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CHAPTER 6

FINDINGS

This chapter contains summary of finding and some concrete suggestions. The summary of

findings is based on the comprehensives analysis of the facts and figures during the period of

2007 to 2011, undertaken in the 4th

and 5th

chapter. With a view to improve the position of FDI

inflows in India under study, some practical suggestions have also been offered.

The finding of this study is as below:

1. 100 percent FDI allowed in Tea sector, Mining expect some cases, cigarettes, Coffee, Drugs,

Powers, Courier Services and Merchant Bank whereas in Telecommunication and Banking

sector allowed 74 percent as like 49 percent allowed in Cable network, 26 percent allowed

in Insurance and Defence products sector.

2.

FDI Equity inflow percentage over growth of last year was 88% more in 2012.

3. FDI Inflow from Mauritius was 38% followed by Singapore 10%,UK 9%,Japan 7% and USA

6%.

4. In sector wise 19% FDI investment was in service sector followed by 7% in

telecommunication, 7% in construction, 7% in computer and software, 7% in housing and

real estate.



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5. Foreign investors tend to invest only in high-profit areas, which may lead to unbalanced

development of economy. Such as FDI approvals in Maharashtra is highest as comparison of

Kerala. The main reason is that from the view point of profit area and infrastructure

facilities etc. Maharashtra is much better than Kerala. So that FDI does not appear to be a

decisive factor for growth of less advanced states. Although there is a positive correlation

between FDI and economic growth across Indian states, it is only in relatively rich states

that a higher FDI intensity is associated with significantly high growth rate.

6. Foreign investors in India strongly prefer locations that are relatively advanced in terms of

per capita income and infrastructure. States whose endowment of skilled workers is

particularly poor may face more difficulties in attracting foreign investment.FDI is heavily

concentrated even within Indian states. Typically, three most attractive districts in a state

account for more than two third of all FDI projects located in the state as a whole.

7. During 5 years of study, India has received 167.9 billion dollar. There has been tremendous

progress in the various sectors of the Indian economy due to the inflow of foreign capital.

The GDP growth rate has crossed 9% due to boom in manufacturing and service industries.

8. In 2011 the inflows of FDI in manufacturing industry are in positive as comparison of other

years. In 2007-08, FDI inflows in manufacturing industry was decreased i.e., Rs.3726 million

as comparison of other years. From 2007 to 2011, the FDI inflows inBusiness Services

areincreased to Rs.1590 million from 1158 million.

9. In 2010, FDI inflows in Construction sector was decreased i.e., 1599 million dollar as

comparison of other years. In 2009-10, the FDI inflows in Construction sector were increased

to 3516 million.

10. In 2008-09 the inflows of FDI inflows in communication sector was positive as comparison

of other years. The percentage of total inflows of FDI in India in communication sector i.e.

6.06 percent. In 2008-09, the flow of FDI in communication sector was 2067 million.11. In 2007-08 the inflows of FDI in Transportation sector is 816 million as compared to other

years. In 2009-10 the flows of FDI is not in a negative position, it was on least level 220

million.



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12. In 2008-09 the inflows of FDI inflows in Financial & Non-Financial Service sector is positive

as comparison of other years. In 2010-11 the flows of FDI is not in a negative position, it is

on the minimum level in 2009-10. FDI allowed in the following 19 NBFC activities shall be as

per levels indicated below: 49% FDI is allowed from all sources on the automatic route

subject to guidelines issued from RBI from time to time.

13. In 2009-10 the inflows of FDI in Real Estate Sector is positive as comparison of other years.

In 2008-09 the flows of FDI is not in a negative position, it shows flows of FDI during 2008-

2009. The contribution of Real Estate Sector in total FDI inflows in India is 5.56 percent.

14. India has allowed Foreign Direct Investment up to 100% in many manufacturing industries

which were designated as Small Scale Industries

15. At present, Mauritius rank first with 43.49 percent of FDI inflows, Singapore second with

8.14 percent, US third with 8.03 percent. Cyprus, Japan occupy fourth and fifth position

respectively with 7.08 and 4.61 percent.

16.

At present, Maharashtra rank first with 17.5 percent of FDI inflows, Delhi second with 12.1percent. Karnataka and Gujarat received FDI after the 2

nd position of Delhi.

17. FDI trend in India in 2007, it was 100% and it was in 2008 increased to 173.6%. After that it

reduced to 109.4% in 2010 but it increased to 146% in 2011.

18. In comparison of FDI with Inflation Rate was 4.8% in 2007 and in 2009 it was at the least

level 3.6%. In 2010 it again increased to 9.2% but in 2011it was reduced to 7.8%.

19. Bank Interest rate was 7% in 2007 and 2008 and it reduced to 4.5% in 2009 after that in

2010 again bank rate increased to 5.2% and in 2011 bank rate was maximum at 7.6%.



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20. During the study period GDP Growth rate was 9.32%(maximum) in 2007 and it reduced to

6.72% in 2008. Again GDP increased in 2010 at 9.32% which was the maximum level during

the study period. In 2011 it reduced to 6.21%.

21. Foreign Exchange rate was minimum in 2007 at Rs. 40.2 and it increased to Rs 45.9 in 2008

and in 2009 Foreign Exchange rate was Rs 47.4% and in 2011 it was maximum at Rs 47.5.

22. BSE Sensex was in 2007 at 15426 points. It reduced to 13588 points in 2008 and BSE Sensex

was in the upward trend in 2010 at the 17580 points.

23. FII in India was 661.79 billion in 2007 and in 2008 it was negative -458.11 billion because of

subprime crises later on in 2009 FII was 1426.58 billion which was much positive for the

country but it reduced to 937.26 billion in 2011.

24. In 2007 Indian Industrial Index was at the maximum rate of 12.17% and in 2008 it reduced

to 9.67% and in 2009 it was at the minimum level of 4.44% again in 2011 it increased to

9.16%

25. In comparative study of FDI Trend of Four countries India, China, Russia and Brazil,

maximum FDI inflow was in China and all the three countries have less FDI inflow than

China. China inflow was 273% (maximum) in 2011, Brazil 192.77% and 146% in INDIA, Due

to the better & Favorable environment in China. China provides the facilities which attract

the FDI inflow. In India FDI growth rate was satisfactory during the study.

26.

Foreign investment sometimes have an unfavorable effect on the balance of paymentsbecause of the drainage of foreign exchange by way of royalty, dividends etc.



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27. Technologies brought by foreign investors may not be adaptable to the recipient country

because of resource availability, differences in consumption needs and size of domestic

markets and stages of the development of economy.

28. The concentration of FDI in a few relatively advanced regions may have prevented FDI

effects from spreading across the Indian economy. Growth promoting spill-over of FDI to

local companies and workers tend to be relatively weak in the primary sector.

29. The stage for the expected FDI growth is set by the foreseeable macroeconomic climate,

which is largely favorable to FDI, and growing corporate profits that increase the availability

of investible funds for corporate future expansion .

30. At the same time, there are also risk factors that can be potentially detrimental to future

FDI growth rates, such as protectionism, lower-than expected growth in industrialized

countries, financial instability in major source economies, global terrorism, and the volatility

of petroleum and other raw material prices.

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