FOREIGN

DIRECT
INVESTMENT

FDI
Foreign Direct Investment (FDI) occurs
when an investor based in one country
(the home country) acquires an asset in
another country (the host country) with
the intent to manage the asset.
FDI is a type of investment that
involves the injection of foreign funds into
an enterprise that operates in a different
country of origin from the investor.

FOREIGN DIRECT
INVESTMENT
A firm that engages in FDI becomes a
multinational enterprise (MNE)
Multinational = more than one country
Involves ownership of entity abroad for
Production
Marketing/service
R&D
Access of raw materials or other resource
Parent has direct managerial control
Depending on its extent of ownership and
On other contractual terms of the FDI

WHY FDI IN INDIA ?

Largest Democracy.
Second Largest emerging market (US$2.4 trillion)
Skilled & Competitive labors force
Highest rates of return on investment
One Hundred of the Fortune 500 have R & D facilities in India
Second largest group of software developers after the U.S.
Lists 5,432 companies on the BSE
Worlds fourth largest Economy & second largest Pharmaceutical
Industry.
Low costs & Tax exemptions in SEZ
Second largest English speaking, scientific, technical &executive
manpower
Growth over the past few years averaging 8%
Destination for BPO, KPO

FORBIDDEN TERRITORIES
FDI is prohibited under the Government
Route as well as the Automatic Route in
the following sectors:
Atomic Energy
Lottery Business
Gambling and Betting
Chit Fund & Nidhi Company
Housing and Real Estate business (except
development of townships, construction of
residential/commercial premises, roads or
bridges.)

EVOLUTION OF FDI
POLICY
Economic reforms embarked upon by the
Government of India since mid-1991
FDI policy liberalized progressively, through:
ongoing review
permitting FDI in more industries under the automatic route

Negative list notified in 2000

FDI, up to 100%, on the automatic route, permitted for most
activities

Since then:
FDI policy gradually simplified/rationalized
more sectors opened up for foreign investment

For India to maintain its momentum of GDP growth,

it is vital to ensure that the robustness of its
FDI inflows is also maintained.

MAJOR BENEFITS OF FDI

ImprovesFOREXposition of the country;
Employment generation and increase in
production ;
Help in capital formation by bringing fresh
capital;
Helps in transfer of new technologies,
management skills, intellectual property
Increases competition within the local
market and this brings higher efficiencies
Helps in increasing exports;
Increases tax revenues

FDI IN INDIA
Total FDI Inflows (from April, 2000 to May, 2014) :
US$ 331,923 million
FDI Inflows During Financial Year 2014-15 : US$
8,011 million

SECTORIAL INVESTMENT
PATTERN

ANY QUERY