Foreign Direct Investment (FDI)• A foreign direct investment (FDI) is an investment made by a company or entity

based in one country, into a company or entity based in another country.

• Foreign direct investments differ substantially from indirect investments such as portfolio flows, wherein overseas institutions invest in equities listed on a nation's stock exchange.

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• India is the second fastest growing economy in the world with a GDP growth rate of 7.6% in the FY16.

• In terms of GDP it is the 10th largest economy in the world and in terms PPP (Purchasing Power Parity) it is the 3rd largest economy in the world.

• Government of India has taken many initiatives to attract foreign investment into India.

• One of such initiative is “Make in India”, programme to make India a ‘Manufacturing Hub’ of the world.

1. Accelerated Economic Growth

• It has been witnessed that with the increase in FDI inflows in India from $0.13 billion to $30.3 billion in 2010-11, the GDP growth rate of the country has accelerated from 1.43 percent in 1990-91 to 7.6 percent in 2015-16. It shows that India’s GDP has increased four times since 1990-91.

2. ACCELERATED ECONOMIC DEVELOPMENT

• FDI act as a catalyst in various sectors mainly in manufacturing and service sectors.

• With the new government in power, there are many reforms to attract FDI inflows in the country. FDI inflows in 2015-16 are more in the areas of service sectors (18%), construction development (10%), telecommunication (7%), computer software and hardware (6%) etc.

•  With FDI inflows there are development in many areas like infrastructure, per capita income and standard of living of the people has increased, poverty has declined in absolute terms, unemployment has reduced by 3 times since 1990-91 to 2013-14, clean technology has installed, roads, dams, bridges, schools, colleges, hospitals has been built with new technology. Thereby, overall development has shown in all over India.

3. CAPITAL• For the economic growth and development of the country India requires huge

capital. To compensate this domestic capital requirement, FDI inflows are one of the important pre-requisite. FDI is helping developing countries in capital formation by bringing fresh capitals.

4. TECHNOLOGY:

Developing countries are lacking technological know-how. With the opening up of their economies for FDI, they will get the access to sophisticated technology from the foreign firms which will enhance their productivity and quality of the products.

5.Managerial Skills

• FDI inflows are not only helping in capital formation but also help in developing managerial skills.

6. Competitive Environment

FDI inflows have increased the competitive environment for the domestic firms consequently benefitting the consumers by accessing with better quality products at a lesser price.

FDI IN DIFFERENT SECTORS• We can see the functions of FDI in various sectors which provide support to all

sector by providing available resources the companies have.

1. FDI in Insurance Sector

• The Indian Cabinet Committee on Economic Affairs (CCEA) is strongly expected to

raise the FDI ceiling in the Insurance and Pension sectors.

• FDI threshold to 49% in the Insurance sector from the existing limit of 26%, has been

submitted to the cabinet for proper approval in the quickest possible period.

• Increment in the FDI ceiling in the insurance sector of India, will certainly be highly

and greatly appreciated by domestic and foreign insurance companies, for the purpose

of expanding and enriching their insurance and re-insurance businesses.

2. Pension• The proposal to allow foreign direct investment, or FDI, in the pension space

has to clear the parliamentary hurdle before pension funds become a reality in

the country where more and more people are working in private sector

enterprises that do not offer a pension after retirement.

• "What the pension reforms will do is attract more money and help the

companies sustain their businesses over a long period of time, which is key for

the sector.

3. FDI in Broadcasting Sector

• Liberalize the Broadcasting sector of India to foreign direct investment, the Indian Cabinet Committee on Economic Affairs (CCEA) raised the FDI cap from 49% to 74% many fields of the Broadcasting sector . CCEA opted to retain the existing cap of 26% in the fields of TV News Channels and the FM Radio.

• The recent governmental decision will be applied to the following Broadcast Carriage Service Providers.• Teleports (Up-linking HUBs/Teleports)• Direct-to Home (DTH)• Head-end in the Sky (HITS)• Cable Networks (Multi-Service Operators who undertake up-gradation of networks for

digitalization and addressability)• Mobile TVs

4.FDI in Broadcasting Sector

• The latest visionary decision of the Government of India to allow FDI up to 49% in India's domestic aviation, is expected to heal the cash-strapped aviation industry of India, and attract massive foreign direct investment in the aviation sector of India, in short and long future.

• The aviation sector of India has been serving about 100 million aviation travellers every year, both international and domestic markets, in the recent years.

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• According to RNCOS Report, India is one among the top ten largest markets of the world, in respect of aviation, and is growing tremendously.

• The domestic aviation market of India will emerge out as the third biggest domestic aviation market in the entire world by 2020 with over 450 million domestic passengers.

SOME EXAMPLES OF FDI1. BP Plc is making one of the biggest foreign direct investments (FDI) in India, with a $7.2 billion tie-up with Reliance Industries to explore for deepwater oil and gas.BP will take a 30 percent stake in 23 oil and gas blocks and form a 50:50 joint venture with Reliance for the sourcing and marketing of gas.

2. Vodafone entered India in 2007, paying $11.1 billion to buy a 67 percent controlling stake in Hutchison Whampoa Ltd's mobile business in India, in which India's Essar Group is a partner. The deal is the largest inbound foreign direct investment to be completed.

CNTD………• Japanese drug maker Daiichi Sankyo paid up to $4.6 billion in 2008 for control of

India's Ranbaxy Laboratories Ltd.

CONCLUSION• FDI plays very important role in the development of economy of any country. In

India after the implementation of LPG policy 1991 the concept of FDI came into existence the purpose is to increase the growth rate of economy and also helpful in increasing the national income & per capita income.