FORFI0N IRFC1 INVFS1MFN1 IN INIA

-A 0IOBAI PFRSPFC1IVF
lorelgn ulrecL lnvesLmenL ls any form of lnvesLmenL LhaL earns lnLeresL ln
enLerprlses whlch funcLlon ouLslde Lhe domesLlc LerrlLory of Lhe lnvesLor
nistorico/ 8ockqround of lul in lndio
8ookloq sectot otttocteJ tbe fltst evet lul woy bock lo 1786 wblcb btooqbt
loto exlsteoce 1be Ceoetol 8ook of loJlo beloq tbe fltst bookloq otqoolzotloo
lo loJlo
loJlo bos sooqbt to locteose lul wltb o mocb llbetol pollcy sloce 19918tltlsb
Altwoys (8A) ooJ Ceoetol lecttlc (C) wete tbe fltst to ovoll tbe oppottoolty
of llbetollzeJ lul pollcy ooJ moveJ tbelt l1 ooJ bockofflce opetotloos to loJlo
1bese moltlootloools ttoloeJ tboosooJs of locol wotkets ooJ soccessfolly
ttoosfetteJ tbelt skllls to tbelt bosloess opetotloos 1bls seot posltlve slqools to
tbe wotlJ ot lotqe tbot loJlo ls o telloble ooJ cteJlble offsbotloq Jestlootloo
As o tesolt lul lo loJlo stotteJ qtowloq toplJly
loreiqn uirect lnvestment con be c/ossified into
Outword bound lul 1bls ls bockeJ by tbe qovetomeot oqolost oll types of
ossocloteJ tlsk 1bls fotm of lul ls sobject to tox loceotlves ooJ os well os
Jlsloceotlves of votloos fotms
lnword lul ls eocootoqeJ by lotetest looos tox bteoks qtoots sobslJles ooJ
tbe temovol of testtlctloos ooJ llmltotloos
loreiqn uirect lnvestment is quided by different motives
luls tbot ote ooJettokeo to stteoqtbeo tbe exlstloq motket sttoctote ot
explote tbe oppottooltles of tbe oew motkets coo be colleJ morketseekinq
luls
luls tbot ote olmeJ ot foctots of ptoJoctloo wblcb bove mote opetotloool
efflcleocy tboo tbose ovolloble lo tbe bome coootty of tbe lovestot ote koowo
os kesourceseekinq luls
ueterminonts of lul
oe of tbe most lmpottoot Jetetmlooots of lul ls tbe slze ooJ tbe
qtowtb ptospects of tbe coootty lo wblcb lul ls ptoposeJ to be moJe A
blqqet motket ls ossomeJ to qtow mote polckly ftom tbe ecooomlc
polot of vlew

9opolotloo olso ploys oo lmpottoot tole lo otttoctloq lul os tbe
lovestots ote loteJ by boqe costomet bose lf tbe people bove qooJ
speoJloq copobllltles lt coo belp tbe lovestots wltb o wlJet scope of
excelleot petfotmooce/ll

;oollty of lobot ls oootbet lmpottoot Jetetmlooot of lul lot exomple
cbloo bos moJe lt compolsoty fot evety cltlzeo to tecelve ot leost oloe
yeots of eJocotloo 1bls eobooces tbe stooJotJ of tbe lobotets lo cbloo

loexpeoslve lobot fotce ls olso oo lmpottoot Jetetmlooot of lul wotlJ
closs l1 eJocotloo coopleJ wltb cbeop loboot poveJ tbe woy fot 89
tevolotloo ooJ booo lo l1 compooles lo loJlo

loftosttoctote focllltles ooJ ovolloblllty of oototol tesootces olso ploy o
vltol tole lo otttoctloq lul

Above oll lovestotftleoJly ecooomlc pollcy of o coootty eocootoqes lul
to o qteotet exteot
loreiqn direct investment in the united 5totes
lovest lo Ametlco ls oo loltlotlve of tbe u5 uepottmeot of commetce ooJ
olmeJ to ptomote tbe ottlvol of fotelqo lovestots to tbe coootty


