Harmanjit Singh

Strategy for companies that wish to operate on a global basis.

Refers to the investment made by an entity in an enterprise located in a different country.

Foreign investment that establishes a lasting interest in or effective management control over an enterprise. Foreign direct investment can include buying shares of an enterprise in another country, reinvesting earnings of a foreign- owned enterprise in the country where it is located, and parent firms extending loans to their foreign affiliates.

International Monetary Fund (IMF) guidelines consider an investment to be a foreign direct investment if it accounts for at least 10 percent of the foreign firm's voting stock of shares. However, many countries set a higher threshold because 10 percent is often not enough to establish effective management control of a company or demonstrate an investor's lasting interest.

Investor will get certain degree of influence or control over the management of the enterprise.
An Indian company can receive Foreign Direct Investment under the two routes:

Direct Route Govt. Route

Inward foreign direct investment Outward foreign direct investment

RBI F I P B(foreign investment promotion board) of the dept of commerce under ministry of finance.

Inflow of equipment and technology. Competitive advantage & innovation. Financial resources for expansion. Employment generation. Contribution to exports growth. Improved consumer welfare through reduced cost , wider choice and improved quality.

Crowding of local industry. Conflicts of laws Loss of control. Effect on natural environment. Effect on local culture.

Advantages

Disadvantages

At least 10% of shares of Co; needed to qualify as FDI.

Mauritius has been the largest direct investor in India.(US$20 billion) The United States is the second largest investor in India.(US$6 billion)

U.S is the worlds largest recipient of FDI.

Mumbai and New Delhi are two major cities where FDI inflows is heavily concentrated. FDI inflows for January-December 2010 stood at $21 billion.

$27.5 billion during January-December 2011 period.

Retailing is the single largest component of the services sector in terms of contribution to GDP.

Minimum investment of $100 million.

50% of the investment is to be in backend infrastructure development.

30% of all raw material has be procured from India's small and medium industries.
Permission to set up malls only in cities with a minimum population of 10 lakhs. Government has the first right to procure material from the farmers. Products should be sold under the same brand internationally. Foreign investor should be the owner of the brand.

Farmers get only 10 to 15% of the price we pay. 3-4 middlemen in between farmers and customers. Huge post produce losses for farmers due to inadequate facilities. A poorly managed food supply infrastructure.

Why do we need it:

We are the second highest producer of fruits and vegetables in the world but still we are not able to utilize is properly because of inadequate infrastructure facilities. It will reduce pre-harvest wastage/losses and thus help control food inflation. It will create 1.5 million more jobs in 5 years. Apart from the huge number of indirect employment. It will increase competition which is always beneficial for the customer.

It will remove the middleman from the equation. It will reduce costs which in turn will reduce prices.

FDI in aviation: Allow foreign airlines to invest 49% in domestic carriers

Allowed by non-airline players, but bars foreign airlines from investing in them, primarily due to security reasons.

Thanks Harmanjit Singh harman.bindra@gmail.com