Foreign Direct Investments in India

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FOREIGN DIRECT INVESTMENT
I N T E R N AT I O N A L B U S I N E S S

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CONCERNED FACULTY-
Bhanu Sree Reddy
HigherAcademic Grade
VIT Business School
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TEAM-1
TEAM MEMBERS-
Abhay Raj Singh Pal (19BBA0010)
Siddharth misra (19BBA0082)
Abinesh Prabhu (19BBA0088)
Harshita Sharma (19BBA0102)
Krishna Mandal (19BBA0102)
Ashwini (19BBA0135)

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CONTENT
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1. What is FDI?
2. Why FDI?
3. FDI in India
4. History of FDI in India
5. Entry Strategies for FDI in India
6. FDI Policies in India
7. Major sectors for FDI in India
8. Top Investors in India
9. Needs and Challenges of FDI in India
10. Factors affecting FDI in India
11. Recommendations for promoting FDI in India
12. Implementation in India
13. Current Situations
14. GDP & FDI

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WHAT IS FDI?
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• Foreign direct investment (FDI) has grown dramatically as a major form of international capital transfer over the
past decade.
• A foreign direct investment (FDI) is an investment in the form of a controlling ownership in a business in one
country by an entity based in another country.
• FDI is when an investor from another country (foreign country) makes an investment in a business situated in the
country. Now such an investor can be an individual, firm, company, etc.
• Generally, the investor will acquire assets of the business or establishes business operations to get a controlling
interest in the business in a foreign country. This is distinctly separate than buying the equity of foreign companies
• Basically, there are two routes for FDI in India. There is the Automatic Route, where no approval or authority is
required by the private foreign investor. He can invest in any company it wishes with no need for government
approval.

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WHY FDI?
• Increased Employment and Economic Growth
• Provision of Finance and Technology
• Increase in Exports
• Exchange Rate Stability
• Creation of Competitive Market
• Development of Backward Areas
• Human Resource Development
• Economic Stimulation
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HISTORY OF FDI IN INDIA
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FDI was introduced in 1991 under Foreign Exchange Management Act, driven by then Finance Minister
Manmohan Singh.
1997 2006 2008 2011
FDI up to 100% allowed
under the Automatic
Route in Cash & Carry
(wholesale)
FDI up to 51%
allowed with prior
Government approval
in ‘single brand
retail’
Government mulled over the
ideas of allowing 100% FDI
in Single Brand retail and
50% FDI in Multi rand
Retail
Government allowed
50% FDI in Multi
and 100% FDI in
REtail

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ENTRY STRATEGIES FOR FDI IN INDIA
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Foreign Company has the following options to set up business operations in India-
 By Incorporating a Company under the Companies Act, 1956
 A wholly owned subsidiary
 Joint venture company- existing/new company with domestic partner
 As an office of a Foreign Entity through
1. Liaison Office
2. Project Office
3. Branch office
 Global Depository Receipt Issues

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FDI POLICIES IN INDIA
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•Any Non-resident individual (NRI)/Entity can invest subject to FDI policy (except
in prohibited sectors).
•Company, trust or partnership firm incorporated outside India and owned and
controlled by NRIs.
• the government increased foreign investment upper limit from 26% to 49% in
insurance sector.
•Foreign Institutional Investors (FII) and Foreign Portfolio Investors (FPI).
•Registered FIIs/ FPIs/ NRIs Regulations, 2000 can invest or trade through a
registered broker of Indian Companies on recognized stock exchanges.
•It also launched Make in India initiative in September 2014 under which FDI
policy for 25 sectors was liberalised further.
•SEBI registered Foreign Venture Capital Investor (FVCI) in any activity
mentioned in Schedule 6 of Notification No. FEMA 20/2000.

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MAJOR SECTORS FOR FDI IN INDIA
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Current regulatory position under
FDI Policy 2017
NOT-PERMITTED
1. Any Real Estate Business
2. Construction of far houses
3. Trading in Transferable
Development Rights
PERMITTED
100% FDI under automatic route is
allowable in construction-development
projects, which includes development of
townships, construction of residential/
commercial premises, roads/bridges,
hotels, resorts, etc.

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Restricted sectors in services-
1.Atomic energy, lottery business, gambling and betting, business of chit fund, and any activity or factorthat is
not opened to private sector investments.
2. FDI is not allowed in plantations
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TOP INVESTORS IN INDIA
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• Singapore emerged as the largest source of FDI in India during the last fiscal with $ 14.67 billion investments.
• Mauritius ($ 8.24 billion),
• Netherlands ($ 6.5 billion),
• US ($ 4.22 billion)
• Caymen Islands ($ 3.7 billion)
• Japan ($ 3.22 billion)
• France ($ 1.89 billion).

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NEED & CHALLENGES FOR FDI IN INDIA
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• Market size of FDI in India
• Objective of study
• Research Methodology
• Investments /development
• Government initiative and attitudes towards FDI in India
• High import tariffs
• Exit barriers for firms
• Poor quality infrastructure
• Centralized decision-making processes,

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FACTORS AFFECTING FDI IN INDIA
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• Opposition from the Traders on FDI.
• Scope for Expansion
• Prevalence of Illiteracy and Mass Poverty
• Transport and infrastructure
• Total Convertibility of Currency
• Size of economy / potential for growth
• Wage rates
• Labour skills
• Tax rates
• Access to free trade areas.

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RECOMMENDATIONS FOR PROMOTING FDI IN INDIA
• Consider providing Tax relief and/or subsidy by way of low rate loans to domestic retailers to provide support.
• Implement a 'phased introduction' of FDI to the retail sector, say over 2-4 years, so as to provide gradual adjustment
for the domestic players.
• The government should reform price control policies to ensure that foreign retailers cannot sell below a minimum
price.
• Bureaucracy and formalities should be reduced by updating related legislation,
• Labour Laws need to be reviewed to be more in line with the requirements of the companies

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CURRENT SITUATIONS
Some Present day situations

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GDP & FDI IN INDIA
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• India's Foreign Direct Investment (FDI) registered a growth equal to 2.1 % of the country's Nominal GDP in Mar
2020, compared with a growth equal to 1.8 % in the previous quarter.

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CONCLUSION
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1. FDI Policy permits FDI up to 100% from foreign/NRI investors without prior approval in most of the sectors
known as the automatic route.
2. The FDI policies in India are formulated on 4 parameters:
Improved Technology
Increased Capital Flow
Management Expertise
Access to International Markets
3. Hence 100% inflow was allowed in sectors like power, renewable energy, agriculture, mining etc.
4. Also sectors like insurance and sefence have a cap of 26% and the banking sectors has cap of 49%.

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Thank You!
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