PRESENTED BYDEBABRATA DEB BARMA

MBA (SOM,NIT AGARTALA)

Investment made in India

Foreign Direct Investment(FDI) FDI is defined as cross-border

investment by a resident entity in one economy with the objective of obtaining a lasting interest in an enterprise resident in another economy Ownership of at least 10% of the voting power, representing the influence by the investor, is the basic criterion used.

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...

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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 (Year 2011)

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

FDI inflow in India(2005-12)

Year Amount(in billion $)

2005-06 6.05

2006-07 8.96

2007-08 17.59

2008-09 27.3

2009-10 24.2

2010-11 19.4

2011-12 35

Country-wise FDI inflow in India

Sector-Wise FDI inflow in India

Factors affecting FDI

Profitability

Costs of production Economic Conditions Government policies Political factors

Links

1. http://www.onemint.com 2. http://www.investopedia.com 3. http://www.rbi.org.in 4. http://www.sebi.gov.in

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