Foreign Direct

Investment

Presenter:
Pankaj Gaur
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Contents
Introduction
Government policy of FDI
Benefits of FDI
Disadvantages of FDI
FDI inflow in India
FDI v/s FII
References

Introduction
Foreign Direct Investment is any form of investment
that earns interest in enterprises which function
outside of the domestic territory of the investor.
FDIs require a business relationship between a parent
company
and
its
foreign
subsidiary
FDI stocks now constituting 28% of the global GDP

Types of FDI
Inward FDI and Outward FDI
Vertical FDI and Horizontal FDI
Market seeking FDI and Resource seeking FDI
Greenfield investments and mergers and acquisitions

FDI movement in the

World
Increased by 5.1% and stood at US $
947 bn in 2007
Number of projects 11,574 (2007)
Top 10 destinations for FDI :
China, US, India, UK, France, Germany,
Russia, Spain , Poland and Romania
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Ranking based on
FDI
Rank
(2007)

Rank
(2006)

Country

FDI Inflow
(US $ )

No. of
Projects

China

90 bn

1,171

USA

46.8 bn

783

India

24.57 bn

676

UK

18.7 bn

622

Based on no. of projects

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Government policy
for FDI
Approval given by Foreign Investment Promotion Board
Under automatic route
Under government approval
Prohibited sectors
FDI policy notified by RBI under Foreign Exchange
Management Act (FEMA)
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Benefits of FDI
Economic development of the host
Transfer of technology
Development of human capital resources
Creation of jobs
Opening export window
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Disadvantages of
FDI
Company may lose ownership
Difference in language and culture
Country secrets may be disclosed
Policies adapted may not be appreciated

FDI inflow in India

25000

20000

15000

10000

5000

FDI Inflow in US million dollars

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Sector wise FDI

Sectors attracting highest FDI Equity Inflows (In Rs crore)
SECTOR

2008-09
(AprilMay)

Cumulative
% of total
(Apr.2000inflows*
May 2008)

2005-06

2006-07

2007-08

Services (Financial &

non-financial)

2399
(543)

21047
(4664)

26589
(6615)

4955
(1198)

60652
(14256)

21.85

Computer Software &

Hardware

6172
(1375)

11786
(2614)

(1410)

817
(199)

32984
(7477)

11.88%

Telecommunications

2776
(624)

2155
(478)

5103
(1261)

939
(232)

17687
(4074)

6.37

Construction

667
(151)

4424
(985)

6989
(1743)

4846
(1162)

18313
(4325)

6.57

Automobile

630
(143)

1254
(276)

2697
(675)

1385
(346)

11241
(2582)

4.05

Housing and Real estate

171
(38)

2121
(467)

8749
(2179)

4277
(1034)

15439
(3745)

5.56

Power

386
(87)

713
(157)

3875
(967)

1771
(438)

11401
(2643)

4.11

Metallurgical

6540
(147)

7866
(173)

4686
(1177)

2563
(615)

9911
(2377)

3.57

Chemicals (Other than

fertilizers)

1731
(390)

930
(205)

920
(229)

544
(134)

6684
(1519)

2.41

64
(14)

401
(89)

5729
(1427)

106
(26)

8352
(2007)

3.01

Petroleum & Natural Gas

Figures in bracket are in US$ million

* In terms of Rs.
SOURCE: DIPP, Federal Ministry of Commerce and Industry, Government of India

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Country wise share

in FDI
Mauritius
Singapore
UK
USA
Cyprus
Japan
Netherlands
Germany
UAE
Japan

SOURCE: DIPP, Federal Ministry of Commerce and Industry,

Government of India

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FDI v/s FII

Till 2006 more FII investment than FDI in India.
Reverse in China
FDI was more than ten times of ours earlier
More FDI helpful than FII

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References
www.indianembassy.org
www.economywatch.com
www.indiaonestop.com
Pratiyogita Darpan

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HANK YOU
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