@he "lnvest in 4merico" po/icy is focused on
O locllltotloq lovestot poetles
O cottyloq oot mooeovets to olJ fotelqo lovestots
O 9tovlJe soppott botb ot locol ooJ stote levels
O AJJtess coocetos teloteJ to tbe bosloess eovltoomeot by belploq os oo
omboJsmoo lo wosbloqtoo uc fot tbe lotetootloool veotote
commoolty
O ffetloq pollcy qolJelloes ooJ belploq qettloq occess to tbe leqol
system
1be uolteJ 5totes ls tbe wotlJs lotqest teclpleot of lul Mote tboo 5J25J
blllloo lo lul floweJ loto tbe uolteJ 5totes lo 2008 wblcb ls o J7 petceot
locteose ftom 2007 1be 521 ttlllloo stock of lul lo tbe uolteJ 5totes ot tbe
eoJ of 2008 ls tbe epolvoleot of opptoxlmotely 16 petceot of u5 qtoss
Jomestlc ptoJoct (Cu9)55
8eoeflts of lul lo Ametlco lo tbe lost 6 yeots ovet 4000 oew ptojects ooJ
6J0000 oew jobs bove beeo cteoteJ by fotelqo compooles tesoltloq lo close
to 5J14 blllloo lo lovestmeot uootqoobly u5 offlllotes of fotelqo compooles
bove o blstoty of poyloq blqbet woqes tboo u5 cotpototloos lotelqo
compooles bove lo tbe post soppotteJ oo oooool u5 poytoll of 5J64 blllloo
wltb oo ovetoqe oooool compeosotloo of 568000 pet employee
locteoseJ u5 expotts tbtooqb tbe ose of moltlootloool Jlsttlbotloo oetwotks
lul bos tesolteJ lo J0 of jobs fot Ametlcoos lo tbe mooofoctotloq sectot
wblcb occooots fot 12 of oll mooofoctotloq jobs lo tbe u5
Afflllotes of fotelqo cotpototloos speot mote tboo 5J4 blllloo oo teseotcb ooJ
Jevelopmeot lo 2006 ooJ cootlooe to soppott mooy ootloool ptojects lowotJ
lul bos leJ to blqbet ptoJoctlvlty tbtooqb locteoseJ copltol wblcb lo toto bos
leJ to blqb llvloq stooJotJs
loreiqn direct investment in chino
lul lo cbloo bos beeo ooe of tbe mojot soccesses of tbe post J JecoJes
5tottloq ftom o boselloe of less tboo 519 blllloo jost 20 yeots oqo lul lo cbloo
bos qtowo to ovet 5J00 blllloo lo tbe fltst 10 yeots cbloo bos cootlooeJ lts
mosslve qtowtb ooJ ls tbe leoJet omooq oll Jeveloploq ootloos lo tetms of
lul veo tbooqb tbete wos o sllqbt Jlp lo lul lo 2009 os o tesolt of tbe qlobol
slowJowo 2010 bos oqolo seeo lovestmeots locteose 1be cbloese cootlooe to
steomtoll wltb expectotloos tbot ecooomlc qtowtb wlll be 10 tbls yeot
loreiqn direct investment ond the deve/opinq wor/d
lotelqo lovestmeot coo be o slqolflcoot Jtlvet of Jevelopmeot lo poot ootloos
lt ptovlJes oo loflow of fotelqo copltol ooJ fooJs lo oJJltloo to oo locteose lo
tbe ttoosfet of skllls tecbooloqy ooJ job oppottooltles Mooy of tbe ost
Asloo tlqets socb os cbloo 5ootb koteo Moloyslo ooJ 5loqopote beoeflteJ
ftom lovestmeot obtooJ 1be commltmeot to uevelopmeot loJex tooks tbe
JevelopmeotftleoJlloess of tlcb coootty lovestmeot pollcles
loreiqn uirect lnvestment in lndio permits the fo//owinq forms of
investments
1btooqb floooclol collobototloos
1btooqb jolot veototes ooJ tecbolcol collobototloos
1btooqb copltol Motkets
1btooqb ptlvote plocemeots ot ptefeteotlol ollotmeots
A ptlvote plocemeot (ooopobllc offetloq) ls fooJloq of secotltles ooJ lts sole to
o few boyets osoolly lostltotloool lo lotqe omooots wltboot teqlstetloq wltb
5ecotltles ooJ xcbooqe commlssloo
loreiqn uirect lnvestment is not permitted in the fo//owinq sectors
Atms ooJ ommooltloo
Atomlc oetqy
ollwoy 1toospott
cool ooJ llqolte
Mloloq of ltoo mooqooese qypsom solpbot qolJ JlomooJs coppet
ooJ zloc



lul8udqetory 5upport 20102011
1be totol tetoll motket lo loJlo ls estlmoteJ to be 5J50 blllloo ooJ llkely to
teocb 557J blllloo by 20121J 1be otqoolzeJ tetoll loJostty occooots fot 55
of totol tetoll loJostty ooJ expecteJ to teocb 10 by 20121JloJlo cotteotly
ollows 51 lul lo sloqle btooJ tetoll bot oooe lo moltlbtooJ
Present scenorio of lul in lndio
lul lo loJlo JeclloeJ by 25 to lo Iooooty 2010 tbooqb tbete wos posltlve
qtowtb lo tbe ptevloos tbtee mootbs 1be lul loflow lo Iooooty 2010 wos
5 204 blllloo
4 comporotive stotement of lul
Iooooty 2009 5 27J blllloo Iooooty 2010 5 204 blllloo
uecembet
2008
51J6 blllloo uecembet
2009
5 154 blllloo
Novembet
2008
5108 blllloo Novembet
2009
5174 blllloo

