVirginia 3,604.01 795.76 0.41
19 Indonesia 2,825.48 610.30 0.32
20 Poland 2,987.28 568.79 0.29
21 Malaysia 2,730.13 549.45 0.28
22 Australia 2,478.02 535.06 0.28
23 The Bermudas 2,252.20 502.07 0.26
24 Belgium 2,277.18 491.86 0.25
25 Luxembourg 2,197.27 473.03 0.24
26 Russia 2,236.55 468.17 0.24
27 Canada 1,954.65 425.67 0.22
28 Oman 1,622.44 352.02 0.18
29 Denmark 1,645.73 342.61 0.18
30 China 1,428.48 278.31 0.14
31 Finland 1,301.95 273.89 0.14
32 Austria 895.05 187.64 0.10
33 Ireland 687.66 154.23 0.08
34 Chile 654.72 141.07 0.07
35 Morocco 649.65 136.99 0.07
36 Norway 607.06 126.18 0.07
37 SouthAfrica 564.27 120.71 0.06
38 Thailand 513.66 111.10 0.06
39 BritishIsles 451.33 98.37 0.05
40 WestIndies 348.17 78.28 0.04
41 Taiwan 306.60 65.70 0.03
42 Mexico 345.83 64.97 0.03
43 Turkey 279.53 59.66 0.03
44 Israel 247.93 55.69 0.03

45 St. Vincent 254.02 49.67 0.03
46 SaudiArabia 193.91 40.93 0.02
47 Panama 185.36 40.61 0.02
48 Korea(North) 187.15 36.94 0.02
49 SaintKitts&Nevis 147.88 33.53 0.02
50 NewZealand 145.92 32.62 0.02
51 Philippines 168.58 31.24 0.02
52 Bahamas 141.68 30.74 0.02
53 Sri Lanka 138.45 29.45 0.02
54 Jordan 155.03 28.57 0.01
55 Portugal 119.72 25.00 0.01
56 Iceland 93.72 21.14 0.01
57 Kenya 98.45 21.07 0.01
58 Brazil 100.43 20.97 0.01
59 VirginIslands(US) 101.10 20.83 0.01
60 Gibraltar 83.67 19.51 0.01
61 Seychelles 86.99 18.24 0.01
62 Kuwait 84.96 17.95 0.01
63 Kazakhstan 81.11 17.42 0.01
64 CzechRepublic 74.81 17.36 0.01
65 Bahrain 130.53 29.23 0.01
66 Liberia 64.54 14.56 0.01
67 Malta 58.39 12.78 0.01
68 Channel Islands 57.20 12.71 0.01
69 Belarus 49.93 12.17 0.01
70 Nigeria 49.48 10.44 0.01
71 Hungary 47.86 10.30 0.01
72 Argentina 46.23 10.15 0.01
73 Myanmar 35.75 8.96 0.00
74 IsleofMan 38.09 8.49 0.00
75 Slovenia 39.07 8.24 0.00
76 Liechtenstein 29.90 6.43 0.00
77 Belize 25.14 5.52 0.00
78 Maldives 24.72 5.49 0.00
79 Slovakia 22.62 5.22 0.00
80 Rep.ofFiji Islands 22.30 5.07 0.00
81 Romania 23.16 4.60 0.00
82 Ghana 21.13 4.46 0.00
83 Tunisia 19.84 4.31 0.00
84 Guersney 23.27 4.20 0.00
85 Greece 18.78 3.72 0.00
86 Uruguay 16.06 3.63 0.00
87 Scotland 13.51 2.99 0.00
88 Qatar 14.23 2.84 0.00
89 WestAfrica 12.31 2.47 0.00
90 Nepal 9.12 1.93 0.00
91 Yemen 7.74 1.87 0.00
92 Monaco 7.49 1.52 0.00
93 Egypt 7.30 1.43 0.00
94 Tanzania 6.31 1.41 0.00

95 Colombia 5.36 1.17 0.00
96 Ukraine 5.06 1.12 0.00
97 Uganda 5.06 1.10 0.00
98 Cuba 4.73 1.04 0.00
99 Guyana 4.60 1.00 0.00
100 Vanuatu 4.41 0.94 0.00
101 Bermuda 3.45 0.64 0.00
102 TogoleseRepublic 3.08 0.60 0.00
103 Congo(DR) 2.41 0.54 0.00
104 Croatia 2.29 0.52 0.00
105 Aruba 1.96 0.43 0.00
106 Lebanon 1.87 0.39 0.00
107 Bulgaria 1.69 0.36 0.00
108 Estonia 1.31 0.30 0.00
109 Anguilla 1.46 0.29 0.00
110 Yugoslavia 1.13 0.24 0.00
111 Vietnam 1.14 0.24 0.00
112 Jamaica 1.00 0.22 0.00
113 Iraq 0.85 0.19 0.00
114 Zambia 0.67 0.15 0.00
115 Iran 0.47 0.10 0.00
116 Libya 0.28 0.07 0.00
117 Latvia 0.27 0.06 0.00
118 Mongolia 0.27 0.06 0.00
119 Sudan 0.24 0.05 0.00
120 Peru 0.20 0.04 0.00
121 Bangladesh 0.16 0.03 0.00
122 Afghanistan 0.12 0.03 0.00
123 Botswana 0.13 0.02 0.00
124 St. Lucia 0.06 0.01 0.00
125 Georgia 0.02 0.00 0.00
126 EastAfrica 0.02 0.00 0.00
127 Bolivia 0.01 0.00 0.00
128 CostaRica 0.01 0.00 0.00
129 Kyrgyzstan 0.01 0.00 0.00
130 Trinidad&Tobago 0.01 0.00 0.00
131 Cameroon 0.01 0.00 0.00
132 Djibouti 0.00 0.00 0.00
133 Venezuela 0.00 0.00 0.00
134 Barbados 0.00 0.00 0.00
135 Muscat 0.00 0.00 0.00
136 FII's 0.25 0.06 0.00
137 NRI „*‟ 20,383.66 4,684.25 2.42
138 CountryDetailsAwaited 30,854.20 6,960.47 3.65
SUB.-TOTAL 896,379.66 193,281.91 100.00
139 RBI‟S- NRI SCHEMES (2000-
2002)
533.06 121.33 -
GRANDTOTAL 896,912.72 193,403.24 -

