World's largest democracy with 1.2 billion people.
Stable political environment and responsive administrative set up. Well established judiciary to enforce rule of law.
Land of abundant natural resources and diverse climatic conditions. Rapid economic growth: GDP to grow by 8.5% in 2010-11* and 9.0% in 2011-12. 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.
2. Prepared By
Manu Melwin Joy
Assistant Professor
Ilahia School of Management Studies
Kerala, India.
Phone – 9744551114
Mail – manu_melwinjoy@yahoo.com
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3. Why India is the favourite destination for Investment?
• World's largest democracy with 1.2
billion people.
• Stable political environment and
responsive administrative set up.
• Well established judiciary to enforce
rule of law.
• Land of abundant natural resources
and diverse climatic conditions.
• Rapid economic growth: GDP to
grow by 8.5% in 2010-11* and 9.0%
in 2011-12.
• 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.
4. Why India is the favourite destination for Investment?
• Investor friendly policies and
incentive based schemes.
• 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.
• Cost competitiveness - low
labour costs and total labour
force of nearly 530 million.
5. Why India is the favourite destination for Investment?
• Large pool of skilled manpower -
strong knowledge base with
significant English speaking
population.
• Young country with a median age
of 30 years by 2025: India's
economy will benefit from this
"demographic dividend".
• 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.
• Huge untapped market potential.
6. Why India is the favourite destination for Investment?
• The urban population of India
will double from the 2001
census figure of 290m to
approximately 590m by 2030
(McKinsey).
• Progressive simplification and
rationalization of direct and
indirect tax structures.
• Reduction in import tariffs.
• Full current account
convertibility.
• Compliance with WTO norms.
• Robust banking and financial
institutions.
7. Foreign Investment in India
• 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'.
8. Foreign Investment in India
• 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.
9. Foreign Investment in India
• 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).
10. What are the forms in which business can be
conducted by a foreign company in India?
• A foreign company planning to set up business
operations in India may:
– Incorporate a company under the Companies Act,
1956, as a Joint Venture or a Wholly Owned
Subsidiary.
– Set up a Liaison Office / Representative Office or a
Project Office or a Branch Office of the foreign
company which can undertake activities permitted
under the Foreign Exchange Management
(Establishment in India of Branch Office or Other Place
of Business) Regulations, 2000.
11. 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:
– 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.
12. What is the procedure for receiving Foreign
Direct Investment in an Indian company?
• 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.
13. What are the instruments for receiving Foreign Direct
Investment in an Indian company?
• Foreign investment is
reckoned as FDI only if the
investment is made in
equity shares, fully and
mandatorily convertible
preference shares and fully
and mandatorily convertible
debentures with the pricing
being decided upfront as a
figure or based on the
formula that is decided
upfront.
14. Which are 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:
– Atomic Energy
– Lottery Business
– Gambling and Betting
– Business of Chit Fund
– Nidhi Company
– Agricultural
– Housing and Real Estate business
