1
Managing Global Dynamics (MGD)
June 2015 Examination
Post Graduate Diploma in Marketing
Sri Lanka Institute of Marketing
Assignment
Topic
“UN reports foreign direct investment hit $1.4 trillion in 2013,
upward trend to continue”
Student name A. Mohamed Azhar
Reg. No. 0000016630
2
Table of Contents 1. Executive summary .......................................................................................................... 3
2. Introduction ...................................................................................................................... 4
3. Identifying Of Any Growth, Decline, Fluctuations or Trends of Foreign Direct
Investment in India .............................................................................................................. 5
3.1 Foreign direct investment (FDI) ................................................................................ 5
3.2 India shows fluctuations trend ................................................................................... 6
4. Analyzing Reasons for Any of the Above Trends ........................................................... 7
4.1 Lack of policy was followed by government ............................................................. 7
4.2 Tariff .......................................................................................................................... 7
4.3 Government intervention ........................................................................................... 7
4.3.1 Inappropriateexporting procedure ....................................................................... 7
4.4 Other factors............................................................................................................... 8
5. Present Indian Government Policy towards FDI ............................................................. 9
5.1 Foreign Direct Investment - Concept and Policy ....................................................... 9
5.1.1 General Conditions on FDI ................................................................................. 9
6. Has FDI Helped Certain Sectors In The Indian Economy Or Business? ...................... 12
7. Future Economic Growth and FDI in the Indian .......................................................... 13
7.1 Future Economic Growth ......................................................................................... 13
7.2 India Foreign Direct Investment Forecasts .............................................................. 14
8. Conclusion ..................................................................................................................... 15
9. Recommendation ........................................................................................................... 16
10. Reference ..................................................................................................................... 17
3
1. Executive summary
The assignment was done about the Indian foreign direct investment. India is an emerging
country in Asian where It faces competition with a China due to the having cheaper
economies of scale and cheaper labor forces.
In the first task, according to the 10 years, FDI analyses, the growth were fluctuated in
India but in recent four years it had possible growing manner. There were so many
reasons for this fluctuation of FDI because Indian government had followed luck of the
policy with Foreign inverters, inundate government was loved too much tax on importing
product, machinery and raw retail, the government intervention, inappropriate exporting
producers and etc.
n the task three, Pakistan can be an owner of investing amount bur Bangladesh cannot be
the owner of their investment, direct and indirect foreign investment in an Indian
company, some sectors were prohibited and some sectors were allowed.
In the fourth task, Indian FDI was helped certain sectors such as electrical equipments,
transportation industries, telecommunication, fuels, food processing industries, and
services as well as lower support on the gypsum products, metallurgical industries,
chemicals, and drugs and pharmaceuticals.
In the fifth task, the India was expected to future economic growth and FDI growth due to
the growth sectors like physical, growth drivers social and agricultural infrastructure as
well as lower growth on the technological progress, improvement on productivity and
India’s young demography
The FDI policy was not appropriate for foreign customer so, I have recommended
Allow the ownership of foreign investment
Reduce the levy on importing
Indian government should take a responsibility on the liability.
The assignment was faced some limitation because all the data was collected from
websites where the information doesn’t same So, then I have done some areas via
www.tradingeconomics.com.
4
2. Introduction
Foreign direct investment (FDI) is an investment that made by a foreign person or foreign
company in the productive capacity of another country. There is the greatest moment of
capital across national boundaries in a way that contributions the investor control over the
picked up asset.
Indian is divided 29 states and 7 regions. It is a second lager population country in the
world as more than 1.23 Billion. According to the social predicting, India will become a
no 1 country in the world in 2025. There are different religions, people are living
independently where they used more than 30 languages such as Telugu, Hindi, Tamil,
Urdu, Punjabi, and Bengali. However the Hindi and English are used as official
languages. India faces a burgeoning population and its challenge of reducing social and
economic inequality. The culture changes as equal to western way of life. Even though
Poverty is a seriously challenging to country growth.
The economy is the 3rd largest country in the world where it was measured by Purchasing
power parity, with a gross domestic product of US $3.611 trillion. When measuring in
USD exchange-rate terms, India is the 10th largest country in the world, the current GDP
growth rate is 6.4% to 8.2% in the first year to the last quarter in2014 then GDP was
sampled down to 7.2% in the first quarter in 2015.