J. STATEMENTONSECTOR-WISEFDI EQUITY INFLOWS
APRIL,2000TOMARCH,2013
Sr.
No
Sector AmountofFDI Inflows %agewith total
FDI Inflows (+)(InRscrore) (InUS$million)
1 SERVICES SECTOR
(Fin.,Banking, Insurance,NonFin/Business,
Outsourcing, R&D,Courier,Tech.
TestingandAnalysis,Other)
172,275.31 37,234.60 19.26
2 CONSTRUCTION DEVELOPMENT
Townships,housing, built-upinfrastructure
andconstruction-developmentprojects
101,049.13 22,080.20 11.42
3 TELECOMMUNICATIONS 58,732.23 12,856.06 6.65
4 COMPUTER SOFTWARE&HARDWARE 52,774.07 11,691.10 6.05
5 DRUGS&PHARMACEUTICALS 48,879.53 10,318.17 5.34
6 CHEMICALS
(OTHER THAN FERTILIZERS)
40,495.55 8,880.83 4.59
7 AUTOMOBILE INDUSTRY 39,169.94 8,294.85 4.29
8 POWER 36,136.88 7,834.22 4.05
9 METALLURGICAL INDUSTRIES 34,814.13 7,507.07 3.88
10 HOTEL&TOURISM 33,260.03 6,631.25 3.43
11 PETROLEUM&NATURALGAS 24,808.41 5,381.48 2.78
12 TRADING 18,646.51 3,955.80 2.05
13 INFORMATION &BROADCASTING
(INCLUDING PRINTMEDIA)
15,495.69 3,284.21 1.70
14 ELECTRICAL EQUIPMENTS 14,668.58 3,182.70 1.65
15 CEMENTAND GYPSUMPRODUCTS 11,779.04 2,626.43 1.36
16 NON-CONVENTIONAL ENERGY 12,901.12 2,591.22 1.34
17 MISCELLANEOUS
MECHANICAL&ENGINEERINGINDUSTRIES
10,522.52 2,318.71 1.20
18 INDUSTRIALMACHINERY 11,017.51 2,302.14 1.19
19 CONSULTANCY SERVICES 9,692.72 2,095.13 1.08
20 CONSTRUCTION (INFRASTRUCTURE)
ACTIVITIES
9,741.06 2,090.41 1.08
21 FOODPROCESSINGINDUSTRIES 8,681.38 1,811.06 0.94
22 PORTS 6,717.38 1,635.08 0.85
23 AGRICULTURESERVICES 7,797.73 1,608.69 0.83
24 HOSPITAL&DIAGNOSTIC CENTRES 7,437.93 1,597.33 0.83
25 TEXTILES
(INCLUDINGDYED,PRINTED)
5,689.76 1,226.02 0.63
26 ELECTRONICS 5,466.74 1,198.22 0.62
27 SEATRANSPORT 5,492.51 1,194.50 0.62
28 FERMENTATION INDUSTRIES 5,095.29 1,134.63 0.59
29 RUBBER GOODS 5,824.46 1,134.44 0.59
30 MINING 4,368.18 998.30 0.52
31 PAPERAND PULP
(INCLUDINGPAPER PRODUCTS)
4,056.14 865.54 0.45
32 PRIME MOVER
(OTHER THAN ELECTRICALGENERATORS)
4,131.80 848.68 0.44

33 EDUCATION 3,332.97 684.35 0.35
34 SOAPS,COSMETICS
&TOILETPREPARATIONS
3,115.54 632.39 0.33
35 MACHINETOOLS 2,967.09 622.99 0.32
36 MEDICALAND SURGICALAPPLIANCES 2,913.92 604.47 0.31
37 CERAMICS 2,195.59 508.13 0.26
38 AIR TRANSPORT (INCLUDINGAIR
FREIGHT)
2,022.00 449.26 0.23
39 DIAMOND,GOLD ORNAMENTS 1,810.74 390.76 0.20
40 GLASS 1,942.21 389.07 0.20
41 VEGETABLEOILSAND VANASPATI 1,893.72 384.94 0.20
42 FERTILIZERS 1,425.53 297.90 0.15
43 AGRICULTURALMACHINERY 1,423.25 296.42 0.15
44 PRINTINGOF BOOKS
(INCLUDINGLITHO PRINTING INDUSTRY)
1,257.51 272.32 0.14
45 RAILWAY RELATED COMPONENTS 1,246.35 270.33 0.14
46 COMMERCIAL,OFFICE
&HOUSEHOLDEQUIPMENTS
1,181.76 254.83 0.13
47 EARTH-MOVINGMACHINERY 769.05 174.95 0.09
48 LEATHER,LEATHER GOODSAND PICKERS 527.88 107.43 0.06
49 TEA AND COFFEE
(PROCESSING&WAREHOUSING
COFFEE&RUBBER)
456.01 101.21 0.05
50 RETAILTRADING (SINGLEBRAND) 459.55 95.36 0.05
51 SCIENTIFICINSTRUMENTS 496.11 94.48 0.05
52 TIMBER PRODUCTS 398.52 79.15 0.04
53 PHOTOGRAPHIC RAWFILMAND PAPER 269.26 66.54 0.03
54 INDUSTRIAL INSTRUMENTS 307.45 66.53 0.03
55 BOILERSAND STEAM GENERATING
PLANTS
305.75 61.83 0.03
56 SUGAR 242.32 51.82 0.03
57 COAL PRODUCTION 103.11 24.78 0.01
58 DYE-STUFFS 87.32 19.50 0.01
59 GLUEAND GELATIN 70.56 14.55 0.01
60 MATHEMATICAL,SURVEYING AND
DRAWING INSTRUMENTS
39.80 7.98 0.00
61 DEFENCE INDUSTRIES 19.89 4.12 0.00
62 COIR 10.37 2.17 0.00
63 MISCELLANEOUSINDUSTRIES 35,469.28 7,843.68 4.10
SUB-TOTAL 896,379.67 193,283.31 100
-
-
64. RBI‟S- NRI SCHEMES (2000-2002) 533.06 121.33 -
GRANDTOTAL 896,912.73 193,404.64 -
FDI inflows datare-classified,aspersegregationofdatafromApril 2000onwards.
+‟ Percentage ofinflows workedoutin termsofUS$&theaboveamount ofinflows receivedthroughFIPB/SIA
routeRBI‟ sautomatic route&acquisitionofexistingsharesonly.
FDI Sectoral datahasbeenrevalidated/ reconciledin linewith theRBI,whichreflectsminor changes intheFDI
figures(increase/decrease) ascomparedtotheearlierpublishedsectoral data.

