BUSINESS ENVIRONMENT

FOREIGN DIRECT INVESTMENT

Presented By :

Maya Udmale Shradha Mestry Reshma Puradkar Snehal Mhatre Rohan Ahire

66 22 51 21 01

INTRODUCTION

INVESTMENT
Investment is the flow of funds from one destination to another for any activity. Thus, an investment is carried on with some purpose. The purpose can be varied. For Example: Manufacturing, infrastructure, R & D (Research & Development)

FOREIGN DIRECT INVESTMENT

Foreign Direct Investment (FDI) means a company or any other entity in one country making a physical investment in other country. FDI includes investments made to acquire a lasting interest in enterprises that are operating outside the economy & national borders of an investor. FDI (for a country) represents foreign assets in domestic structures, equipments & organizations. FDI does not include foreign investments in stock markets.

For Example: British company investing directly in Indian healthcare sector, is considered as FDI.

Companies engaged in FDI may be involved in the functional areas such as: Production, Marketing and R & D.
In order to qualify as FDI, the investment must give an investor some control over its foreign affiliate. The United Nations defines control as owning 10% or more of ordinary shares or voting power in an incorporated firm or its equivalent.

ADVANTAGES

Foreign Direct Investment plays a pivotal role in the development of India's economy. It is an integral part of the global economic system. Advantages of FDI can be enjoyed to full extent through various national policies and international investment architecture. Both the factors contribute enormously to the maximum FDI inflows in India, which stimulates the economic development of the country.
Economic growth Trade Employment and skill levels Technology diffusion and knowledge transfer Linkages and spillover to domestic firms

DISADVANTAGES

FDI has and adverse effects on competition.

FDI will be make the host country lost the control over domestic policy. One of the most indirect disadvantages of foreign direct investment is that the economically backward section of the host country is always inconvenienced when the stream of foreign direct investment is negatively affected.

It has been observed that the defense of a country has faced risks as a result of the foreign direct investment in the country.

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. This has often caused many companies to approach foreign direct investment with a certain amount of caution. Foreign direct investment disadvantageous for the ones who are making The investment themselves.

Foreign direct investment may entail high travel and communications expenses.
Inflation is increased Local market is affected badly

Why is FDI important for any consideration of going global?

Avoiding foreign government pressure for local production. Circumventing trade barriers, hidden and otherwise. Making the move from domestic export sales to a locally based national sales office. Capability to increase total production capacity. Opportunities for co-production, joint ventures with local partners, joint marketing arrangements, licensing, etc;

FDI POLICIES IN INDIA

The Foreign direct investment scheme and strategy depends on the respective FDI norms and policies in India. The FDI policy of India has imposed certain foreign direct investment regulations as per the FDI theory of the Government of India (GoI). These include FDI limits in India for example: Foreign direct investment in India in infrastructure development projects excluding arms and ammunitions, atomic energy sector, railways system , extraction of coal and lignite and mining industry is allowed upto 100% equity participation with the capping amount as Rs. 1500 crores. FDI figures in equity contribution in the finance sector cannot exceed more than 40% in banking services including

credit card operations and in insurance sector only in joint ventures with local insurance companies. FDI limit of maximum 49% in telecom industry especially in the GSM services

FDI Trends in India

Steps have been taken by the government to impart technical FDI education so as to improvise the FDI database of the country. FDI and trade go hand in hand as both works in a symbiotic situation. FDI has also create. more employment opportunities as FDI trends have increased the basic infrastructure of any organization thus demanding growth in terms of organizational structure as well. The foreign direct investment news in India shows the FDI notations being adopted by India, the foreign direct investment strategies, and the FDI guidelines regulating the inflow of foreign funds in India.

Sector Specific Foreign Direct Investment in India

Hotel & Tourism: FDI in Hotel & Tourism sector in India 100% FDI is permissible in the sector on the automatic route. Private Sector Banking: Non-Banking Financial Companies (NBFC) 49% FDI is allowed from all sources on the automatic route subject to guidelines issued from RBI from time to time.

Insurance Sector: FDI in Insurance sector in India FDI up to 26% in the Insurance sector is allowed on the automatic Route subject to obtaining license from Insurance Regulatory & Development Authority (IRDA)

Telecommunication: FDI up to 100% is allowed for the following activities in the telecom sector Call Centers in India / Call Centers in India FDI up to 100% is allowed subject to certain conditions.
Business Process Outsourcing BPO in India FDI up to 100% is allowed subject to certain conditions.

Trading: FDI in Trading Companies in India Trading is permitted under automatic route with FDI up to 51% provided it is primarily export activities, and the undertaking is an export house/trading house/super trading house/star trading house .. FDI up to 100% permitted for e-commerce activities Power: FDI In Power Sector in India Up to 100% FDI allowed in respect of projects relating to electricity generation, transmission and distribution, other than atomic reactor power plants. There is no limit on the project cost and quantum of foreign direct investment.

Drugs & Pharmaceuticals FDI up to 100% is permitted on the automatic route for manufacture of drugs and pharmaceutical

Roads, Highways, Ports and Harbors FDI up to 100% under automatic route is permitted in projects for construction and maintenance of roads, highways, vehicular bridges, toll roads, vehicular tunnels, ports and harbors.
Foreign Direct Investment in Small Scale Industries (SSI's) in India Recently, India has allowed Foreign Direct Investment up to 100% in many manufacturing industries which were designated as Small Scale Industries.

Thank You