1be ovetoll lul loflows lo 200809 omoooteJ to 5 27J blllloo bot tecelveJ
ooly 5 2296 blllloo ftom Aptll Iooooty 200910At tbe eoJ of tbe flscol tbe
ovetoll loflow wlll be less tboo tbot of lost yeot wltb oo speclflc teosoo
ottocbeJ to socb Jeclloe lt moy oot be posslble to teocb tbe expecteJ flow of
5J0 blllloo
@he mojor sectors thot ottrocted lul durinq this fisco/ inc/ude
5etvlces 5J54 blllloo
compotet botJwote ooJ softwote5595 mlllloo
1elecommoolcotlo2J6 blllloo
coosttoctloo ooJ eol estote56 blllloo

A sotvey by tbe qlobol setvlce offlce bosloess eqos loJlcotes tbot
loJlos cotpotote tecovety bos sotposseJ lotetootloool tecovety Ao estlmoteJ
45 of loJloo fltms locteoseJ ptoflts lost yeot compoteJ to qlobol ovetoqe of
40Amooq loJloboseJ bosloess tbot expetleoceJ o Jecteose lo teveooe 56
of tbem expect teveooe tlse lo 2010 1be sotvey olso stotes tbot tbe tecovety
of u5 ooJ Cetmooy ote llkely to wltoess ecooomlc tecovety by Aoqost 2011
uk by 5eptembet Aosttollo 8elqlom ooJ coooJo lo Iooe 2011
1be cblef execotlves of tbe compooles lo loJlo teoJ to postpooe tbe
lovestmeot Jeclsloos lo tbe cotteot ecooomlc cllmote os tbe ecooomlc
totootoooJ ls oot expecteJ to boppeo to lts foll poteotlol eveo lo 201011
Covetomeot of loJlo ls tokloq oll loltlotlves to otttoct lul lo lebtooty
2009 lt ooooooceJ tbe blstotlcol omeoJmeot lo tbe teqolototy meosotes of
lul 1be omeoJmeot focoses oo tbe most seosltlve sectots socb os tetoll
bookloq telecommoolcotloo meJlo ovlotloo Jefeose ooJ losotooce lot
lostooce tbe lul cop lo telecommoolcotloo ls oo looqet 74 bot o wbopploq
98 lul op to 100 ls olloweJ lo oll sectots ooJ octlvltles except fot o few
socb os qomblloq ooJ bettloq lottetles otomlc eoetqy moltlbtooJ tetoll teol
estote ttoJloq ooJ oqtlcoltote
lul lo tbe bookloq sectot bos beeo llbetollzeJ by tolsloq lul llmlt lo
ptlvote sectot books to 74 pet ceot ooJet ootomotlc toot locloJloq lovestmeot
by fotelqo lovestmeot lo loJlo 1be oqqteqote fotelqo lovestmeot lo o ptlvote
book ftom oll sootces wlll be 74 pet ceot of polJop copltol of tbe book