K. INDIAN ECONOMY
I. Recent Trends in Indian Economy
1. The Indian economy has emerged with remarkable rapidity from the slowdown caused by the global
economic crisis and emerged stronger in 2011.The Indian economy is estimated to grow at 8.6 per cent in
2010-11 as compared to the growth rate of 8.0 per cent in 2009-10. The growth rate of 8.6 per cent in GDP
during 2010-11 has been due to the robust growth rates of over 8 per cent in the sectors of manufacturing,
construction, trade, hotels, transport and communication, financing, insurance, and, real estate and business
services.
2. The agriculture, forestry and fishing sector is likely to show a growth of 5.4 per cent during 2010-11, as
against the previous year's growth rate of 0.4 per cent. According to the Department of Agriculture and
Cooperation (DAC) of Government of India, production of food grains and oilseeds is expected to grow by
6.5 per cent and 11.9 per cent, respectively, as compared to the previous agriculture year. The production
of cotton and sugarcane is also expected to rise by 41.2 per cent and 15.2 per cent, respectively, in 2010-
11. Among the horticultural crops, production of fruits and vegetables is expected to increase by 4.1 per
cent and 3.8 per cent, respectively, during the year 2010-11.
3. The growth in mining and quarrying and manufacturing sectors during 2010-11 is expected to be 6.2 and
8.8 per cent respectively over previous year. According to the latest estimates available of the Index of
Industrial Production (IIP),mining and manufacturing registered growth rates of 8.0 per cent and 10.0 per
cent respectively during April-November, 2010. The estimated growth rate for construction sector is 8.0
per cent in 2010-11. The key indicators of construction sector, namely, cement production and steel
consumption have registered growth rates of 4.4 per cent and 8.8 per cent, respectively during April-
December, 2010.
4. The estimated growth in the trade, hotels, transport and communication sectors during 2010-11 is placed at
11.0 per cent, mainly on account of growth of 14.9 per cent in passengers handled in civil aviation, 21.3
per cent in air cargo handled and 40.9 per cent in stock of telephone connections. The sales of commercial
vehicles witnessed an increase of 34.1 per cent per cent in April-December, 2010. The financing,
insurance, real estate and business services sectors are expected to show a growth rate of 10.6 per cent
during 2010-11, on account of 14.0 per cent growth in aggregate deposits and 22.6 per cent growth in bank
credit during April- November 2010 (against the respective growth rates of 18.6 per cent and 10.1 per cent
in the corresponding period of previous year). The growth rate of community, social and personal services
during 2010-11 is estimated to be 5.7 per cent.
5. India's per capita income, often used to measure a country's standard of living, increased by 14.5 per cent
during 2009-10 to US$ 1038.2 as compared to US$ 906.9 in 2008-09.

II. Growth in Gross Domestic Product
Annual growth by economic activity in Gross Domestic Product (GDP) for the year 2010-11, released by
the Central Statistics office (CSO) of Government of India
S.No. Industry GDP at Factor Cost
(2010-11)
Percentage change over previous year
at 2004-05 prices(US$
billion)
at current prices
(US$ billion)
at 2004-05
prices
at current
prices
1 Agriculture, forestry & fishing 152.42 295.25 5.4 23.2
2 Mining & quarrying 24.32 40.13 6.2 18.2
3 Manufacturing 170.87 228.09 8.8 14.5
4 Electricity, gas & water supply 20.49 22.15 5.1 8.6
5 Construction 84.57 129.21 8.0 17.0
6 Trade, hotels, transport &
communication
291.36 379.65 11.0 16.7
7 Financing, insurance, real estate &
business services
187.89 285.97 10.6 26.5
8 Community, social & personal
services
141.87 216.87 5.7 11.3
Total GDP 1073.79 1597.49 8.6 18.3
Source: Central Statistics Office (CSO), Ministry of Statistics &Programme Implementation, Government of India

III. Economic Survey 2012-13
According to the Economic Survey 2010-11, tabled in Parliament on February 25, 2011 by the Union Finance
Minister, Mr.Pranab Mukherjee, the economy is expected to grow at 8.6 per cent in 2010-11 and is expected to
be around 9 per cent in the next fiscal year. The growth has been broad based with a rebound in the Agriculture
sector which is expected to grow around 5.4 per cent. Manufacturing and Services sector have registered
impressive gains. The Survey reports that the industrial output growth rate was 8.6 per cent while the
manufacturing sector registered a growth rate of 9.1 per cent in 2010-11.
The main highlights of the survey are:
1. Economy expected to grow at 8.6 per cent in 2010-11 and 9 per cent in next fiscal.
2. Growth broad based with rebound in Agriculture, continued momentum in manufacturing and private
services.
3. Fundamentals strong with savings and investments up, exports rising rapidly and inflation falling.
4. Agriculture likely to grow at 5.4 per cent in 2010-11.
5. Industrial output grows by 8.6 per cent.
6. Manufacturing sector registers 9.1 per cent growth.
7. Exports in April–December 2010 up by 29.5 per cent.
8. Imports in April–December 2010 up by 19 per cent.
9. Trade gap narrowed to US$ 82.01 billion in April-December 2010.
10. 59 per cent rise in Net Bank Credit.
11. Social programme spending stepped up by 5 percentage points of GDP over past 5 years.
12. 9.7 per cent growth of GDP at market prices.
13. Production of food grains estimated at 232.1 million tonnes.
14. Forex Reserves estimated at US$ 297.3 billion.
15. Gross Fiscal Deficit stands at 4.8 per cent of GDP

L. POTENTIAL FOR INVESTMENT IN INDIA
1. India presents a vast potential for overseas investment and is actively encouraging the entrance of foreign
players into the market. India is also one of the few markets in the world, which offers high prospects for
growth and earning potential in practically all areas of business.
2. India‟s biotechnology sector is set to become a $10 billion industry by 2015, CMD of Biocon Ltd,
KiranMazumdar-Shaw said . She expects the industry to grow to $5 billion by next year. In 2008-09 it was
$2.51 billion. “India‟s biotechnology industry is at an inflexion point, and has attained a critical mass,
Mazumdar-Shaw said. It now has a platform from where it can leapfrog and deliver exponential growth,
she said. India is also becoming the vaccine capital.Clinical trials, agri-biotech and bio-fuels are becoming
opportunities. There are a lot of growth drivers and trigger points which, she said, will deliver in the next
five years.
3. With the launch of video telephony, by BSNL and Sai Info Systems (SIS), will boost demand for
broadband connection, Sam Pitroda, advisor to Prime Minister on public information, infrastructure and
innovations, expects the number to hit 100 million in next five years. "The service is expected to
revolutionize the telecom sector and take it to the next level. Globally with video phones have become an
integral part of life. The service will be provided and marketed by SIS while the connectivity for the
service will be provided by BSNL. BSNL will also market it as another value added service to its large
broadband customer base," said Vijay Mandora, director, SIS.
4. Tumbling voice tariffs contributing to the declining average revenue per user (ARPU) rates, will result in
SMS volumes to reach 191.6 billion in India by 2013, predicts Gartner.By 2013, the country would have
more than 750 million mobile connections; therefore the SMS usage per user would essentially drop.
However, overall large base of mobile connections would support this SMS volume. Strong organic
growth continues in Asia‟s developing markets, with marginal subscribers turning to low-cost messaging
as an entry-level service. In the mature markets of the Asia-Pacific region, SMS has seen sustained healthy
growth as a result of steady price declines and increasingly generous SMS and data bundles," said
Madhusudan Gupta, senior research analyst at Gartner. SMS contributes around 8% to value added
services (VAS), which in turn contributes 10-12% of an operator‟s revenue.
5. The Indian auto sector is likely to witness an overall growth of 10%-12% in sales during 2010 and a faster
recovery in expected in passenger vehicle (PV) volumes of 12%-14% compared with 5%-6% for the
commercial vehicle (CV) segment. The positive outlook for demand could result in a sharp increase in
capex plans, which could offset the positive impact on credit profiles of higher volumes and lower
inventories, said Fitch Ratings. The PV rebound has been supported by an improving liquidity scenario and
restoration of consumer confidence; modest growth in industrial production, together with the government
stimulus, has brought about stability in CV sales, though at lower levels than for PVs.Domestic CV sales
grew by 22.3% during April-December 2009 compared with same period in 2008, building on the recovery
in demand beginning Q4 09. However, growth trends have distinctly varied within the CV segment -
depending on the tonnage capacity and end-use, as light commercial vehicles (LCVs) have been able to
maintain their ground while medium and heavy commercial vehicles (M&HCVs) continued to face
pressure due to the decline in industrial output. The M&HCV segment is now stabilizing with the higher
industrial production, while the LCV segment is showing a more rapid recovery. Fitch expects the full-year
2010 numbers to reveal moderate growth in the range of 5%-6% for domestic sales, with the first few
months being driven by regulatory guidelines.