Services sector is increased an important role in the Indian economy. The country has so
many advents by the digital age, a large number of young and educated populace fluently
in English. India is a key exporter of highly talented workforce in software and financial
sectors and software engineering.
India adopted a socialist-inspired approach for most of its independent country, with
strength government control on private organization, global trade, and foreign investment.
However, in 1990, India step by step expanded its markets via economic improvements
by reducing government controls on foreign investment. The privatization of publicly
owned commerce and the opening some sectors to private and foreign investors has kept
slowly amid political debate. FDI up to 100% is allowed under the automatic route in all
activities/sectors which approval of the Government
5
3. Identifying Of Any Growth, Decline, Fluctuations or Trends of
Foreign Direct Investment in India
3.1 Foreign direct investment (FDI)
Foreign direct investment (FDI) is an investment that made by a foreign person or foreign
company in the productive capacity of another country. There is the greatest moment of
capital across national boundaries in a way that contributions the investor control over the
picked up asset.
Foreign direct investment shows an expected growing role in international business. It
delivers a firm with new markets and marketing channels, economical production
facilities, access to new technology, goods, skills and funding. For a host country or the
foreign firm this receives the investment. FDI is allowed and prohibited in some sector,
according to their policy.
I have selected India due to following reasons
FDI is allowed routines (up to 100%) in all activities/sectors with approval of the
Government
Demographic are divided
Stable government and
Goveremnt by rule of law
2/3rd of population below 25 age of age
in 2015, there could be more than 200 million additional peoples earning income
about $15,000 per annum
Huge and growing milled class purchasing power
Faster growing economy
6
3.2 India shows fluctuations trend
(Source- http://www.tradingeconomics.com/india/foreign-direct-investment)
In India, the foreign direct investment was established in 1991 under Foreign Exchange
Management Act (FEMA), when Manmohan Singh was finance minister. Actually India
already disallowed to overseas corporate bodies, after India decided to allow overseas
corporate bodies several sectors.
FDI was started with a less than $1 billion in 1990 as well three sector was grown by
higher inflows were in the services, telecommunication, construction activities and
computer software and hardware.
According to the trading economics, the Foreign Direct Investment (FDI) is fluctuations
in India, where they are larger investment was made only the $ 5130 million in 2006
December, then FDI was down after that FDI has grown slowly from 149 million in 2011
July to $ 3968 million in 2014 December.
Indian FDI was averagely $1053.52 Million from 1995 until 2015, reached the greater of
$ 5670 Million in February of 2008 as well as a record low of -60 USD Million in
February of 2014.
In the 2015, the FDI was decreased to $ 3089 million in February in 2015 to $4687
Million in January of 2015
0
1000
2000
3000
4000
5000
6000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
US$
Mill
ion
Year
Foreign Direct Investment (FDI) (US$ Million)
7
4. Analyzing Reasons for Any of the Above Trends
Following reason are fluctuations trend of FDI in India,
4.1 Lack of policy was followed by government
FDI policy is considered to invest selected the one country’ differ sectors. India follows
inappropriate or lower concern FDI policy on the sectors likes a retail, insurance and real
estate. An example, the Indian real state declined to 6% during the June quarter from
2009/2010. Also, the services sectors down from 17% to 11%.
There is too much delay on their producers on the new land acquisition act, there is
appropriate availability on these sectors but slowing producer they had.
Indian FDI investments is lower than expected due to less improvement on
Manufacturing, being slow by flip-flops in government policy making and unsuitable
investment manner.
4.2 Tariff
The tariff should be paid importing or exporting the particular good, however high tariff
applicable on mostly on importing product. But the government has to safeguard their
local supplier and it is revenue for Indian government.
Indian tariff rates are high compared with other countries, which continuously reducing
manufacturing products. An example Indian tariff quota was ranked 59nd place out of 59
Asian countries.
4.3 Government intervention
The political environment is most important part of the FDI because it’s every activities
effect on their business activities. FDI was small restriction. Because, foreign investment
had an ownership about 51% of government. But they haven’t strong rules to continue the
investing as well as the rules avoided to investing (attractive) different sectors.
4.3.1 Inappropriateexporting procedure
India has some inadequate exporting procedure zones due to their restricted scale.
8
4.4 Other factors
There is a big difference on the foreign fund on the Indian stock. An example, It was high
stage in 2009. FDI investors haven’t liked the common wealth (year 2010) competition in
due to larger changes in the Indian economy.
