Professional Documents
Culture Documents
INTRODUCTION
The last two decade of the 20th century witnessed a dramatic world-wide
increase in foreign direct investment (FDI), accompanied by a marked
change in the attitude of most developing countries towards inward FDI. As
against a highly suspicious attitude of these countries towards inward FDI in
the past, most countries now regard FDI as beneficial for their development
efforts and compete with each other to attract it. Such shift in attitude lies in
the changes in political and economic systems that have occurred during the
closing years of the last century.
The wave of liberalisation and globalization sweeping across the world has
opened many national markets for international business. Global private
investment, in most part, is now made by multinational corporations
(MNCs). Clearly these corporations play a major role in world trade and
investments because of their demonstrated management skills, technology,
financial resources and related advantages. Recent developments in global
markets are indicative of the rapidly growing international business. The end
of the 20th century has already marked a tremendous growth in international
investments, trade and financial transactions along with the integration and
openness of international markets.
FDI is a subject of topical interest. Countries of the world, particularly
developing economies, are vying with each other to attract foreign capital to
Foreign Direct Investment in India
Page | 1
boost their domestic rates of investment and also to acquire new technology
and managerial skills. Intense competition is taking place among the fundstarved less developed countries to lure foreign investors by offering
repatriation facilities, tax concessions and other incentives. However, FDI is
not an unmixed blessing. Governments in developing countries have to be
very careful while deciding the magnitude, pattern and conditions of private
foreign investment.
In the 1980s, FDI was concentrated within the Triad (EU, Japan and US).
However, in the 1990s, the FDI flows to developed countries declined, while
those to developing countries increased in response to rapid growth and
fewer restrictions. Most FDI flows continue still to be concentrated in 10 to
15 host countries overwhelmingly in Asia and Latin America. South, East
and Southeast Asia has experienced the fastest economic growth in the
world, and emerged as the largest host region. China is now the largest host
country in the developing world.
However, small markets with low growth rates, poor infrastructure, and high
indebtedness, slow progress in introducing market and private-sector
oriented economic reforms and low levels of technological capabilities are
not attractive to foreign investors.
The remarkable expansion of FDI flows to developing countries had belied
the fear that the opening of central and Eastern Europe and the efforts of the
countries of that region to attract such investment would divert investment
Foreign Direct Investment in India
Page | 2
Page | 3
areas. In recent years, the government has initiated the second generation
reforms under which measures have been taken to further facilitate and
broaden the base of foreign direct investment in India. The policy for FDI
allows freedom of location, choice of technology, repatriation of capital and
dividends. As a result of these measures, there has been a strong surge of
international interest in the Indian economy. The rate at which FDI inflow
has grown during the post-liberalisation period is a clear indication that India
is fast emerging as an attractive destination for overseas investors.
Encouragement of foreign investment, particularly for FDI, is an integral
part of ongoing economic reforms in India.
Though India has one of the most transparent and liberal FDI regimes
among the developing countries with strong macro-economic fundamentals,
its share in FDI inflows is dismally low. The country still suffers from
weaknesses and constraints, in terms of policy and regulatory framework,
which restricts the inflow of FDI.
Foreign investment policies in the post-reforms period have emphasized
greater encouragement and mobalisation of non-debt creating private
inflows for reducing reliance on debt flows. Progressively liberal policies
have led to increasing inflows of foreign investment in the country.
Page | 4
CHAPTER-2:
WHAT IS FOREIGN DIRECT INVESTMENT?
FDI is the process whereby residents of one country (the home country)
acquire ownership of assets for the purpose of controlling the production,
distribution and other activities of a firm in another country (the host
country).
IMF Definition
According to the BPM5, FDI is the category of international investment that
reflects the objective of obtaining a lasting interest by a resident entity in
one economy in an enterprise resident in another economy. The lasting
interest implies the existence of a long-term relationship between the direct
investor and the enterprise and a significant degree of influence by the
investor on the management of the enterprise.