6. The Union food processing ministry has set a target of attracting investments to the tune of Rs 1 lakh crore
in the sector by 2015.Subodh Kant Sahai, Union food processing minister, said: “We are expecting
investments of Rs 1 lakh crore in the next five years. We are planning to increase food processing to 20%
of the total fruits and vegetable produced in the country. “According to him, food processing has grown by
10% in India while value-added products have grown by 10-15% in the last five years.We are looking at a
growth of 35% in value-added production by 2015,” Sahai said.
7. The 234 million tonne per annum (mtpa) Indian cement industry, which witnessed a double digit dispatch
growth in December 2009 and an overall growth thanks to infrastructure and real estate projects, is set to
add 43.2 mtpa capacity during the next 15 months (January 2010 to March 2011).South India, which has
already started feeling the heat of oversupply, will add the maximum capacity of 17.6 million tonne during
that period. The next in line is the northern region, which will add 9.6 mt. The western, central and eastern
regions will add 9 mt, 3 mt and 4 mt, respectively. “The southern market with 18 players having capacity
of 1mtpa or more is the most fragmented one in India. Capacities of three new players (Raghuram Cement,
Jayajyothi and JSW Cement with more than 2 mtpa each) will stabilize in the next 6-9 months. With sharp
price cuts, new producers may find it difficult to break even, and this would likely to prompt some
consolidation. All the three new producers are unlikely to participate in consolidation,” J Radhakrishnan,
analyst with IIFL, said in his report.
8. The healthcare industry in the country, which comprises hospital and allied sectors, is projected to grow
23% per annum to touch $77-billion mark by 2012 from the current estimated size of $35 billion,
according to a Yes Bank and Assocham report. The sector has registered a growth of 9.3% between 2000-
2009, comparable to the sectorial growth rate of other emerging economies such as China, Brazil and
Mexico. The growth in the sector would be driven by healthcare facilities, both private and public sector,
medical diagnostic and pathlabs and the medical insurance sector.Of the sum, diagnostic and pathology
services would account for $2.5 billion in 2012, more than double its estimated current size of $1billion.
The growth in the segment is expected to be driven by consolidation in the industry and increasing
insurance penetration among the country‟s population. Healthcare facilities, inclusive of public and private
hospitals, the core sector, around which the healthcare sector is centered, would continue to contribute over
70% of the total sector and touch a figure of $54.7 billion by 2012.The medical insurance sector would
account for another $ 3 billion in the next three years, up from the estimated current size of $1 billion.
9. Steve King, CEO of Zenith Optimedia Worldwide feels that new and emerging advertising markets like
India and China will power the global industry‟s recovery, on the back of positive signals from developed
markets like US, Europe. “India, with an approximate 10% growth, will certainly be in the top ten
advertising markets in absolute dollar terms by 2015,” he told.Zenith Optimedia, the world‟s third largest
media-buying agency and an enterprise under the Paris-based Publics Group is upbeat about India.It has
brought fresh business worth $100 million in the country this year.India figures amongst Zenith
Optimedia‟s 20 largest markets globally, but over the past five years, it has been among the top three
fastest growing ones. “Most of our markets are between 15 to 20 years old, so despite being here for only
five years, this market has responded very well. Our focus here will be on winning local clients, apart from
the international ones. By the next five years, we will have considerably closed the gap on the top two
market leaders here,” King said.

M. ADVANTAGE IN INDIA
1. World's largest democracy with 1.2 billion people.
2. Stable political environment and responsive administrative set up.
3. Well established judiciary to enforce rule of law.
4. Land of abundant natural resources and diverse climatic conditions.
5. Rapid economic growth: GDP to grow by 8.5% in 2010-11* and 9.0% in 2011-12.
6. India's growth will start to outpace China's within three to five years and hence will become the fastest
large economy with 9-10% growth over the next 20-25 years (Morgan Stanley).
7. Investor friendly policies and incentive based schemes.
8. Second most attractive Foreign Direct Investment (FDI) location in the world: India received a total of US$
25.9 billion of FDI in 2009-10.
9. Healthy macro-economic fundamentals: Investment rate is expected to be 37% in 2010-11 and 38.4% in
2011-12 while Domestic Savings rate is expected to be 34% in 2010-11 and 36% in 2011-12.
10. India's economy will grow fivefold in the next 20 years (McKinsey).
11. Cost competitiveness: low labour costs.
12. Total labour force of nearly 530 million.
13. Large pool of skilled manpower; strong knowledge base with significant English speaking population.
14. Young country with a median age of 30 years by 2025: India's economy will benefit from this
"demographic dividend".
15. The proportion of population in the working age group (15-59 years) is likely to increase from
approximately 58% in 2001 to more than 64% by 2021.
16. Huge untapped market potential.
17. The urban population of India will double from the 2001 census figure of 290m to approximately 590m by
2030 (McKinsey).
18. Progressive simplification and rationalization of direct and indirect tax structures.
19. Reduction in import tariffs.
20. Full current account convertibility.
21. Compliance with WTO norms.
22. Robust banking and financial institutions.
"* India's financial year is from April to March. 2010-11 above means April 2010-March 2011."

