Managerial economics-II presentation

Topic :-Foreign Direct Investment(FDI)

Stewart

Bhavesh

Monit

Kaveshna

Sorabh

Vikas

Arif

Group

membe

rs

Chaitali

FDI• What is?• Why FDI?• Types • Benefits And Limitations

Investing routes • Factors affecting it

FDI in India• Its policies• Territories allowed• Forbidden territories

FDI in India• Sectors attracting highest FDI equity inflows• Impact • Advantages in India

Statistical data• The trends in FDI inflow to India since

1991• Regional disparities in FDI equity inflows

Overview of the

project

WHAT IS FDI ? Foreign direct investment (FDI) in its classic form

is defined as a company from one country making a physical investment into building a factory in another country.

Include investments made to acquire lasting interest in enterprises operating outside of the economy of the investor.

They are usually non volatile in nature. Preferred over other forms of external finance

because they are non debt creating. Their returns usually depends on the performance

of the project.

Gain a foothold in

a new geographic market

Increase a firm’s global

competitive-ness

and positionin

g

Fill gaps in a

company’s product lines in a

global industry

Reduce costs in areas

such as R&D,

production, and

distribution

WHY FDI?

Typ

es

of

FD

IGreenfield investment

Mergers & Acquisition

Vertical FDIBackward

ForwardHorizontal FDI

Economic Growth

Trade

Employment and skill

levels

Technology diffusion

and knowledge

transfer

Linkages and

spillover to domestic

firms

Benefits

Limitations

Fluctuation in value of

home currency

Environment and natural

cost.

Inflation

Greater competition for small and

infant industries

Compromising with

soveigernity

Investing in India – Entry

Routes

By incorporating a company under the Companies Act, 1956

As an unincorporated entity

Foreign Company has the following options to set up business operations in India :

100% FDI Permitted

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)

FORBIDDEN

TERRITORIES

Arms and ammunition

.

Atomic Energy.

Railway Transport.

Coal and lignite.

Mining

Lottery Business

Agricultural or

plantation activities

Housing and Real Estate

Business

Liberal, largest

democracy, political stability

Secon

d

larges

t

emerg

ing

marke

t (US$

2.4

trillio

n

)

Skilled and competitive labors force Highest

rates of return on investme

nt

One

hundred

of the

fortune

500

have R

& D

facilitie

s

in India

Lists 6,500 companies on the Bombay

stock exchange (only the NYSE has more

India An FDI

Destination

World's fourth largest

economy & second largest

pharmaceutical industry

Growth over

the past few

years

averaging

8%

Second

largest

English-

speakin

g,

scientifi

c,

tech

nical

and

execu

tive

manpower

Second largest

group of

software

developers

after the U.S.

Has A middle class estimated at 300 million out of A total population

of 1 billion Contd………..

Factors affecting FDI

Profitability

Costs Of Production

Economic Conditions

Government Policies

Political Factors

Impact of FEMA on FDI

As the third-largest economy India is a preferred destination for foreign direct investments (FDI).

 India’s recently liberalized FDI policy permits up to a 100% FDI stake in ventures.

Industrial policy reforms have substantially reduced industrial licensing requirements, removed restrictions on expansion and facilitated easy access to foreign technology and FDI.

During past few years number of changes was approved on the FDI policy to remove the cap in most of the sectors. Restrictions will be relaxed in sectors as diverse as civil aviation, construction development, industrial parks, commodity exchanges, petroleum and natural gas, credit-information services, Mining etc.

Contd……….

  The future of Indian economy is brighter because of its huge human resources, rapidly upcoming service sector, availability of large number of competent professionals, vast market for every product, increasing impact of consumerism, absence of controls and licenses, interest of foreign entrepreneurs in India and existence of four hundred million middle class people.

  Today, India provides highest returns on FDI than any other country in the world.

Overall we can say that FEMA had a great influence on Economic growth of the country & it will remain for the coming years as well.

FDI policy in India

FDI is not allowed in the sectors of arms and ammunitions, atomic energy, railway system, extraction of coal and lignite and mining industry

In infra-structure development, FDI is allowed up to 100% equity participation, with the capping amount as Rs.1500 crores

In finance sector, FDI is allowed up to 40% In telecom industry, FDI is allowed up to

49%

IMPACT OF FDI IN INDIA

Enabled India to achieve a high degree of growth and development.

A number of projects have been announced in areas such as electricity generation, distribution and transmission, as well as the development of roads and highways, with opportunities for foreign investors.

The Indian national government also provided permission to FDIs to provide up to 100% of the financing required for the construction of bridges and tunnels, but with a limit on foreign equity of INR 1,500 crores, approximately $352.5m.

21%

9%

8%

8%

7%

4%

4%

3%2% 2%

Sectors attracting highest FDI equity in-flows

SERVICES SECTOR

COMPUTER SOFTWARE& HARDWARE

TELE- COMMUNICATIONS

HOUSING & REAL ESTATES

CONSTRUCTION ACTIVITIES

POWER

AUTOMOBILE INDUSTRY*

METALLURGICAL INDUSTRIES

PETROLEUM & NATURAL GAS

CHEMICALS

1991

-92

1992

-93

1993

-94

1994

-95

1995

-96

1996

-97

1997

-98

1998

-99

1999

-00

2000

-01

2001

-02

2002

-03

2003

-04

2004

-05

2005

-06

2006

-07

2007

-08

2008

-09

2009

-10

2010

-11

(Upt

o Ju

ne '1

0)165 393 654 1374214127703682308324392908

422231342634

3754

5975

15725

24573

2732925609

5772

The Trends In FDI Inflow To India Since 1991

US $

Mumbai

New delhi

Banglore

Ahemadabad

Chennai

Hyderabad

Kolkatta

Chandigargh

Panaji

Jaipur

Cochi

Bhopal

Bhubaneshwar

Kanpur

Guwhati

Patna

Regions not indicated

0% 5% 10% 15% 20% 25% 30% 35%

Regional disparities in FDI equity inflows

Thank

you.......