2. MEANING OF FOREIGN DIRECT INVESTMENT

Foreign direct investment (FDI) is a direct
investment into production or business in a country
by a company in another country, either by buying a
company in the target country or by expanding
operations of an existing business in that country

3. WHY COUNTRIES SEEK FDI ?
Domestic capital is inadequate for purpose of
economic growth;
 Foreign capital is usually essential, at least as a
temporary measure, during the period when the
capital market is in the process of development;
 Foreign capital usually brings it with other scarce
productive factors like technical know
how, business expertise and knowledge


4. WHAT ARE THE MAJOR BENEFITS OF FDI
(a) Improves forex position of the country;
(b) Employment generation and increase in production ;
(c) Help in capital formation by bringing fresh capital;
(d) Helps in transfer of new technologies, management
skills, intellectual property
(e) Increases competition within the local market and this
brings higher efficiencies
(f) Helps in increasing exports;
(g) Increases tax revenues

5. WHY FDI IS OPPOSED BY LOCAL PEOPLE OR
DISADVANTAGES OF FDI
(a) Domestic companies fear that they may lose their
ownership to overseas company
(b) Small enterprises fear that they may not be able to
compete with world class large companies and may
ultimately be edged out of business;
(c) Large giants of the world try to monopolise and take
over the highly profitable sectors;
(d) Such foreign companies invest more in machinery and
intellectual property than in wages of the local people;
(e) Government has less control over the functioning of
such companies as they usually work as wholly owned
subsidiary of an overseas company

6. BRIEF LATEST DEVELOPMENTS ON FDI
in the insurance sector from 26% to 49%;
 Allowed51% foreign investment in multi-brand retail,
 Relaxed FDI norms for civil aviation and broadcasting
sectors. – FDI cap in Broadcasting was raised to 74%
from 49%;

Allowed foreign investment in power exchanges


7. WHAT IS THE PROCEDURE FOR RECEIVING FOREIGN DIRECT
INVESTMENT IN AN INDIAN COMPANY?
An Indian company may receive Foreign Direct Investment
under the two routes as given under:
i. Automatic Route
FDI is allowed under the automatic route without prior
approval either of the Government or the Reserve Bank
of India in all activities/sectors as specified in the
consolidated FDI Policy, issued by the Government of
India from time to time.
ii. Government Route
FDI in activities not covered under the automatic route
requires prior approval of the Government which are
considered by the Foreign Investment Promotion Board
(FIPB), Department of Economic Affairs, Ministry of
Finance.

8. WHAT IS SCOPE OF FDI IN INDIA? WHY WORLD IS
LOOKING TOWARDS INDIA FOR FOREIGN DIRECT
INVESTMENTS
India is the 3rd largest economy of the world in terms of
purchasing power parity and thus looks attractive to the world
for FDI. Even Government of India, has been trying hard to
do away with the FDI caps for majority of the sectors, but there
are still critical areas like retailing and insurance where there is
lot of opposition from local Indians / Indian companies.
Some of the major economic sectors where India can attract
investment are as follows: Telecommunications
 Apparels
 Information Technology
 Pharma
 Auto parts
 Jewellery
 Chemicals

9. NAME THE SECTORS WHERE FDI IS NOT ALLOWED IN
INDIA, BOTH UNDER THE AUTOMATIC ROUTE AS WELL AS UNDER
THE GOVERNMENT ROUTE?
FDI is prohibited under the Government Route as well as the Automatic Route
in the following sectors:
i) Atomic Energy
ii) Lottery Business
iii) Gambling and Betting
iv) Business of Chit Fund
v) Nidhi Company
vi) Agricultural (excluding Floriculture, Horticulture, Development of
seeds, Animal Husbandry, Pisciculture and cultivation of
vegetables, mushrooms, etc. under controlled conditions and services related
to agro and allied sectors) and Plantations activities (other than Tea
Plantations)
vii) Housing and Real Estate business (except development of
townships, construction of residen-tial/commercial premises, roads or bridges
to the extent specified in notification
viii) Trading in Transferable Development Rights (TDRs).

10. NAME THE AUTHORITIES DEALING WITH FOREIGN
INVESTMENT:
Foreign Investment
Promotion Board
Secretariat for Industrial
Assistance
Foreign Investment
Implementation Authority
(FIIA)
Investment Commission
Project Approval Board
Reserve Bank of India

11. WHAT ARE THE TOTAL INFLOWS OF FDI IN
INDIA
For the FY 2012-13 (for the month of July, 2012)
was US$ 1.47 billion.
 Amount of FDI equity inflows for the financial year
2012-13 (from April 2012 to July 2012) stood at
US$ 5.90 billion.
 Cumulative amount of FDI (from April 2000 to
July 2012) into India stood at US$ 176.76 billion


12. WHICH COUNTRY TOPS IN INFLOW OF FDI SINCE
2000-2010? TOP 5 COUNTRIES FOR FDI
Country
Mauritius
Inflows in absolute
Terms (million US
dollars)
Iinflow in % age terms
42%
50164
Singapore
9
11275
USA
7
8914
UK
5
6158
Netherlands
4
4968

13. FOREIGN INSTITUTIONAL INVESTMENT
The term foreign institutional investment denotes all
those investors or investment companies that are not
located within the territory of the country in which they are
investing. These are actually the outsiders in the financial
markets of the particular company. Foreign institutional
investment is a common term in the financial sector of
India
 Who Can Get Registered As Foreign Institutional
Investors (FII) in India?
Foreign Institutional investors also known as International
institutional investors need to register themselves with the
Security and Exchange Board of India (SEBI) in order to
participate in the Indian market.


14. FOREIGN CORPORATES AND INDIVIDUALS AND BELONG
TO ANY OF THE UNDER GIVEN CATEGORIES CAN BE
REGISTERED FOR FII
Pension Funds
Mutual Funds
Insurance Companies
Investment Trusts
Banks
University Funds
Foundations
Charitable Trusts / Charitable Societies

15. How Much Is The Registration Fee For FII
Applicants?
5000 USD
 What Is The Validity Period Of FII Registration?
The FII registration is valid for 5 years. After expiry of
5 years, the registration needs to be renewed.


16. WHAT ARE THE ADVANTAGES OF FOREIGN
INSTITUTIONAL INVESTMENT (FII) IN INDIA?
Increases Forex reserves
 Increases domestic savings
 Increases domestic investments
 Availability of capital reserve


17. IS THERE ANY DISADVANTAGES OF FOREIGN
INSTITUTIONAL INVESTMENT (FII) IN INDIA?
Problem of inflation
 False representation of economy
 Problem for small investors
 Hot Money
FII investment is frequently referred to as hot
money for the reason that it can leave the country
at the same speed at which it comes in.
