Foreign Direct

Investment
Submitted by
Mohit Sewani(14020241067)
Charvi Puri(14020241064)
Prashanth Mohan(14020241068)
Prithwish Purkayastha(14020241069)
Armaan Anand(14020241107)
Manish Jaiswal(1402024135)

Introduction

Controlling ownership in a business enterprise in

one country by an entity based in another country

"inorganically" by buying a company in the target

country

"organically" by expanding operations of an

existing business in that country.

Introduced in 1991 underForeign

Management Act (FEMA)

Exchange

Current FDI insectors is limited to a maximum of

49%.
Foreign investment can result in :
transfer of soft skills through training and job creation
availability of more advanced technology for the

domestic market
access to research and development resources
employment opportunities

FDI involves the transfer of factors

complementary to capital, including
management, technology and organisational
skills.

3 Types

Horizontal
Vertical
Conglomerate

2 Forms

Greenfield entry
Takeover or 'mergers and acquisitions
(M&As)

Technical Aspects
Procedure for receiving FDI in an Indian Company-

1.
2.

An Indian company may receive Foreign Direct Investment under the two
routes:
Automatic Route
Government Route

Sectors where FDI is not allowed, under both routes:

Atomic Energy

.
.
.
.
.
.

Lottery Business
Gambling and Betting
Business of Chit Fund
Nidhi Company
Agri & Plantation activities
Housing and Real Estate business( except townships, roads or bridges to the
extent specified in notification.
Trading in Transferable Development Rights (TDRs).
Manufacture of cigars, cheroots, cigarillos and cigarettes, of tobacco or of
tobacco substitutes.

.
.

Technical Aspects

Authorities dealing with Foreign Investment:

1.
2.
3.
4.
5.
6.

Foreign Investment Promotion Board (FIPB)

Secretariat for Industrial Assistance (SIA)
Foreign Investment Implementation Authority (FIIA)
Investment Commission
Project Approval Board
Reserve Bank of India

Instruments for receiving FDI in a company?

Sector Wise limits

1.
2.

Automobiles & Automobile Components: 100% FDI is

allowed under the automatic route.
Aviation:
100% FDI is permitted for greenfield airport projects under the automatic

route.
Up to 74% FDI is permitted for existing airport projects under the automatic
route, above 74% and up to 100% permitted under government approval
route.
Up to 49% FDI is permitted in domestic scheduled passenger airlines under
the automatic route. 100% permitted for NRIs.
Up to 100% FDI is permitted in helicopter services and seaplanes under the
automatic route.
Up to 49% FDI is permitted in ground handling services under the
automatic route.
Up to 100% FDI is permitted in maintenance and repair organizations;
flying training institutes; and techincal training institutes under the
automatic route.

3.

4.
5.

6.
7.
8.
9.

Biotechnology: FDI up to 100% is permitted through the

automatic route for greenfield and through the government
route for brownfield, for pharmaceuticals.
Chemicals: 100% FDI is allowed under the automatic route.
Construction: 100% FDI through the automatic route is
permitted in townships, housing, built-up infrastructure and
construction-development projects, subject to certain
conditions.
Defence Manufacturing: Up to 49% investment is allowed
under the government route.
Electrical Machinery: 100% allowed
Electronic Systems: 100% FDI is allowed under the automatic
route.
Food Processing:
1. 100% FDI is permitted in the automatic route for most food products

except for items reserved for micro and small enterprises.

2. 100% FDI is permitted for alcoholic beverages, with the requirement of
an industrial license.

Sector Wise limits

IT & BPM: Up to 100% allowed.
11. Leather: 100% FDI is permitted.
12. Mining: Up to 100% is allowed.
13. Oil & Gas: Up to 100% is permitted, subject to certain
policies. 49% is permitted under automatic route in petroleum
10.

refining by
PSUs, without any disinvestment or dilution of
domestic equity in the existing PSUs.

Pharmaceuticals: 100% allowed.

15. Ports: 100% allowed.
16. Railways: 100% FDI under automatic route is
permitted for certain activities.
14.

Sector Wise limits

10. Renewable

Energy: Up to 100% is allowed.

11. Roads & Highways: Up to 100% is allowed.
12. Space: FDI up to 74% is allowed in satellitesestablishment and operation, subject to the
sectoral guidelines of the Department of
Space/ISRO, under the government route.
13. Textiles & Garments: 100% FDI is allowed.
14. Thermal Power: 100% FDI is allowed.
15. Tourism & Hospitality: 100% FDI is allowed.
16. Wellness: 100% FDI is permitted in the AYUSH
sector.