I. Indian Economy
India has undergone a paradigm shift owing to its competitive stand in the world. The Indian economy is on a
robust growth trajectory and boasts of a stable annual growth rate, rising foreign exchange reserves and
booming capital markets among others.
Indian economy is estimated to grow at 8.6 percent in 2010-11 as compared to the growth rate of 8.0 percent
in 2009-10. These GDP figures are based at factor cost at constant (2004-05) prices in the year 2010-11.The
growth rate of 8.6 per cent in GDP during 2010-11 has been due to the robust growth rates of over 8 per cent
in the sectors of manufacturing, construction, trade, hotels, transport and communication, financing,
insurance, and, real estate and business services. Agriculture sector registered a growth rate of 5.4 percent in
2009-10. A growth rate of 18.3 percent is estimated for GDP at current prices in the year 2010-11.
II. Agriculture Sector
The agriculture, forestry and fishing sector is likely to show a growth of 5.4 per cent in its GDP during 2010-
11, as against the previous year‟s growth rate of 0.4 per cent.The estimate of GDP from agriculture in 2010-
11,according to the Department of Agriculture and Cooperation (DAC),production of foodgrains and oilseeds
is expected to grow by 6.5 per cent and 11.9 per cent, respectively, as compared to the previous agriculture
year. The production of cotton and sugarcane is also expected to rise by 41.2 per cent and 15.2 per cent,
respectively, in 2010-11. Among the horticultural crops, production of fruits and vegetables is expected to
increase by 4.1 per cent and 3.8 per cent, respectively, during the year 2010-11.
III. Industry Sector
The growth in GDP for mining and quarrying and manufacturing sectors during 2010-11 is expected to be
6.2 and 8.8 percent respectively over previous year. According to the latest estimates available on the Index
of Industrial Production (IIP), the index of mining and manufacturing registered growth rates of 8.0 per cent
and 10.0 per cent during April-November, 2010. The estimated growth rate for construction sector is 8.0
percent in 2010-11. The key indicators of construction sector, namely, cement production and steel
consumption have registered growth rates of 4.4 per cent and 8.8 per cent, respectively during April-
December, 2010.
IV. Services Sector
The estimated growth in GDP for the trade, hotels, transport and communication sectors during 2010-11 is
placed at 11.0 per cent, mainly on account of growth during April- November, 2010-11 of 14.9 per cent in
passengers handled in civil aviation, 21.3 per cent in air cargo handled and 40.9 per cent in stock of
telephone connections. The sales of commercial vehicles witnessed an increase of 34.1 per cent per cent in
April-December, 2010. The financing, insurance, real estate and business services sector is expected to show
a growth rate of 10.6 per cent during 2010-11, on account of 14.0 per cent growth in aggregate deposits and
22.6 per cent growth in bank credit during April- November 2010 (against the respective growth rates of 18.6
per cent and 10.1 per cent in the corresponding period of previous year). The growth rate of community,
social and personal services during 2010-11 is estimated to be 5.7 per cent.

N. FDI POLICY FRAMEWORK
Policy regime is one of the key factors driving investment flows to a country. Apart from underlying macro
fundamentals, ability of a nation to attract foreign investment essentially depends upon its policy regime -
whether it promotes or restrains the foreign investment flows. This section undertakes a review of India‟s FDI
policy framework and makes a comparison of India‟s policy vis-à-vis that of select EMEs.
1. FDI Policy Framework in India
There has been a sea change in India‟s approach to foreign investment from the early 1990s when it began
structural economic reforms encompassing almost all the sectors of the economy.
Pre-Liberalization Period
Historically, India had followed an extremely cautious and selective approach while formulating FDI policy in
view of the dominance of „import-substitution strategy‟ of industrialization. With the objective of becoming
„self-reliant‟, there was a dual nature of policy intention – FDI through foreign collaboration was welcomed in
the areas of high technology and high priorities to build national capability and discouraged in low technology
areas to protect and nurture domestic industries. The regulatory framework was consolidated through the
enactment of Foreign Exchange Regulation Act (FERA), 1973 wherein foreign equity holding in a joint
venture was allowed only up to 40 per cent. Subsequently, various exemptions were extended to foreign
companies engaged in export oriented businesses and high technology and high priority areas including
allowing equity holdings of over 40 per cent. Moreover, drawing from successes of other country experiences
in Asia, Government not only established special economic zones (SEZs) but also designed liberal policy and
provided incentives for promoting FDI in these zones with a view to promote exports. As India continued to
be highly protective, these measures did not add substantially to export competitiveness. Recognising these
limitations, partial liberalisation in the trade and investment policy was introduced in the 1980s with the
objective of enhancing export competitiveness, modernisation and marketing of exports through Trans-
national Corporations (TNCs). The announcements of Industrial Policy (1980 and 1982) and Technology
Policy (1983) provided for a liberal attitude towards foreign investments in terms of changes in policy
directions. The policy was characterized by de-licensing of some of the industrial rules and promotion of
Indian manufacturing exports as well as emphasizing on modernization of industries through liberalized
imports of capital goods and technology. This was supported by trade liberalization measures in the form of
tariff reduction and shifting of large number of items from import licensing to Open General Licensing
(OGL).
Post-Liberalization Period
A major shift occurred when India embarked upon economic liberalization and reforms program in 1991
aiming to raise its growth potential and integrating with the world economy. Industrial policy reforms
gradually removed restrictions on investment projects and business expansion on the one hand and allowed
increased access to foreign technology and funding on the other. A series of measures that were directed
towards liberalizing foreign investment included:
(i) Introduction of dual route of approval of FDI – RBI‟s automatic route and Government‟s
approval (SIA/FIPB) route,
(ii) Automatic permission for technology agreements in high priority industries and removal of
restriction of FDI in low technology areas as well as liberalization of technology imports,
(iii) Permission to Non-resident Indians (NRIs) and Overseas Corporate Bodies (OCBs) to invest
up to 100 per cent in high priorities sectors,
(iv) Hike in the foreign equity participation limits to 51 per cent for existing companies and
liberalization of the use of foreign „brands name‟ and

(v) Signing the Convention of Multilateral Investment Guarantee Agency (MIGA) for protection
of foreign investments. These efforts were boosted by the enactment of Foreign Exchange
Management Act (FEMA), 1999 [that replaced the Foreign Exchange Regulation Act (FERA),
1973] which was less stringent. This along with the sequential financial sector reforms paved
way for greater capital account liberalization in India.
Investment proposals falling under the automatic route and matters related to FEMA are dealt with by RBI,
while the Government handles investment through approval route and issues that relate to FDI policy per se
through its three institutions, viz., the Foreign Investment Promotion Board (FIPB), the Secretariat for
Industrial Assistance (SIA) and the Foreign Investment Implementation Authority (FIIA).
FDI under the automatic route does not require any prior approval either by the Government or the Reserve
Bank. The investors are only required to notify the concerned regional office of the RBI within 30 days of
receipt of inward remittances and file the required documents with that office within 30 days of issuance of
shares to foreign investors. Under the approval route, the proposals are considered in a time-bound and
transparent manner by the FIPB. Approvals of composite proposals involving foreign investment/ foreign
technical collaboration are also granted on the recommendations of the FIPB. Current FDI policy in terms of
sector specific limits has been summarized in Table 3 below:
Table 3: Sector Specific Limits of Foreign Investment in India
Sector FDI Cap/Equity Entry Route Other Conditions
A. Agriculture
1. Floriculture, Horticulture, Development of
Seeds, Animal Husbandry, Pisciculture,
Aquaculture, Cultivation of vegetables &
mushrooms and services related to agro and
allied sectors.
100% Automatic
2. Tea sector, including plantation 100% FIPB
(FDI is not allowed in any other agricultural sector /activity)
B. Industry
1. Mining covering exploration and mining of
diamonds & precious stones; gold, silver and
minerals.
100% Automatic
2. Coal and lignite mining for captive
consumption by power projects, and iron &
steel, cement production.
100% Automatic
3. Mining and mineral separation of titanium
bearing minerals
100% FIPB
C. Manufacturing
1. Alcohol- Distillation & Brewing 100%
Automatic
2. Coffee & Rubber processing & Warehousing. 100% Automatic
3. Defence production 26% FIPB
4. Hazardous chemicals and isocyanates 100% Automatic
5. Industrial explosives -Manufacture 100% Automatic
6. Drugs and Pharmaceuticals 100% Automatic
7. Power including generation (except Atomic
energy); transmission, distribution and power
trading.
100% Automatic