The present policy was implemented from April 17, 2014. India had some stick policy
producers due to the more concern on their economy. It includes, the new investors of
Pakistan and Bangladesh.
9
5. Present Indian Government Policy towards FDI
Following many factors affects for the fluctuations stage in the FDI in India.
5.1 Foreign Direct Investment - Concept and Policy
Foreign direct investment is an investment made by a foreign individual or business in the
dynamic capacity of different country. It is the movement of capital across national
frontiers in a way that grants the investor control over the acquired asset. The new policy
was Consolidated FDI Policy Circular of 2014 as well as the effect was expected from
April 17, 2014.
5.1.1 General Conditions on FDI
5.1.1.1 Who Can Invest in India?
Nonresistant is allowed to invest in premised sectors, but in new budget had small
changes. An example, A nonresistant entry can invest in premised sector or activities, but
only the Bangladesh individual should be invested via the their government rout but
Pakistan's individual or company was allowed independence.
5.1.1.2 Entities investment methods
Nonresistant can invest via India on non-repatriation based. Example, Amount should be
invested by inward remittance or out of NRE/FCNR (B)/NRO account maintained with
Authorized Dealers/Authorized banks. but, it is not applicable to plantation or real estate
business or print media sector as well it not applicable to invest outside of India.
5.1.1.3 Investment sectors allowed in FDI
FDI is 100% allowed with a Limited Liability Partnerships (LLPs) in the sectors of such
as 'Non-Banking, Finance Companies' or 'Development of Townships, Housing, Built-up
infrastructure and Construction-development projects' etc., but, FDI within the LLPs will
not allowed in the sectors of plantation activity, print media or real estate business.
5.1.1.4 direct and indirect foreign investment in an Indian company
Indian has some control on calculating the foreign direct invest on foreign invester, but
the Indian government has approved their Indian citizens.
10
5.1.1.5 Prohibited Sectors:
Foreign direct investment is prohibited on the following sectors:
All the types of Lottery Industry ( government, privet, online and etc)
Gambling
Chit funds
Nidhi organization
Trading in Transferable Development Rights (TDRs)
Real Estate Business or Construction of Farm Houses
Manufacturing of cigars, cheroots, cigarillos and cigarettes, of tobacco or tobacco
substitutes
Avoided sectors, an example, Atomic Energy and Railway Transport instead Mass
Rapid Transport Systems
5.1.1.6 FDI is allowed up to 100% onollowing sectors
A. Agriculture
Agriculture & Animal Husbandry
Tea Plantation
B. Mining and Petroleum & Natural Gas
Mining
Petroleum & Natural Gas
C. Manufacturing
Manufacture of items reserved for production in Micro and Small Enterprises
(MSEs)
Defence
D. Services Sector
Broadcasting
Print Media
Civil Aviation
Courier services
11
Construction Development: Townships, Housing, Built-up infrastructure
Industrial Parks – new and existing
Satellites- establishment and operation
Private Security Agencies
Telecommunication Services
Trading
E. Financial Services (Asset Reconstruction Companies, Banking- Private Sector,
Banking- Public Sector and Commodity Exchanges)
F. Others (Pharmaceuticals, Power Exchanges)
12
6. Has FDI Helped Certain Sectors In The Indian Economy Or
Business?
India up to 100% liberalized their key sectors for individual and corporate investors who
are highly invested with the 4 years analyzed by rapidly growing privet industry.
FDI has developed as a major source of private external factors, Indian Sectors
Attracting Highest FDI Inflows are many such as, electrical equipments, transportation
industries, telecommunication, fuels, food processing industries, and services. Further the
Indian Sectors Attracting Highest FDI Inflows are cement and gypsum products,
metallurgical industries, chemicals, and drugs and pharmaceuticals.
(Source - http://business.mapsofindia.com/fdi-india/indian-sectors-attracting-highest-
inflows.html#sthash.2wra0bBd.dpuf)
Foreign direct investment (FDI) is a crucial support to non-debt financial resource for the
Indian economic development. It had so many advantages in Indian business by cheaper
labor forces, expectation on specify investing and also, if the foreign investors made an
investment in technical it can be acknowledge for new ways of generating Indian employs
via experience.
13
7. Future Economic Growth and FDI in the Indian
7.1 Future Economic Growth
India has occurred as strong growing economy over the few years bur some of the crisis
was dictated by global market down, local final market, oil price on the Indian GDP
growth. However the having economic crises were handled by strong fundamental sector
growth in future. The fundamental stores were intentioned in the potential growth,
stimulated growth, which has led to sustained high growth of way to Indian economy.