UNCTAD Definition
The WIR02 defines FDI as an investment involving a long-term
relationship and reflecting a lasting interest and control by a resident entity
in one economy (foreign direct investor or parent enterprise) in an enterprise
resident in an economy other than that of the FDI enterprise, affiliate
enterprise or foreign affiliate. FDI implies that the investor exerts a
significant degree of influence on the management of the enterprise resident
in the other economy. Such investment involves both the initial transaction
between the two entities and all subsequent transaction between them among
Foreign Direct Investment in India
Page | 5
Page | 6
and
among
affiliated
enterprises,
both
incorporated
and
unincorporated.
As is evident from the above definitions, there is a large degree of
commonality between the IMF, UNCTAD and OECD definitions of FDI.
The IMF definition is followed internationally.
Page | 7
CHAPTER-3:
FOREIGN DIRECT INVESTMENT (FDI): THEORITICAL
SETTINGS
Most of the present day underdeveloped countries of the world have set out a
planned programme for accelerating the pace of their economic
development. In a country planning for industrialization and aiming to
achieve a target rate of growth, there is a need for resources. The resources
can be mobilized through domestic as well as foreign sources. So far as, the
domestic sources are concerned, they may not be sufficient to acquire the
fixed rate of growth. Generally domestic savings are less than the required
amount of investment. Also the very process of industrialization calls for
import of capital goods which can not be locally produced. Hence comes the
need for foreign sources. They not only supplement the domestic savings but
also provide the recipient country with extra foreign exchange to buy
imports essential for filling the saving investment gap and foreign exchange
gap.
The means of getting foreign resources available to a developing country are
mainly three:
1. Through export of goods and services
2. External aid
3. Foreign investment
Page | 8
Export of goods and services do contribute to foreign resources but they can
meet only a small part of the total demand for foreign resources.
External Aid from foreign governments and international institutions, by
increasing the rate of home savings and removing the foreign gap allows the
utilization of previously under utilized resources and capacity. But generally
the aid is tied and distorts the allocation of resources. So its use has been on
the decline.
Foreign investment is of following two types.
1. Foreign Direct Investment (FDI) and
2. Portfolio Investment.
Foreign Direct versus Portfolio Investment
By Foreign Direct Investment (FDI) we mean any investment in a foreign
country where the investing party (corporation, firm) retains control over
investment. A direct investment typically takes the form of a foreign firm
starting a subsidiary or taking over control of an existing firm in the country
in question. FDI consists of equity capital, technical and managerial
services, capital equipment and intermediate inputs and legal rights to
patented or secret products, processes or trade marks. It is the direct type of
foreign investment which is associated with multinational corporations
because most of FDI is transferred through firms and remains outside of
ordinary, functioning markets.
Foreign Direct Investment in India
Page | 9
Page | 10
Page | 11
FDI is more stable than other types of capital inflows. Moreover, the
volatility of FDI remained exceptionally low in the 1990s, when several
emerging economies were hit by financial crisis.
FDI is widely considered an essential element for achieving sustainable
development. Even former critics of MNCs expect FDI to provide a stronger
stimulus to income growth in host countries than other types of capital
inflows. Especially after the recent financial crisis in Asia and Latin
America, developing countries are strongly advised to rely primarily on FDI,
in order to supplement national savings by capital inflows and promote
economic development.
Macro-economic and Micro-economic Aspects of FDI
In judging the significance of FDI, especially from the view point of
developing countries, it is useful to make a distinction between macroeconomic and micro-economic effects. The former is connected with issues
of domestic capital formation, balance of payments, and taking advantage of
external markets for achieving faster growth, while the latter is connected
with the issues of cost reduction, product quality improvement, making
changes in industrial structure and developing global inter-firm linkages.
In this context, it needs to be recognized that FDI is an aggregate entity, the
sum total of the investments made by many diverse multinationals, each
with its own corporate strategy. The micro-economic effects of the
Foreign Direct Investment in India
Page | 12
Page | 13
Globalisation
essentially
means
that
geographically
dispersed
Page | 14
Viewed industrially, for any given country, FDI generally comes from less
than four or five out of twenty or so major industry groups and inflows into
those same industries in the receptor country.