(FDI is not permitted for generation, transmission & distribution of electricity produced
in atomic power plant/atomic energy since private investment in this activity is prohibited
and reserved for public sector.)
D.Services
1. Civil aviation (Greenfield projects and
Existing projects)
100% Automatic
2. Asset Reconstruction companies 49% FIPB
3. Banking (private) sector 74% (FDI+FII).
FII not to exceed 49%
Automatic
4. NBFCs : underwriting, portfolio management
services, investment advisory services, financial
consultancy, stock broking, asset management,
venture capital, custodian, factoring, leasing and
finance, housing finance, forex broking, etc.
100% Automatic
s.t.minimum
capitalization
norms
5. Broadcasting
a. FM Radio
b. Cable network; c. Direct to home; d.
Hardware facilities such as up-linking, HUB.
e. Up-linking a news and current affairs TV
Channel
20%
49% (FDI+FII)
100%
FIPB
6. Commodity Exchanges 49% (FDI+FII) (FDI
26 % FII 23%)
FIPB
7. Insurance 26% Automatic Clearance from
IRDA
8. Petroleum and natural gas :
a. Refining
49% (PSUs).
100% (Pvt.
Companies)
FIPB (for
PSUs).
Automatic
(Pvt.)
9. Print Media
a. Publishing of newspaper and periodicals
dealing with news and current affairs
b. Publishing of scientific magazines / speciality
journals/periodicals
26%
100%
FIPB
FIPB
S.t.guidelines by
Ministry of
Information &
broadcasting
10. Telecommunications
a. Basic and cellular, unified access services,
national / international long-distance, V-SAT,
public mobile radio trunked services (PMRTS),
global mobile personal communication services
(GMPCS) and others.
74% (including FDI,
FII, NRI, FCCBs,
ADRs/GDRs,
convertible preference
shares, etc.
Automatic up
to 49% and
FIPB beyond
49%.
Sectors where FDI is Banned
1. Retail Trading (except single brand product retailing);
2. Atomic Energy;
3. Lottery Business including Government / private lottery, online lotteries etc;
4. Gambling and Betting including casinos etc.;
5. Business of chit fund;
6. Nidhi Company;
7. Trading in Transferable Development Rights (TDRs);
8. Activities/sector not opened to private sector investment;
9. Agriculture (excluding Floriculture, Horticulture, Development of seeds, Animal Husbandry, Piscicultureand
cultivation of vegetables, mushrooms etc. under controlled conditions and services related to agro and allied
sectors) and Plantations (Other than Tea Plantations);
10. Real estate business, or construction of farm houses;
11. Manufacturing of Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco or of tobacco
substitutes.

2. FDI Policy: The International Experience
Foreign direct investment is treated as an important mechanism for channelizing transfer of capital and
technology and thus perceived to be a potent factor in promoting economic growth in the host countries.
Moreover, multinational corporations consider FDI as an important means to reorganise their production
activities across borders in accordance with their corporate strategies and the competitive advantage of host
countries. These considerations have been the key motivating elements in the evolution and attitude of EMEs
towards investment flows from abroad in the past few decades particularly since the eighties. This section
reviews the FDI policies of select countries to gather some perspective as to „where does India stand‟ at the
current juncture to draw policy imperatives for FDI policy in India.
China
Encouragement to FDI has been an integral part of the China‟s economic reform process. It has gradually
opened up its economy for foreign businesses and has attracted large amount of direct foreign investment.
Government policies were characterised by setting new regulations to permit joint ventures using foreign
capital and setting up Special Economic Zones (SEZs) and Open Cities.The concept of SEZs was extended
to fourteen more coastal cities in 1984.Favorable regulations and provisions were used to encourage FDI
inflow, especially export-oriented joint ventures and joint ventures using advanced technologies in 1986.
Foreign joint ventures were provided with preferential tax treatment, the freedom to import inputs such as
materials and equipment, the right to retain and swap foreign exchange with each other, and simpler
licensing procedures in 1986. Additional tax benefits were offered to export-oriented joint ventures and
those employing advanced technology.
Priority was given to FDI in the agriculture, energy, transportation, telecommunications, basic raw
materials, and high-technology industries, and FDI projects which could take advantage of the rich natural
resources and relatively low labour costs in the central and northwest regions.
China‟s policies toward FDI have experienced roughly three stages: gradual and limited opening, active
promoting through preferential treatment, and promoting FDI in accordance with domestic industrial
objectives. These changes in policy priorities inevitably affected the pattern of FDI inflows in China.
Chile
In Chile, policy framework for foreign investment, embodied in the constitution and in the Foreign
Investment Statute, is quite stable and transparent and has been the most important factor in facilitating
foreign direct investment. Under this framework, an investor signs a legal contract with the state for the
implementation of an individual project and in return receives a number of specific guarantees and rights.
Foreign investors in Chile can own up to 100 per cent of a Chilean based company, and there is no time
limit on property rights. They also have access to all productive activities and sectors of the economy,
except for a few restrictions in areas that include coastal trade, air transport and the mass media.
Chile attracted investment in mining, services, electricity, gas and water industries and manufacturing.
Investors are guaranteed the right to repatriate capital one year after its entry and to remit profits at any
time.
Although Chile‟s constitution is based on the principle of non-discrimination, some tax advantages are
extended to foreign investors such as invariability of income tax regime, invariability of indirect taxes, and
special policy regime for large projects.

Malaysia
The Malaysian FDI regime is tightly regulated in that all foreign manufacturing activity must be licensed
regardless of the nature of their business.
Until 1998, foreign equity share limits were made conditional on performance and conditions set forth by
the industrial policy of the time.
In the past, the size of foreign equity share allowed for investment in the manufacturing sector hinged on
the share of the products exported in order to support the country's export-oriented industrial policy.
FDI projects that export at least 80 per cent of production or production involving advanced technology are
promoted by the state and no equity conditions are imposed. Following the crisis in 1997-98, the restriction
was abolished as the country was in need of FDI.
Korea
The Korean government maintained distinctive foreign investment policies giving preference to loans over
direct investment to supplement its low level of domestic savings during the early stage of industrialisation.
Korea‟s heavy reliance on foreign borrowing to finance its investment requirements is in sharp contrast to
other countries.
The Korean Government had emphasised the need to enhance absorptive capacity as well as the
indigenisation of foreign technology through reverse engineering at the outset of industrialisation while
restricting both FDI and foreign licensing. This facilitated Korean firms to assimilate imported technology,
which eventually led to emergence of global brands like Samsung, Hyundai, and LG.
The Korean government pursued liberalised FDI policy regime in the aftermath of the Asian financial
crisis in 1997-98 to fulfil the conditionality of the International Monetary Fund (IMF) in exchange for
standby credit.
Several new institutions came into being in Korea immediately after the crisis. Invest Korea is Korea‟s
national investment promotion agency mandated to offer one-stop service as a means of attracting foreign
direct investment, while the Office of the Investment Ombudsman was established to provide investment
after-care services to foreign-invested companies in Korea. These are affiliated to the Korea Trade
Investment Promotion Agency.
Korea enacted a new foreign investment promotion act in 1998 to provide foreign investors incentives
which include tax exemptions and reductions, financial support for employment and training, cash grants
for R&D projects, and exemptions or reductions of leasing costs for land for factory and business
operations for a specified period.
One of the central reasons for the delays in the construction process in Korea is said to be the lengthy
environmental and cultural due diligence on proposed industrial park sites. (OECD, 2008).
Thailand
Thailand followed a traditional import-substitution strategy, imposing tariffs on imports, particularly on
finished products in the 1960s. The role of state enterprises was greatly reduced from the 1950s and
investment in infrastructure was raised. Attention was given to nurturing the institutional system necessary
for industrial development. Major policy shift towards export promotion took place by early 1970s due to
balance of payments problems since most of components, raw materials, and machinery to support the
production process, had to be imported.

