Presentation

Of
Business Environment
Foreign direct investment (FDI) is a direct
investment into production or business in a country
by an individual or company in another country,
either by buying a company in the target country or
by expanding operations of an existing business in
that country.
In simple terms :- FDI is any investment made by a
foreign country in the domestic assets such as
companies, organizations, buildings and factories.
It provides foreign capital, funds, expertise and job
opportunities to the host nation.
Foreign direct investment (FDI) in India has played an
important role in the development of the Indian
economy.
FDI helps the country in achieving the following
aspects :-
Financial Stability
Growth
Development
A number of projects have been implemented in
various areas :-
electricity generation, distribution and transmission,
as well as the development of roads and highways


The Indian national government also granted
permission for FDIs to provide up to 100% of
the financing required for the construction of
bridges and tunnels .
Economic Growth
Trade
Technology diffusion and knowledge
transfer
Increased competition
Human Resources Development
Employment
FDI has and adverse effects on competition.
FDI will be make the host country lost the
contr.
Foreign direct investment may entail high
travel and communications expenses.
Another disadvantage of foreign direct
investment is that there is a chance that a
company may lose out on its ownership to an
overseas company.
Political Lobbying :- In the past, there have been
many instances in which MNCs have resorted to
political lobbying in order to get certain policies and
laws implemented in their favor. At times, these
MNCs are so large that their revenues even exceeded
the Gross Domestic Product (GDP) of some smaller
nations and compel or threaten them to pass
judgments and policies in their favor.

Exploitation of Resources: Exploitation of natural
resources of a host country is not an very uncommon
phenomenon in the case of FDI. MNCs of other
countries have been known to indiscriminately
exploit the resources of hosts countries in order to
get short run gains and profits
Threaten Small Scale Industries :- MNCs
have large economic and pricing power due
to their large sizes. They do not have much
problem with regards to financial capital and
can hence resort to using advertising which is
a costly affair. Also, these companies are
global players . All this results in the MNC
having cheaper products and more visibility
due to the higher amounts of advertising and
have been known to push out smaller
industries out of business.

Technology :- Although, the MNCs have
access to new and cutting edge technology,
they do not transfer the latest technology to
the host country with a fear that their home
country may loose its competitive advantage,
hence the maximum potential of the host
economy cannot be achieved as a result of
old technology transferred.

FDI cap in telecom raised to 100 percent from 74 percent;
up to 49 percent through automatic route and beyond via
FIPB.
No change in 49 percent FDI limit in civil aviation.
FDI cap in defence production to stay at 26 percent,
higher investment may be considered in state-of-the-art
technology production by Cabinet Committee on Security
(CCS).
100 percent FDI allowed in single brand retail; 49 percent
through automatic, 49-100 percent through FIPB.
FDI limit in insurance sector raised to 49 percent from
present 26 percent.

FDI up to 49 ppercent in petroleum refining
allowed under automatic route, from earlier
approval route.
In power exchanges 49 percent FDI allowed
through automatic route, from earlier FIPB
route.
Raised FDI in asset reconstruction companies to
100 percent from 74 percent; of this up to 49
percent will be under automatic route
FDI limit increased in credit information
companies to 74 percent from 49 percent.
FDI up to 49 percent in stock exchanges,
depositories allowed under automatic route.
FDI up to 100 percent through automatic
route allowed in courier services.
FDI in tea plantation up to 49 percent
through automatic route; 49-100 percent
through FIPB route.
No decision taken on FDI cap in airports,
media, brownfield pharma and multi-brand
retail.


Foreign Institutional Investor (FII) means an
institution established or incorporated outside
India which proposes to make investment in
securities in India. They are registered as FIIs in
accordance with Section 2 (f) of the SEBI (FII)
Regulations 1995.
AUTOMATIC ROUTE

FDI Policy permits FDI up to 100 % from foreign/NRI
investor without prior approval in most of the
sectors including the services sector under
automatic route. FDI in sectors/activities under
automatic route does not require any prior
approval either by the Government or the RBI.
GOVERNMENT APPROVAL ROUTE
All activities which are not covered under the
automatic route, prior Government approval for
FDI/NRI shall be necessary. An investor can make
an application for prior Government approval
even when the proposed activity is under the
automatic route.

Proposals requiring Government Approval :-
FDI up to 100% is allowed under the automatic route
in all activities/sectors except the following which
will require approval of the Government:


Activities/items that require an Industrial
License.
All proposals falling outside notified sectoral
policy/caps or under sectors in which FDI is
not permitted.
Proposals in which the foreign collaborator
has a previous/existing venture/tie up in
India in the same.


FDI is not permissible in the following cases
Gambling and Betting, or
Lottery Business, or
Business of chit fund
Nidhi Company
Housing and Real Estate business (to a certain
extent has been opened. For details please see
note on Construction)
Trading in Transferable Development Rights (TDRs)

Retail Trading
Atomic Energy
Agricultural or plantation activities or
Agriculture (excluding Floriculture,
Horticulture, Development of Seeds, Animal
Husbandry, Pisiculture and Cultivation of
Vegetables, Mushrooms etc. under controlled
conditions and services related to agro and
allied sectors) and Plantations(other than Tea
plantations)


India's pharmaceuticals sector has received
FDI of $1 billion, the highest among the top
10 segments, during the April-June period
this year amid concerns over increasing
acquisitions of domestic firms by
multinationals.
Foreign Direct Investment (FDI) in drugs and
pharmaceuticals during April-June 2012 stood
at $465 million, according to the latest data
of Department of Industrial Policy and
Promotion (DIPP).