General attribute of FDI is that it has evoked by type over time. Prior to First
World War, a crude but valid generalization would that a large part of FDI
was in service sector of the host economy (particularly transportation,
power, communication and trading) while most of the rest was of the
backward vertical integration type. During the inter-war period, most of
the currently largest manufacturing multinational corporations (MNCs)
made their initial foreign investments, but these horizontal or market
extension types of investments have now become major category.
The fourth recognized characteristic of manufacturing FDI is that it
originates in industries that are technologically intensive, skill oriented or
progressive. In addition, the FDI prone industries are typically more
concentrated, have higher advertising outlays per unit of sales and exhibit
above average export propensities. Industries from which FDI tends to
originate display many characteristics associated with oligopoly.
Another universal property of FDI is that it is really a package of
complementary inputs, a collective flow of both tangible and intangible
assets & services.
Page | 15
countrys
economic
performance
and
international
competitiveness.
After the debt-crisis that hit the developing world in early 1980s, the
conventional wisdom quickly became that it had been unwise for countries
to borrow so heavily from international banks or international bond markets.
Rather countries should try to attract non-debt-creating private inflows
(DFI). The financial advantage is that such capital inflows need not be
repaid and that outflow of funds (remittance of profits) would fluctuate with
the cycle of the economy. It has also been widely observed that the structural
adjustment efforts of the 1980s failed to lead to new patterns of sustained
growth in developing countries. In particular, structural adjustment programs
failed to restore private investment to desirable levels. Again it is hoped that
FDI could play an important role; the World Bank observes that FDI can be
an important complement to the adjustment effort, especially in countries
having difficulty in increasing domestic savings.
Against this background of balance of payments problems and low level of
private investment, it is probably not surprising that attitudes in developing
countries towards FDI have shifted. In the 1960s and 1970s many countries
maintained a rather cautious, and sometimes an outright negative position
with respect to FDI. In the 1980s, however the attitudes shifted radically
Foreign Direct Investment in India
Page | 16
towards a more welcoming policy stance. This change was not so much due
to new research finding on the impact of FDI but to the economic problems
facing the developing world.
Developing countries are liberalizing their foreign investment regimes and
are seeking FDI not only as a source of capital funds and foreign exchange
but also as a dynamic and efficient vehicle to secure the much needed
industrial technology, managerial expertise and marketing know-how and
networks to improve on growth, employment, productivity and export
performance.
At the global level the flows of FDI and PFI to developing countries have
indeed increased. The average net inflow of FDI in developing countries had
been US$ 11 billion in 1980-86, but in 1987 it started to increase, by 1991
the annual net inflow had risen to US$ 35 billion and by 2004 to US$ 233
billion. The share of developing economies in total inflow of Foreign Direct
Investment in the world has been rising continuously since 1989.
Page | 17
CHAPTER-4:
ADVANTAGES AND DISADVANTAGES OF FDI FOR THE HOST
COUNTRY
Advantages of Foreign Direct Investment
Foreign Direct Investment has the following potential benefits for less
developed countries.
1. Raising the Level of Investment: Foreign investment can fill the gap
between desired investment and locally mobilised savings. Local capital
markets are often not well developed. Thus, they cannot meet the capital
requirements for large investment projects. Besides, access to the hard
currency needed to purchase investment goods not available locally can
be difficult. FDI solves both these problems at once as it is a direct source
of external capital. It can fill the gap between desired foreign exchange
requirements and those derived from net export earnings.
2. Upgradation of Technology: Foreign investment brings with it
technological knowledge while transferring machinery and equipment to
developing countries. Production units in developing countries use outdated equipment and techniques that can reduce the productivity of
workers and lead to the production of goods of a lower standard.
Page | 18
Page | 19
Page | 20
Page | 21
Page | 22
CHAPTER-5:
DETERMINANTS OF FDI
To understand the scale and direction of FDI flows, it is necessary to identify
their major determinants. The relative importance of FDI determinants
varies not only between countries but also between different types of FDI.
Traditionally, the determinants of FDI include the following.