On the FDI front, in 1977 a new Investment Promotion Law was passed which provided the Board of
Investment (BOI) with more power to provide incentives to priority areas and remove obstacles faced by
private investors (Table 4). After the East Asian financial crisis, the Thai government has taken a very
favourable approach towards FDI with a number of initiatives to develop the industrial base and exports
and progressive liberalisation of laws and regulations constraining foreign ownership in specified
economic activities.
The Alien Business Law, which was enacted in 1972 and restricted majority foreign ownership in certain
activities, was amended in 1999. The new law relaxed limits on foreign participation in several professions
such as law, accounting, advertising and most types of construction, which have been moved from a
completely prohibited list to the less restrictive list of businesses.
To sum up, the spectacular performance of China in attracting large amount of FDI could be attributed to its
proactive FDI policy comprising setting up of SEZs particularly exports catering to the international market,
focus on infrastructure and comparative advantage owing to the low labour costs. A comparison of the FDI
policies pursued by select emerging economies, set out above, suggests that policies although broadly common
in terms of objective, regulatory framework and focus on technological upgradation and export promotion, the
use of incentive structure and restrictions on certain sectors, has varied across countries. While China and
Korea extend explicit tax incentives to foreign investors, other countries focus on stability and transparency of
tax laws. Similarly, while all the countries promote investment in manufacturing and services sector, China
stands out with its relaxation for agriculture sector as well. It is, however, apparent that though policies across
countries vary in specifics, there is a common element of incentivisation of foreign investment (Table 4).
Table 4: FDI Policy and Institutional Framework in Select Countries
Year of
Liberalisation
Objective Incentives Priority Sectors Unique
features
China 1979 Transformation
of traditional
agriculture,
promotion of
industrialization,
infrastructure
and export
promotion.
Foreign joint ventures were
provided with preferential tax
treatment. Additional tax
benefits to export-oriented
joint ventures and those
employing advanced
technology. Privileged access
was provided to supplies of
water, electricity and
transportation (paying the
same price as state-owned
enterprises) and to interest-
free RMB loans.
Agriculture, energy,
transportation,
telecommunications,
basic raw materials,
and high-technology
industries.
Setting up of
Special
Economic
Zones
Chile 1974 Technology
transfer, export
promotion and
greater domestic
competition.
Invariability of tax regime
intended to provide a stable
tax horizon.
Allproductive
activities and sectors
of the economy,
except for a few
restrictions in areas
that include coastal
trade, air transport
and the mass media.
Does not use
tax incentives
to attract
foreign
investment.

Korea 1998 Promotion of
absorptive
capacity and
indigenization
of foreign
technology
through reverse
engineering at
the outset of
industrialization
while restricting
both FDI and
foreign
licensing.
Businesses located in Foreign
Investment Zone enjoy full
exemption of corporate
income tax for five years
from the year in which the
initial profit is made and 50
percent reduction for the
subsequent two years. High-
tech foreign investments in
the Free Economic Zones are
eligible for the full exemption
three years and 50 percent for
the following two years. Cash
grants to high-tech green field
investment and R&D
investment subject to the
government approval.
Manufacturing and
services
Loan-based
borrowing to
an FDI-based
development
strategy till
late1990s.
Malaysia 1980s Export
promotion
No specific tax incentives. Manufacturing and
services.
Malaysian
Industrial
Development
Authority
was
recognised to
be one of the
effective
agencies in
the Asian
region
Thailand 1977 Technology
transfer and
export
promotion
No specific tax incentives.
The Thai Board of Investment
has carried out activities
under the three broad
categories to promote FDI.
1. Image building to
demonstrate how the host
country is an appropriate
location for FDI.
2. Investment generation by
targeting investors through
various activities.
3. Servicing investors
Manufacturing and
services
-

3. Cross-Country Comparison of FDI Policies – Where does India stand?
A true comparison of the policies could be attempted if the varied policies across countries could be reduced
to a common comparable index or a measure. Therefore, with a view to examine and analyse „where does
India stand‟ vis-a-vis other countries at the current juncture in terms of FDI policy framework, the present
section draws largely from the results of a survey of 87 economies undertaken by the World Bank in 2009
and published in its latest publication titled „Investing Across Borders‟.
The survey has considered four indicators, viz., „Investing across Borders‟, „Starting a Foreign Business‟,
„Accessing Industrial Land‟, and „Arbitrating Commercial Disputes‟ to provide assessment about FDI
climate in a particular country. Investing across Bordersindicator measures the degree to which domestic
laws allow foreign companies to establish or acquire local firms.Starting foreign business indicator record
the time, procedures, and regulations involved in establishing a local subsidiary of a foreign
company. Accessing industrial land indicator evaluates legal options for foreign companies seeking to lease
or buy land in a host economy, the availability of information about land plots, and the steps involved in
leasing land. Arbitrating commercial disputes indicator assesses the strength of legal frameworks for
alternative dispute resolution, rules for arbitration, and the extent to which the judiciary supports and
facilitates arbitration. India‟s relative position in terms of these four parameters vis-à-vis major 15 emerging
economies, which compete with India in attracting foreign investment, is set out in Tables 5A and 5B.
Following key observations could be made from this comparison:
A comparative analysis among the select countries reveals that countries such as Argentina, Brazil, Chile
and the Russian Federation have sectoral caps higher than those of India implying that their FDI policy is
more liberal.
The sectoral caps are lower in China than in India in most of the sectors barring agriculture and forestry
and insurance. A noteworthy aspect is that China permits 100 per cent FDI in agriculture while completely
prohibits FDI in media. In India, on the other hand, foreign ownership is allowed up to 100 per cent in
sectors like „mining, oil and gas‟, electricity and „healthcare and waste management‟.
India positioned well vis-a-vis comparable counterparts in the select countries in terms of the indicator
„starting a foreign business‟. In 2009, starting a foreign business took around 46 days with 16 procedures in
India as compared with 99 days with 18 procedures in China and 166 days with 17 procedures in Brazil
(Table 5 B).
In terms of another key indicator, viz., „accessing industrial land‟ India‟s position is mixed. While the
ranking in terms of indices based on lease rights and ownership rights is quite high, the time to lease
private and public land is one of the highest among select countries at 90 days and 295 days, respectively.
In China, it takes 59 days to lease private land and 129 days to lease public land. This also has important
bearing on the investment decisions by foreign companies.
In terms of the indicator „arbitrating commercial disputes‟ India is on par with Brazil and the Russian
Federation. Although, the strength of laws index is fairly good, the extent of judicial assistance index is
moderate.

