Presented byRitika Sood Sahil Kataria Surbhi Sood

INTRODUCTION
International trade & FDI are the two most important international economic activities integrating the world economy With the increase in the mobility of factors of production across countries, FDI has become an integral part of a firms strategy to expand international business

SUPERIOR TO OTHER CAPITAL FLOWS

Firms entering a host country through FDI have a long-term perspective in contrast to foreign lenders and portfolio investors Debt inflows may finance consumption whereas FDI is more likely to be used to improve productivity FDI provides not only capital but also technologies, management & marketing skills

CONCEPT OF FDI
FDI means acquiring ownership in an overseas business entity FDI occurs when an investor based in one country acquires an asset in another country with the intent to manage it

FOREIGN PORTFOLIO INVESTMENT

FPI is defined as an investment by individuals, firms or a public body in foreign financial instruments such as foreign stocks, government bonds etc Equity stake not enough to exert any management control Thus, FPI is passive & FDI is active

WHY FDI
Cost of transportation Higher cost of transportation between the production facilities & geographically distant markets make it economically unviable for firms to compete Liabilities of foreignness A firms unfamiliarity with the host country and lack of adaptation of business practices in a foreign country often results in a disadvantage.

BENEFITS OF FDI
Access to superior technology Increased competition Increase in domestic investment Bridging host countries foreign exchange gaps

NEGATIVE IMPACT
Market monopoly Profit outflow Corruption National security Technology dependence Crowding-out and unemployment

METHODS OF FDI
by incorporating a wholly owned subsidiary or company anywhere by acquiring shares in an associated enterprise through a merger or an acquisition of an unrelated enterprise participating in an equity joint venture with another investor or enterprise

SELECTION OF FDI DESTINATION

Cost of capital input Wage rate Taxation regime Costs of inputs Costs of logistic Market demand

TYPES OF FDI

On the basis of direction of investment

Inward FDI Outward FDI

On the basis of type of activity

Horizontal Vertical Backward Forward

On the basis of investment objective

Resource seeking FDI Market seeking FDI Efficiency seeking FDI Strategic-Asset seeking FDI

On the basis of entry mode

Greenfield investment Merger and acquisition

On basis of sector
Industrial Non- industrial

On the basis of strategic mode

Export replacement Export platforms Domestic substitutions

FDI in INDIA

INSTITUTIONAL FRAMEWORK
Major Regulatory Body Department Of Industrial Policy and Promotion The Foreign Implementation Authority (FIIA) Other departments Ministries of Finance , External Affairs , Labor , Environment and Forests,etc

THE ENTRY PROCESS

Investing in India

Automatic Route
General rule Inform RBI within 30 days of inflow/issue of shares

Prior Permission By exception Approval of Foreign Investment Promotion Board needed. Decision generally within 4-6 weeks
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PROHIBITED AREAS
Retail Trading(except single branding product retailing) Atomic Energy Lottery Business Gambling & betting sector Business of chit fund & nidhi company Plantation except tea Trading in Transferable Development Rights (TDR) Activity/sector not opened to private sector investment

FOREIGN INVESTMENTS FLOWS

FDI IN RETAIL SECTOR

PROS
Consumers- more choice , better services, wider access, easier credit & a better shopping experience Competition for local retailers Less wastage if agri-produce due to improved due to improved food processing techniques & cold storage facilities Help Indian products get global recognition Elimination of multiple middlemen

CONS
Wipe out pop (kirana) stores Introduce competitive pricing Reduce employment opportunities by displacing smaller retailers in unorganized sector Legalize predatory practices of MNCs leading to increased imports Dumping of products by MNCs