1. Size of the Market: Large developing countries provide substantial
markets where the consumers demand for certain goods far exceed the
available supplies. This demand potential is a big draw for many foreignowned enterprises. In many cases, the establishment of a low cost
marketing operation represents the first step by a multinational into the
market of the country. This establishes a presence in the market and
provides important insights into the ways of doing business and possible
opportunities in the country.
2. Political stability: In many countries, the institutions of government are
still evolving and there are unsettled political questions. Companies are
unwilling to contribute large amounts of capital into an environment
where some of the basics political questions have not yet been resolved.
3. Macro-economic Environment: Instability in the level of prices and
exchange rate enhance the level of uncertainty, making business
Page | 23
Page | 24
CHAPTER-6:
FOREIGN DIRECT INVESTMENT IN INDIA
Since independence till 1990, the performance of Indian economy has been
dominated by a regime of multiple controls, restrictive regulations and wide
ranging state intervention. Industrial economy of the country was protected
by the state and insulated from external competition. As a result of which,
India was thrown a long way behind the world of rapid expanding
technology. The cumulative effect of these policies started becoming more
and more pronounced. By the year 1989-90, the situation on the balance of
payment and foreign exchange reserves became precarious and the country
was driven to the brink of default. The credibility reached the sinking level
that no country was willing to advance or lend to India at any cost. In such
circumstances, the government quickly followed a liberalized economic
policy in July 1991.
The main objectives of the liberalized economic policy are two fold. At the
country level the reform aims at freeing domestic investors from all the
licensing requirements, virtual abolition of MRTP restriction on the
investment by large houses, and a competitive industrial structure for Indian
companies to achieve a global presence by becoming as competitive as their
counterparts worldwide. Secondly, the focus on structural reforms intended
to tap foreign investment for economic growth and development.
Page | 25
Page | 26
Page | 27
CHAPTER-7:
POLICIES AND PROCEDURES OF FDI
The initial policy stimulus to foreign direct investment in India came in July
1991 when the new industrial policy provided, inter alia, automatic route
approval for projects with foreign equity participation up to 51 percent in
high priority areas. In recent years, the government has initiated the second
generation reforms under which measures have been taken to further
facilitate and broaden the base of FDI in India. The policy of FDI allows
freedom of location, choice of technology repatriation of capital and
dividends. The rate at which FDI inflow has grown during the postliberalisation period is a clear indication that India is a fast emerging as an
attractive destination for overseas investors.
As part of the economic reforms programme, policy and procedures
governing foreign investment and technology transfer have been
significantly simplified and streamlined. Today FDI is allowed in all sectors
including the service sector except in cases where there are sectoral ceilings.
FDI Policy Regime
Most of the problem for investors arises because of domestic policy, rules
and procedures and not the FDI policy per se or its rules and procedure.
India has one of the most transparent and liberal FDI regimes among the
emerging and developing economies. By FDI regime it means those
restrictions that apply to foreign nationals and entities but not to Indian
Foreign Direct Investment in India
Page | 28
Page | 29
Page | 30
Page | 31
Railways,
Page | 32
Page | 33
Project Office
Branch Office
Such offices can undertake activities permitted under the Foreign Exchange
Management Regulations, 2000.
Foreign Direct Investment in India
Page | 34
Page | 35
Page | 36
firm
or
proprietary
concern
is
not
engaged
in
any
NRIs/PIOs
may
invest
in
sole
proprietorship
Page | 37
Currency
Convertible
Bonds
(FCCB):
Foreign
Page | 38
Page | 39
The dividend rate would not exceed the limit prescribed by the
Ministry of Finance.
Page | 40
Page | 41
CHAPTER-8:
SECTOR SPECIFIC GUIDELINES FOR FDI IN INDIA
Hotel & Tourism Sector
100% FDI is permissible in the sector on the automatic route.
The term hotels include restaurants, beach resorts, and other tourist
complexes providing accommodation and/or catering and food facilities to
tourists. Tourism related industry include travel agencies, tour operating
agencies and tourist transport operating agencies, units providing facilities
for cultural, adventure and wild life experience to tourists, surface, air and
water transport facilities to tourists, leisure, entertainment, amusement,
sports, and health units for tourists and Convention/Seminar units and
organizations.