Table 5A: Investing Across Borders – Sector wise Caps – 2009
Country Mini
ng,
oil
and
gas
Agric
ul
ture
and
fores
try
Light
manuf
act
uring
Teleco
mm
unicat
ions
Electrici
ty
Banking Insura
nce
Trans
portation
Media Constr
uction,
touris
m and
retail
Health
care
and
waste
manag
ement
Argentina 100 100 100 100 100 100 100 79.6 30 100 100
Brazil 100 100 100 100 100 100 100 68 30 100 50
Chile 100 100 100 100 100 100 100 100 100 100 100
China 75 100 75 49 85.4 62.5 50 49 0 83.3 85
India 100 50 81.5 74 100 87 26 59.6 63 83.7 100
Indonesia 97.5 72 68.8 57 95 99 80 49 5 85 82.5
Korea, 100 100 100 49 85.4 100 100 79.6 39.5 100 100
Malaysia 70 85 100 39.5 30 49 49 100 65 90 65
Mexico 50 49 100 74.5 0 100 49 54.4 24.5 100 100
Philippines 40 40 75 40 65.7 60 100 40 0 100 100
Russian 100 100 100 100 100 100 49 79.6 75 100 100
South 74 100 100 70 100 100 100 100 60 100 100
Thailand 49 49 87.3 49 49 49 49 49 27.5 66 49

Table 5B: Investing Across Borders – Key Indicators 2009
Country Starting a Foreign
Business
Accessing Industrial Land Arbitrating
Commercial Disputes
Time
(day
s)
Pro
ced
ures
(nu
mbe
r)
Ease
of
establ
i
shme
nt
index
(0 =
min,
100 =
max)
Strengt
h of
lease
rights
index
(0 =
min,
100 =
max)
Strength
of
ownersh
ip rights
index
(0 =
min,
100 =
max)
Acces
s
to
land
infor
m
ation
index
(0 =
min,
100
=
max)
Avail
a
bility
of
land
infor
m
ation
index
(0 =
min,
100
=
max)
Tim
e to
leas
e
priv
ate
land
(day
s)
Tim
e to
leas
e
pub
l
ic
land
(day
s)
Stre
n
gth
of
laws
inde
x (0
=
min,
100
=
max
)
Ease
of
proc
essin
de
x (0
=
min,
100
=
max )
Exten
t
of
judici
al
assist
a
nce
index
(0 =
min,
100 =
max)
Argentin
a
50 18 65 79.3 100 44.4 85 48 112 63.5 72.2 55.1
Brazil 166 17 62.5 85.7 100 33.3 75 66 180 84.9 45.7 57.2
Chile 29 11 63.2 85.7 100 33.3 80 23 93 94.9 62.8 74.8
China 99 18 63.7 96.4 n/a 50 52.5 59 129 94.9 76.1 60.2
India 46 16 76.3 92.9 87.5 15.8 85 90 295 88.5 67.6 53.4
Indonesi
a
86 12 52.6 78.6 n/a 21.4 85 35 81 95.4 81.8 41.3
Korea, 17 11 71.1 85.7 100 68.4 70 10 53 94.9 81.9 70.2
Malaysia 14 11 60.5 78.5 87.5 23.1 85 96 355 94.9 81.8 66.7
Mexico 31 11 65.8 81.3 100 33.3 90 83 151 79.1 84.7 52.7
Philippin
es
80 17 57.9 68.8 n/a 23.5 87.5 16 n/a 95.4 87 33.7
Russian 31 10 68.4 85.7 100 44.4 90 62 231 71.6 76.1 76.6
South 65 8 - 84.5 100 47.4 85 42 304 82.4 79 94.5
Thailand 34 9 60.5 80.7 62.5 27.8 70 30 128 84.9 81.8 40.8
Thus, a review of FDI policies in India and across major EMEs suggests that though India‟s policy stance
in terms of access to different sectors of the economy, repatriation of dividend and norms for owning
equity are comparable to that of other EMEs, policy in terms of qualitative parameters such as „time to
lease private land‟, „access to land information‟ and „Extent of Judicial assistance‟ are relatively more
conservative. Since time taken to set up a project adds to the cost and affect competitiveness, an otherwise
fairly liberal policy regime may turn out to be less competitive or economically unviable owing to
procedural delays. Thus, latter may affect the cross border flow of investible funds. But an assessment of
precise impact of these qualitative parameters on the flow of FDI is an empirical question. The following
section makes an attempt to quantify the impact of various factors that govern the flow of FDI in India.

O. FDI FLOWS TO INDIA IN RECENT PERIOD
Distinct slowdown despite strong fundamentals – Plausible Explanations
As stated above, global FDI flows moderated significantly since the eruption of global financial crisis in
2008, albeit with an uneven pattern across regions and countries. Though initially developing countries
showed some resilience, crisis eventually spread through the trade, financial and confidence channels and
FDI flows declined in both the advanced and developing economies during 2009. Subsequently, while FDI
flows to advanced countries continued to decline, FDI flows to many of the Latin American and Asian
countries witnessed strong rebound during 2010 on the back of improved corporate profitability and some
improvement in M&A activities.
FDI flows to India also moderated during 2009 but unlike trends in other EMEs, flows continued to
be sluggish during 2010 despite strong domestic growth ahead of global recovery. This raised
concerns for policy makers in India against the backdrop of expansion in the current account deficit.
Table 6: FDI Inflows in Select EMEs
(US$ billion)
Argentina Brazil Chile India Indonesia Mexico South
Africa
Thailand
2007 6.5 34.6 12.5 25.5 6.9 29.1 5.7 11.3
2008 9.7 45.1 15.2 43.4 9.3 24.9 9.6 8.5
(50.2) (30.3) (21.1) (70.3) (34.5) -(14.3) (68.1) -(24.7)
2009 4.0 25.9 12.7 35.6 4.9 14.5 5.4 5.0
-(92.0) -(14.3) -(39.9) -(49.4) -(85.9) -(200.8) -(92.1) -(120.2)
Q1-10 1.9 5.5 5.5 6.1 2.9 4.8 0.4 1.5
Q2-10 0.0 6.6 2.5 6.0 3.3 7.6 0.4 2.0
Q3-10 1.9 10.5 5.3 6.7 3.4 2.4 0.1 1.5
Q4-10 0.9 25.9 1.9 5.3 3.7 2.8 - 0.7
2010 4.7 48.5 15.2 24.1 13.3 17.6 0.9 5.7
(17.5) (87.3) (19.7) -(32.3) (171.4) (21.4) -(80.4) (14.0)
Note: Figures in brackets relate to percentage variation over the corresponding period of the previous year.
Source:IMF, BOP Statistics.

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