State and Sector-wise

analysis of FDI in India

Last 12 year trends

Source: http://www.rbi.org.in

Factors affecting FDI inflow

in States

Indian states with strong industrial

base tend to attract more FDI flows
Indian states with higher services
sector activity attract more FDI flows
People with higher standard of living.
The local Policy Environment.

Country-Wise inflow

The Reasons

DTAA and capital gains can only be

taxed in Mauritius.
India loses approximately $US 7 billion
a year in tax from offshore accounts
and tax havens.
Singapore Overtakes Mauritius as Top
Source of FDI into India as GAAR
Looms

Sector-Wise Analysis

Growing Sectors

At present India is the leading country

pertaining to the IT industry in the Asia
-Pacific region.
With a growth rate of 45%, Indian
telecom industry has the highest
growth rate in the world.
Growth in Automobile sectors.
Cement and Semiconductors sector.

Recent Developments in
FDI in India

Singapore Overtakes Mauritius

as Top Source of FDI into India

In 2013-2014, FDI inflows from Singapore - US$5.98 billion

compared with US$2.3 billion in the previous year.

In 2013-2014, FDI inflows from Mauritius was down

considerably from US$9.5 billion, to only US$4.9 billion
the countrys lowest level since 2006-2007.

Cumulatively, Mauritius remained the top source of FDI

into India between 2000 and 2014, however, accounting
for 36 percent of total inflows, followed by Singapore (12
percent) and the United Kingdom (10 percent).
Dated : 8th Feb 2015
Source:
http://www.india-briefing.com/news/singapore-overtakes-mauritius-top-source-fdi-india-gaar-looms-8446.ht
ml/#
sthash.aikfjqFK.dpuf

Maharashtra, NCR attract

49% of total FDI in India

Maharashtra and the National Capital Region (NCR) have cornered 49 percent
of the total foreign direct investment inflows into the country since April 2000.

According to Commerce and Industry Ministry data.

During April 2000 - November 2014, Maharashtra attracted maximum foreign

inflows at USD 70.41 billion, about 30 percent of total FDI inflows.

During April 2000 - November 2014, NCR including parts of U.P. and Haryana,
received USD 45.77 billion FDI. NCR accounted for 19 percent of the country's
total FDI.

Sectors which attracted maximum FDI include : services,

telecommunications, metallurgical industries, power, computer hardware and
software, and construction activities.
Dated : 8th Feb 2015
Source http://zeenews.india.com/business/news/economy/maharashtra-ncr-attract-49-of-total-fdi-in-india
_118154.html

GSMA urges India to encourage FDI in telecom

UK-based telecom group GSMA has urged India to encourage FDIin the mobile phone
services industry to bolster the private sector and spur the economy in the process.

The telecom sector attractedFDIof more than Rs 8,000 Crore in the quarter to July14
while the cumulative FDI inflow since 2000 has been Rs 80,608.47 crore.
By theDepartment of Industrial Policy and Promotion.

TheSupreme Court in 2012 had abolished 122 telecom licences after the 2G spectrum
scam, resulting in what many said was a major blow to FDI inflow into the country.

Subsequently, in August 2013, the government increased the FDI limit in telecom to
100% from 74%.
"There is a need to create policies that are pro-business, forward-looking and
transparent as part of a predictable regulatory framework that will in turn
maximise long-term private sector investment,
Dated : 29th Dec 2014
Source - http://
economictimes.indiatimes.com/industry/telecom/gsma-urges-india-to-encourage-fdi-in-telecom/articleshow/45677831.c
ms

Infact: FDI in India is back

on track

India's FDI inflows grew 26% in 2014 reaching $35 billion

"despite macroeconomic uncertainties and financial risks

While India's performance has been steadily improving since

2012, FDI inflows remain much lower than the economy's best
ever performance in 2008, when over $47 billion of overseas
investment came in the country.

China emerged as the world's top investment destination with

$128 billion of FDI inflows in 2014.

Dated : 1st Feb 2015

Source - http://www.bangaloremirror.com/columns/views/Infact-FDI-in-India-is-back-on-track/articleshow/46088836.cms

FDI
ISSUES IN

RETAIL

Retail Sector at Global Level

One of the world's largest industries exceeding
US$ 9 trillion.
Dominated by developed countries.
47 global fortune companies & 25 of Asia's top
200 companies are retailers.
US, EU & Japan constitute 80% of world retail
sales.

Source: www.dineshvns.com

 Retail tradein Europe employs 15% of

theEuropean workforce(3 million firms and 13
million workers).
The worlds population is poised to expand 50%
by 2050. The world currently comprises of 78%
poor, 11% middle income and 11% rich.