For foreign technology agreements, automatic approval is granted if
1. Up to 3% of the capital cost of the project is proposed to be paid for
technical and consultancy services including fees for architects, design,
supervision, etc.
Page | 42
2. Up
to
3%
of net
turnover
is
payable
for
franchising
and
Page | 43
5.
Joint Venture operating NBFC's that have 75% or less than 75%
foreign investment will also be allowed to set up subsidiaries for
undertaking other NBFC activities, subject to the subsidiaries also
Page | 44
complying with the applicable minimum capital inflow i.e. 2.(a) and 2.(b)
above.
6.
Page | 45
Insurance Sector
FDI up to 26% in the Insurance sector is allowed on the automatic route
subject to obtaining licence from Insurance Regulatory & Development
Authority (IRDA)
Telecommunication sector
1. In basic, cellular, value added services and global mobile personal
communications by satellite, FDI is limited to 49% subject to licensing
and security requirements and adherence by the companies (who are
investing and the companies in which investment is being made) to the
license conditions for foreign equity cap and lock- in period for transfer
and addition of equity and other license provisions.
2. ISPs with gateways, radio-paging and end-to-end bandwidth, FDI is
permitted up to 74% with FDI, beyond 49% requiring Government
approval. These services would be subject to licensing and security
requirements.
3. No equity cap is applicable to manufacturing activities.
4. FDI up to 100% is allowed for the following activities in the telecom
sector :
a. ISPs not providing gateways (both for satellite and submarine cables);
b. Infrastructure Providers providing dark fiber (IP Category 1);
c. Electronic Mail; and
Foreign Direct Investment in India
Page | 46
d. Voice Mail
The above would be subject to the following conditions:
FDI up to 100% is allowed subject to the condition that such
companies would divest 26% of their equity in favor of Indian public
in 5 years, if these companies are listed in other parts of the world.
The above services would be subject to licensing and security
requirements, wherever required.
Proposals for FDI beyond 49% shall be considered by FIPB on case to case
basis.
Trading Companies
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. However, under the FIPB
route:1. 100% FDI is permitted in case of trading companies for the following
activities:
a. exports;
b. bulk imports with ex-port/ex-bonded warehouse sales;
c. cash and carry wholesale trading;
d. Other import of goods or services provided at least 75% is for
procurement and sale of goods and services among the companies of the
same
group
and
not
for
third
party
use
or
onward
transfer/distribution/sales.
Page | 47
Page | 48
Power Sector
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, provided the activity does not attract compulsory
licensing or involve use of recombinant DNA technology, and specific cell /
tissue targeted formulations. FDI proposals for the manufacture of licensable
drugs and pharmaceuticals and bulk drugs produced by recombinant DNA
technology, and specific cell / tissue targeted formulations will require prior
Government approval.
Infrastructure Sector
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.
Pollution Control and Management
FDI up to 100% in both manufacture of pollution control equipment and
consultancy for integration of pollution control systems is permitted on the
automatic route.
Page | 49
Page | 50
Page | 51
CHAPTER-9:
FACTORS AFFECTING FDI
The factors that can narrow the gap between FDI approvals and actual
foreign direct investment inflows and indeed make India a preferred
destination for global capital are,
1. Availability of infrastructure in all areas i.e. transports hospitality,
telecom, power, etc.
2. Transparency of processes, policies and decision making and reduction of
government decision making lead time.
3. Stability of policies i.e. entry, exit, labour laws, etc. over a definite time
horizon so that definite plans can be made.
4. Acceptance of International Standards including accounting standards.
5. Capital account convertibility so that all capital and payments can flow
easily in and out of the economy.