Identified key sectors are physical, growth drivers social and agricultural infrastructure
which led to the future growth of this country in the finical year 2011 to 2020 also, the
economic indicators slower growth in some factors such as technological progress,
improvement in productivity and India’s young demography and etc.
The Indian private societies expect to positive growth to achieve here high level GDP.
Those factors are indicating Indian’s future economic growth.
(Source- http://www.dnb.co.in/India2020economyoutlook/growth_drivers.asp)
14
7.2 India Foreign Direct Investment Forecasts
Indian future FDI investment fasting is possible for this country. Example, in the previous
last four years they FDI investment grown slowly.
Unit Actual Q2/2015 Q3/2015 Q4/2015 Q1/2016 2020 2030 2050
USD
Million
3089 4118 3777 3286 2985 8390 16705 33431
(Source - http://www.tradingeconomics.com/india/foreign-direct-investment/forecast)
India has so many opportunities in new investment in the technology sectors via
Microsoft, Intel, CISCO companies. Flowing examples are below,
Indian’s foreign direct investment forecasting to high investment by a abroad and NRI
organization. Because, Mr. Bill Gates recently come to the Indian who publicized about
their company will be investment about the $1.7 billion within the next few years.
Intel is world leading computer part as a chip manufacturing organization that already
announced about their future investment more than $1 billion in India. FDI was focused
by using an autoregressive integrated moving average (ARIMA) model calibrated using
our analyst prospects. It analyses the best charter of Indian FDI via historical data, then,
it's constant the Indian economic data for future forecasting.
The economy and FDI growth will be possible for this country due to some sectors
growth of physical, growth drivers social and agricultural infrastructure as well the slower
growth are expected on attractive sectors technological progress, improvement in
productivity and India’s young demography and etc. Which led to the future growth of
this country in the finical year 2011 to 2020 also, the economic indicators slower growth
in some factors such as technological progress, improvement in productivity and India’s
young demography and its.
15
8. Conclusion
FDI is allowed under the automatic route in most sectors/activities. FDI policy in India
was supposed to be among the most liberal in emerging economies. FDI Policy was
permitted FDI up to 100 % from foreign/NRI investor without prior approval in most of
the sectors including the services sector under the automatic route. FDI in
sectors/activities was automated route does not require for any prior approval either by
the Government or the RBI.
FDI investment was fluctuated trend stage for few years however it is possible manner in
the last four years. The new organization policy was implemented in the 2014 when it
was given so many opportunities to invest in different sectors but few sectors were
prohibited by Indian government.
The future economic growth will be possible in this country via the attractive sectors of
the social and agricultural infrastructure as well small growth of technology, production
and India’s young demography.
So, foreign direct investment will be increased future in Indian by having some
fundamental sectors.
16
9. Recommendation
The Indian FDI policy has both as an advantage as well s some limitation, the
recommendation was indicted as same changes to this policy as follows. The Indian had
some limitation because the foreign consumer can not get an ownership in own name but
they can get ownership via Indian resistance peoples. This policy doesn’t attractive to
invest in Indian FDI so, the Indian government should give an ownership to nonresistance
investor.
Indian government levies on product, machinery and raw metrical. Those are the result
will lead to lower investment in India, so, The Indian government can follow possible
policy to gain more investment.
Indian Foreign direct investment was allowed to limited liability on the all the sectors
such as 'Non-Banking, Finance Companies' or 'Development of Townships, Housing,
Built-up infrastructure and Construction-development projects’ instead plantation
activity, print media or real estate business. So, FDI in India should allow to liability in
all the sectors.
17
10. Reference
International marketing, indian edition, Kate gillespie (University of Taxes at
Austin)
http://en.wikipedia.org/wiki/India
http://www.tradingeconomics.com/india/foreign-direct-investment
http://webcache.googleusercontent.com/search?q=cache:bun0wFHERFgJ:dipp.nic
.in/English/Policies/FDI_Circular_2014.pdf+&cd=1&hl=en&ct=clnk&gl=lk
http://www.worldlawdirect.com/forum/indian-law/66595-foreign-direct-
investment-india-policies-procedure-legal-framework.html
http://fipb.gov.in/
http://in.reuters.com/article/2010/10/10/idINIndia-51951220101010