Source: www.dineshvns.com

Contribution Of Retail Industry to

GDP of Various Economies
Contribution Respective
to GDP
India

12%

6%

Brazil
Japan

14%

8%
20%

China
USA

Source: www.dineshvns.com

Indian Retail
Industry
Organized retail:
trading activities undertaken by
licensed retailers, that is, those
who are registered for sales tax,
income tax, etc.

Un-Organized retail:
traditional formats of low-cost
retailing, for example, the
localKiranashops, owner
operated general stores,
paan/beedishops, convenience
stores, hand cart and
pavement vendors, etc.

Why Global Retailers Look

Up to India?
India is a developing country.
Indian market is very large market
Retail is the topmost growing market in India
The environmental and political factors are not
that much bad in India.
Tax breaks, import duty exemptions, land and
power subsidies, and other enticements.

Retail market in India

The total retail sales in India will grow from
US$ 395.96 billion in 2011 to US$ 785.12
billion by 2015
Accounts for 14% of countries GDP
Accounts for 8% of countries employment

Current Retail scenario in

India
100% FDI is allowed in wholesale cash and
carry trade.
51% FDI in single brand retail
No FDI in multi brand retail

What will happen to retail trade ?

These companies open chain of shops. With a shop in each area the retail small
shopkeepers will be put to heavy loss

Slowly the local shops will start closing down.

These shops will capture the trade.

In countries where they have established their market share is

Name of Country % of Market Share

America 80%
England 80%
Western Europe 70%
Brazil
40%
Thailand 40%
Korea
35%
China
20%

Imagine Roadside DHABAs after RELIANCE FOOD CHAIN Starts working.

Now its Indias turn

Threat on unorganized retail players

Threat on organized retail players
Marginalize the domestic players
Huge spread of retail chain stores
Monopoly in the customer market and can be converted into cartel of

global players.
Monopoly among suppliers

FDI in organized multi brand retail:

India not yet ready
Employment loss:

There are about 35 towns in India with population exceeding

1 million. There are at least 4, 32,000 people employed in
these towns in India in small-scale to medium-scale shops.
With the entry of big chains, many of them will lose jobs .

In food retail, farmers (the producers right at the tip of the

back end chain) being left at the mercy of the foreign
investors

Inflation cannot be checked:

The point is that inflation cannot be checked as

consumers would still have to bear the cost

WHO ARE WE LETTING

IN?
Annual turnover $ 400
bn
18 lakh rs. crores

Annual turnover $ 130

bn
5.85 lakh rs. Crores

Annual turnover $ 100

bn
4.5 lakh rs. crores

Annual turnover $ 96
bn
4.2 lakh rs. crores

Controversy

Even before its entry into multi-brand retail, the global chain WalMart was grappling with various issues, including spending money
in the US on lobbying for entry into India. USD 25 million (about Rs
125 crore)

Another issue that created controversy was Wal-Mart's USD 100

million investment in Cedar Support Services, an arm of Bharti
Ventures, when FDI in retail was not allowed here.

Adding action to the drama was Swedish furniture chain IKEA's

hectic bargaining with the government over sourcing clauses for its
foray into the Indian market with plans to invest Rs 10,500 crore,
the largest FDI in single-brand retail so far.

http://articles.economictimes.indiatimes.com/2012-12-24/news/35991801_1_multi-brand-centin-single-brand-cent-procurement-norms

Controversy

Alleged Rs 870 crore fraud in Reebok India by its two top

executives.

Notable- Flipkart is under the scanner for allegedly flouting

FDI rules which allows ecommerce companies companies
with foreign investment to carry out B2B transaction.

Current Challenges and

Improvement Areas

Resource challenge

Equity challenge

Political Challenge

Federal Challenge

India must also focus on areas of poverty

reduction, trade liberalization, and
banking and insurance liberalization.

Popular Articles About Foreign

Direct Investment

Foreign direct investment (FDI) in several industries, including

manufacturing, construction, telecommunications and financial services,
but not in others like multi-brand retail.

Trent Hypermarket the equally owned joint venture between the Tata
Group and UK's Tesco plans to invest Rs 250 Cr as the only Indian
multi-brand retailer with foreign investment aims to open more stores.

100% foreign direct investment regime in the pharmaceuticals sector,

overruling concerns raised by the health and industry ministries about
rising medicine costs due to acquisitions of Indian drug companies by
multinationals.

Amazon seeks tie-up with local retailers like Future Group, Shoppers

Conclusion

Indias Foreign Direct Investment (FDI) policy has

been gradually liberalized to make the market
more investor friendly.

For Indian economy which has tremendous

potential, FDI has had a positive impact.

It helps to establish new companies. All of these

contribute to economic growth of the Indian
Economy.