6. Simplification of the regulatory framework in general and tax laws.
7. Improvement in bandwidth for internet and data communication.
8. Improvement in the enforcement of intellectual property rights.
9. Implementation of the WTO agreement full.
All investments foreign and domestic are made under the expectation of
future profits. The economy benefits if economy policy fosters competition,
creates a well functioning modern regulatory system and discourages
artificial monopolies created by the government through entry barriers. A
Foreign Direct Investment in India
Page | 52
Page | 53
CHAPTER-10:
FDI TRENDS IN INDIA
India is the second most populous country and the largest democracy in the
world. The far reaching and sweeping economic reform undertaken since
1991 have unleashed the enormous growth potential of the economy. There
has been a rapid, yet calibrated, move towards deregulation and
liberalisation, which has resulted in India becoming a favourite destination
for investment. Undoubtedly, India has emerged as one of the most vibrant
and dynamic of the developing economies.
India as an Investment Destination
FDI is seen as a means to supplement domestic investment for achieving a
higher level of economic growth and development. FDI benefits domestic
industry as well as the Indian consumers by providing opportunities for
technological upgradation, access to global managerial skills and practices,
optimal utilization of human and natural resources, making Indian industry
internationally competitive, opening up export markets, providing backward
forward linkages and access to international quality goods and services. FDI
policy has been constantly reviewed and necessary steps have been taken to
make India a most favourable destination for FDI. There are several good
reasons for investing in India.
1. Third largest reservoir of skilled manpower in the world.
2. Large and diversified infrastructure spread across the country.
Foreign Direct Investment in India
Page | 54
Page | 55
Page | 56
2008-09
(from
AprilMarch,
2009)
Cumulative % with
(From April total
2000 to April (inflows
2009)
in terms
of
rupees)
2005-06
2006-07
2007-08
Mauritius
11441
(2570)
28759
(6363)
44483
(11096)
50794
(11208)
168485
(38305)
44%
USA
2210
(502)
3861
(856)
4377
(1089)
8002
(1802)
28303
(6404)
7%
UK
1164
(266)
8389
(1878)
4690
(1176)
3840
(864)
23002
(5246)
6%
Singapore
1218
(275)
2662
(578)
12319
(3073)
15727
(3454)
34467
(7934)
9%
Netherlands
340
(76)
2905
(644)
2780
(695)
3922
(883)
15957
(3611)
4%
Japan
925
(208)
382
(85)
3336
(815)
1889
(405)
12041
(2694)
3%
Germany
1345
(303)
540
(120)
2075
(514)
2750
(629)
9580
(2191)
3%
France
82
(18)
528
(117)
583
(145)
2098
(467)
5489
(1229)
1%
Cyprus
310
(70)
266
(58)
3385
(834)
5983
(1287)
11140
(2491)
3%
UAE
219
(49)
1174
(260)
1039
(258)
1133
(257)
4146
(948)
1%
24613
(5546)
70630
(15726)
98664
(24579)
122919
(27309)
404728
(92158)
Total FDI
inflows*
Page | 57
The average FDI inflows per year during the 9th Plan were $ 3.2 billion and
during the 10th Plan it increased manifold to stand at $ 16.33 billion the
annual average being $ 6.16 billion. The top five sectors attracting FDI in
fiscal 2007-08 included Services sector; Housing and Real Estate;
Construction
activities;
Computer
Software
&
hardware;
and
Page | 58
SECTOR
Services (Financial
& non-financial)
2005-06 2006-07
2007-08
Cumulat
2008-09
ive
% of
(April- (Apr.200
total
Jan '09) 0- Jan inflows*
2009)
2399
(543)
21047
(4664)
26589
(6615)
23045
(5061)
11786
(2614)
5623
(1410)
6944
(1599)
39111
(8876)
11%
Telecommunications
2776
(624)
2155
(478)
5103
(1261)
10797
(2374)
27544
(6216)
8%
Construction
667
(151)
4424
(985)
6989
(1743)
6224
(1483)
19606
(4646)
6%
Automobile
630
(143)
1254
(276)
2697
(675)
1792
(441)
11648
(2678)
4%
171
(38)
2121
(467)
8749
(2179)
10632
(2408)
21794
(5119)
6%
Power
386
(87)
713
(157)
3875
(967)
4079
(924)
13709
(3130)
4%
Metallurgical
6540