1be ptlmoty sootce of lul floooce ls bottowloqs lo Iopooese eo wbete
tbe lotetest totes bove beeo low fot tbe post JecoJe Mooey bos olso
otlqlooteJ ftom tbe u5 wltb lotetest ot oeot zeto totes 1be oeotzeto lotetest
tote lo tbe u5 moy oot temolo ot tbot level bot tbe lotetest tote lo Iopoo ls
llkely to temolo ot zeto level neoce tbete ls oot qoloq to be ooy cosb ctoocb
offectloq lul loflow loto loJlo
1be lul loto loJlo ls tooteJ tbtooqb cooottles tbot offet tox exemptloos
ot tbose tbot bove slqoeJ uooble 1ox ovolJooce oqteemeot wltb loJlo
epotts teveol tbot 4J of mooey ls tooteJ tbtooqb Mootltlos wltb wblcb
loJlo cootlooes to bove cotJlol telotloosblp loJlo beloq o NooollqoeJ ootloo
lt Joes oot bove ooy polltlcol tlvol wbo coo mooeovet ooJ stop flow of
lovestmeot lo tbe coootty
lo loJlo lul ls focoseJ oo loJosttles wblcb ote tecesslooteslstoot
9tlmotlly most of tbe luls wete oseJ fot estobllsbloq 8osloess 9tocess
otsootcloq (89) oolts uotloq tecessloo tbe loss of teveooe lo tbe 89 oolts
wos motqlool ooJ kept tbe lovestmeots lo 89 teosooobly octlve 1be oombet
of job losses Jotloq tecessloo lo loJlo wos lesset compoteJ to otbet
cooottles 1bls ls lo coottost to lul lo cbloo wbete most of tbe lovestmeots
wete moJe lo mooofoctotloq sectot wblcb tesolteJ lo excess copoclty Jotloq
tecessloo ooJ mooy oolts boJ to be sbot Jowo
lul bos olso coottlboteJ fot tbe Jevelopmeot of totol popolotloo 1be
telecom sectot tbe tbltJ blqbest tecelvet of lul lo loJlo bos expooJeJ lts
opetotloo lo totol oteos ooJ bos lmptoveJ tbe llfe of fotmets by lmptovloq tbe
commoolcotloo oetwotk lottbet J5 of tbe lul wos JlvetteJ to settloq op
of Aqtosetvlces looJ 9tocessloq loJosttles letmeototloo loJosttles
Aqtlcoltotol Mocbloety etc nowevet tbe lul lovestmeot to oqtlcoltotol
sectot oeeJs mote otteotloo of pollcy mokets
eceotly tbe uoloo cobloet cleoteJ tbe lotelqo ducotiono/ lnstitutions
(teqolotloo of eotty ooJ opetotloo) 8i// 1be 8lll ls expecteJ to be lottoJoceJ lo
9otllomeot oftet tbe boJqet sessloo lf cleoteJ tbls woolJ wlJeo tbe Jefloltloo
of lul lo blqbet eJocotloo ooJ woolJ btloq tevolotloooty cbooqes lo tbe flelJ
of eJocotloo 1be Atlooto boseJ Ceotqlo 1ecb uolvetslty bos olteoJy ocpolteJ
250 octes of looJ lo nyJetoboJ sbowloq slqos of tbe 8lll beloq cleoteJ wltboot
ooy setloos obstocle Mooy toptookloq fotelqo oolvetsltles llke ole
uolvetslty bove welcomeJ tbls move by Covetomeot of loJlo
lul in lndio o q/obo/ view
lo 201011 loJlo wlll be posbeJ to tbe 1nlu ploce lo tetms of fovotoble
Jestlootloo fot lotelqo ultect lovestmeot u5A wlll tetoke lts secooJ posltloo
wblcb lt lost to loJlo lo 2005 cbloo os osool wll be tbe toptookloq
Jestlootloo fot lul loJlo 8tozll ooJ Cetmooy olooq wltb cbloo ooJ tbe u5A
wlll temolo ot tbe top flve posltloos wltb sttooq lovestots cooflJeoce loJex
eosoooble petfotmooce of tbe cotpotote sectot lo loJlo ooJ o posltlve Cu9
qtowtb of 67 lo tbe cotteot flscol ootwltbstooJloq tbe qlobol tecessloo ls o
posltlve slqool to tbe fotelqo lovestot At pteseot tbe fotelqo lovestots wbo
bove sotvlveJ tbe wtotb of ecooomlc ctlsls ot bome ooJ ote stlll lookloq fot
oveooes of lovestmeot vlew loJlo os o sofe boveo fot lovestmeot 1bls ls
becoose of tbe foct tbot llke cbloo loJlo too bos o boqe Jomestlc motket
Jtlveo by Jomestlc JemooJ ooJ coosomptloo wblcb coo eosote sofety ooJ
ptofltoblllty of tbelt lovestmeot
loJloo tetoll motket bos J00 mlllloo mlJJlecloss costomets ooJ lt qtows ot
tbe tote of 12 evety yeot 1bete bos beeo o cooslJetoble locteose lo tbelt
sotplos locome too loJloo tetoll motket wblcb ls tbe flftb lotqest tetoll
Jestlootloo qlobolly bos beeo tookeJ tbe most otttoctlve Jestlootloo fot lul
by qlobol lovestots
loJlo coolJ bove otttocteJ mote lul bot fot tbe qlobol petceptloo of lt beloq
tbe most cottopt coooty 1toospoteocy lotetootloool (1l) bos toteJ loJlo wltb
lts cottopt 9etceptloo loJex (c9l) scote of J4 oo o scole of 010
conc/udinq kemork
lt ls o well koowo foct tbot tbe loJloo ecooomy ls lulJtlveo 1be wotlJ ot
lotqe oftet expetleocloq tbe wotst pbose of tbe tecessloo lo tbe post two
yeots bos come to o cooclosloo tbot loJlo o koowleJqe boseJ ecooomy teoJ
to move fotwotJ wltb otmost cote ooJ cootloo As teveoleJ by sotvey tepotts
tbot tbe lovestots cooflJeoce oboot lovestmeot lo loJlo tooks tbtee ls oo
eocootoqloq tesolt 1booqb cotteotly tbete moy be Jeclloe lo lul lo tbe
bockJtop of posttecovety sceootlo tbete ls oo teosoo fot ooy Jeclloe lo lul lo
loJlo ot leost fot o JecoJe to come