fdi foreign direct investment ppt

What is FDI?

FDI refers to investment in a foreign country where the investor retains control over the investment. It typically takes the form of starting a subsidiary , acquiring a stake in an existing firm or starting a joint venture in the foreign country. Direct investment and management of the firm concerned normally go together.

CONT…Foreign direct investment(FDI) is a direct

investment into production or business in a country by an individual or company of another country, either by buying a company in the target country or by expanding operations of an existing business in that country.

FDI IN INDIA

Foreign investment was introduced in 1991 under Foreign Exchange Management Act (FEMA), driven by then finance minister Manmohan Singh. As Singh subsequently became the prime minister, this has been one of his top political problems, even in the current times. India disallowed overseas corporate bodies (OCB) to invest in India. India imposes cap on equity holding by foreign investors in various sectors, current FDI limit in aviation sector is maximum 49% till 2012 BUT...

CONT..

Finally, after all that waiting & patience, the Indian government has rolled out the red carpet for international corporations to enter India. On 14 September 2012, the Government of India allowed FDI up to 100% in various sectors.

100% FDI permitted Sectors in India

Engineering & Manufacturing sectors

Roads & Highways, Ports and Harbors

Industrial model towns/industrial parks

Hotels & Tourism

Pollution Control and Management

Advertising & Film industry

Power generation (hydro-electric, coal/lignite,

oil or gas based)

Information Technology including E-Commerce

Main Sectors with FDI Equity/Route Limit in India

Insurance- 26%Telecommunication- FDI is permitted

up to 74% with FDI, beyond 49% requiring Government approval

Domestic airlines- 49%Mining (Mining of Diamonds and

precious stones)- 74%Airports- 74%

Advantages of FDI

Increase investment level and thereby income &

employment

Increase tax revenue of government

Facilitates transfer of technology

Increase exports and reduce import requirements

Increase competition and break domestic monopolies

Improves quality and reduces cost of inputs

Limitations of FDI

Flow to high profit areas rather than main concern areas

Through their power and flexibility, MNC can undermine

economic autonomy and control

Sometimes interferes in the national politics

Sometimes engage in unfair and unethical trade practices

Sometimes result in minimizing / eliminating competition

and create monopolies or oligopolistic structures

Country-wise FDI inflow in India

Sector-Wise FDI inflow in India

Factors affecting FDI

Rate of Interest

Speculation

Profitability

Costs of production Economic Conditions Government policies Political factors

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