(147)
7866
(173)
4686
(1177)
3608
(850)
10956
(2613)
3%
Chemicals (Other
than fertilizers)
1731
(390)
930
(205)
920
(229)
2561
(579)
9442
(2244)
2%
Petroleum &
Natural Gas
64
(14)
401
(89)
5729
(1427)
1196
(263)
8509
(2043)
3%
78742
(181189)
22%
Page | 59
Total
Reinvested Other
FDI
earnings+ capital+
inflows
Equity
Fiscal Year
(AprilMarch)
YOY
growth
(%)
FIPB
Equity capital
Route/
of
RBI's
unincorporated
Automatic
bodies#
Route
1991(Aug)2000 (Mar)
15483
15483
2000-01
2339
61
1350
279
4029
2001-02
3904
191
1645
390
6130
(+) 52
2002-03
2574
190
1833
438
5035
(-) 18
2003-04
2197
32
1460
633
4322
(-) 14
2004-05
3250
528
1904
369
6051
(+) 40
2005-06
5540
435
2760
226
8961
(+) 48
2006-07
15585
896
5828
517
22826
(+) 146
2007-08
24575
2292
7168
327
34362
(+) 51
2008-09
(April-Dec)
23885
334
3004
203
27426
Cumulative
Total
(From Aug
1991-Jan
2009)
99332
4959
26952
3382
134625
Page | 60
No. of FTA
USA
1772
22.31
Germany
1106
13.93
Japan
868
10.93
UK
860
10.83
Italy
484
6.09
Other countries
2851
35.91
All Countries
7941
100.00
No. Technical
Collaborations
approved
% of total Technical
Collaborations
approved
Electrical Equipments
(Incl. computer
software & electronics)
1255
15.80
886
11.16
Industrial Machinery
869
10.94
Page | 61
Transportation
Industry
742
9.34
Misc. Mach.
Engineering Industry
442
5.57
Other sectors
3747
47.19
7941
100.00
CHAPTER-11:
CONCLUSION
Economic reforms in India have deregulated the economy and stimulated
domestic and foreign investment, taking India firmly into the forefront of
investment destinations. The Government, keen to promote FDI in the
country, has radically simplified and rationalized policies, procedures and
regulatory aspects. Foreign direct investment is welcome in almost all
sectors; expect those strategic concerns (defence and atomic energy).
Since the initiation of the economic liberalisation process in 1991, sectors
such as automobiles, chemicals, food processing, oil and natural gas, petrochemicals, power, services, and telecommunications have attracted
considerable investments. Today, in the changed investment climate, India
offers exciting business opportunities in virtually every sector of the
economy. Telecom, electrical equipment (including computer software),
energy and transportation sector have attracted the highest FDI.
Foreign Direct Investment in India
Page | 62
Despite its market size and potential, India has yet to convert considerable
favourable investor sentiment into substantial net flows of FDI. Overall,
India remains high on corporate investor radar screens, and is widely
perceived to offer ample opportunities for investment. The market size and
potential give India a definite advantage over most other comparable
investment destinations.
Indias investment profile, however, is also conditioned by factors that affect
the flow of FDI, which are bureaucratic delays, wide spread corruption, poor
infrastructure facilities pro-labour laws, political risk and weak intellectual
property regime.
A perceived slowdown in the process of reforms generates doubts about the
markets long-term potential. To capitalize on its potential for FDI, would
seem that India needs to accelerate efforts to institutionalize government
efficiency and advance the implementation of promised reforms. Other
strategic efforts should include focusing the market on Indias relatively
higher rates of return on existing investments and long-term potential,
addressing the issue of transforming the country into a viable export
platform and encouraging strategic alliances with foreign investors. In short,
this means accelerating Indias integration with the global economy.
Page | 63
Page | 64
BIBLIOGRAPHY
Books:
Foreign Investment in India: 1947-48 to 2007-08, Dr. Kamlesh Gakhar
Foreign Direct Investment in India: 1947 to 2007, Dr. Nitin Bhasin
Websites:
http://business.mapsofindia.com
http://www.economywatch.com
http://siadipp.nic.in
Page | 65