foreign direct investment , fdi in india by abhishek tripathi
DESCRIPTION
This presentation will answer so many questions raising against FDI decision in India. It includes What is FDI, Factors affecting FDI, Advantages and Disadvantages of FDI in IndiaTRANSCRIPT
FDIFDI
FDI refers to capital inflows from abroad FDI refers to capital inflows from abroad that invest in the production capacity of that invest in the production capacity of
the economythe economy
Understanding FDIUnderstanding FDI
ForeignForeign DirectDirect InvestmentInvestment
ForeignForeignDerived from another country or nation; not native
Direct InvestmentDirect InvestmentIn order to qualify as FDI the In order to qualify as FDI the investment must afford the must afford the
parent enterprise parent enterprise controlcontrol over its foreign affiliate. over its foreign affiliate.
ModesModes
Foreign Direct Investment (FDI) is permitted Foreign Direct Investment (FDI) is permitted as under the following forms of investments-as under the following forms of investments-
Through financial collaborations. Through financial collaborations.
Through joint ventures and technical Through joint ventures and technical collaborations. collaborations.
Through capital markets via Euro issues. Through capital markets via Euro issues.
Through private placements or preferential Through private placements or preferential allotments. allotments.
WHY FDI ?WHY FDI ?
1.1. Gain a foothold in a new geographic market. Gain a foothold in a new geographic market. 2. Increase a firm’s global competitiveness and 2. Increase a firm’s global competitiveness and
positioning. positioning. 3. Fill gaps in a company’s product lines in a 3. Fill gaps in a company’s product lines in a
global industry. global industry. 4. Reduce costs in areas such as R&D, production, 4. Reduce costs in areas such as R&D, production,
and distribution. and distribution. 5. Competition :5. Competition :
-Catalysts to spur competition & innovation in -Catalysts to spur competition & innovation in retail industry retail industry -Ensure highly efficient-low margin business -Ensure highly efficient-low margin business modelmodel
WHY FDI ?...WHY FDI ?...6. Consumers: 6. Consumers:
-Improved product availability, quality & -Improved product availability, quality & reduce wastages reduce wastages
-Consumers to get best products and -Consumers to get best products and services at reasonable price services at reasonable price
7. Back End & Supply Chain Improvement : 7. Back End & Supply Chain Improvement : - Inadequate storage facilities cause - Inadequate storage facilities cause
heavy losses to farmers heavy losses to farmers - 25%-30% of F&V and 5%-7% of food - 25%-30% of F&V and 5%-7% of food
grain in India are wasted grain in India are wasted - Food inflation and fluctuation in food - Food inflation and fluctuation in food
prices can be controlled prices can be controlled
WHY FDI ?...WHY FDI ?...
Back End & Supply Chain Back End & Supply Chain Improvement : Improvement : Inadequate storage facilities cause Inadequate storage facilities cause
heavy losses to farmers heavy losses to farmers 25%-30% of F&V and 5%-7% of food 25%-30% of F&V and 5%-7% of food
grain in India are wasted grain in India are wasted Food inflation and fluctuation in food Food inflation and fluctuation in food
prices can be controlled prices can be controlled
FACTORS REQUIRED TO FACTORS REQUIRED TO ATTRACT FDIATTRACT FDI
Low cost BUT Qualified, Educated/Skilled Labor Pool. Low cost BUT Qualified, Educated/Skilled Labor Pool. Long-term Market Potential OR Yields greater than can be achieved Long-term Market Potential OR Yields greater than can be achieved
Domestically.Domestically. Access to Natural Resources.Access to Natural Resources. GeographyGeography Stability of the economic and Political Environment.Stability of the economic and Political Environment. Size of the MarketSize of the Market Legal and Regulatory Framework Legal and Regulatory Framework Access to Basic Inputs Access to Basic Inputs
Cont…Cont… Cost factorsCost factors
Labor costs Labor costs Transpiration/ logistic cost Transpiration/ logistic cost Low cost of raw materials Low cost of raw materials Return on investmentReturn on investment
Market factorMarket factor Large size of host markets Large size of host markets Demand in host country Demand in host country Level of competition in host market Level of competition in host market Economic stabilityEconomic stability
Infrastructure and technological factorsInfrastructure and technological factors Level of infrastructure Level of infrastructure High industrial concentration (Clustering) High industrial concentration (Clustering) Availability of well qualify of work force Availability of well qualify of work force Access to reliable and corporative suppliersAccess to reliable and corporative suppliers
Political and legal factorsPolitical and legal factors Political stability Political stability International trade agreements International trade agreements Tax reduction in host country Tax reduction in host country Benign environmental legislation towards FDIBenign environmental legislation towards FDI
Social & Cultural factorsSocial & Cultural factors Cultural distance Cultural distance Attitude of the local community toward the firm Attitude of the local community toward the firm
Current Indian FDI limitCurrent Indian FDI limit Private Sector Banking - …………………………………… 49 %Private Sector Banking - …………………………………… 49 % Non-Banking Financial Companies (NBFC) – ……….100%Non-Banking Financial Companies (NBFC) – ……….100% Insurance – Insurance – …………………………………………… 26% …………………………………………… 26% Telecommunications – ………………………………………. 74%Telecommunications – ………………………………………. 74% Petroleum Refining (Private Sector) –…………………..100%Petroleum Refining (Private Sector) –…………………..100% Housing and Real Estate –………………………………….100%Housing and Real Estate –………………………………….100% Power – Power – ………………………………………………100% ………………………………………………100% Drugs & Pharmaceuticals – ………………………………….100%Drugs & Pharmaceuticals – ………………………………….100% Hotel & Tourism - ………………………………………………100%Hotel & Tourism - ………………………………………………100% Advertising - ……………………………………………..100%Advertising - ……………………………………………..100% Electricity – Electricity – ……………………………………………..100% ……………………………………………..100% Trading –Trading – ……………………………………………… 51% ……………………………………………… 51% Single Brand Retail ………………………………………........100%Single Brand Retail ………………………………………........100%
Trends – Indian FDI 2012-13Trends – Indian FDI 2012-13
AdvantagesAdvantages Raising the Level of InvestmentRaising the Level of Investment Up gradation of TechnologyUp gradation of Technology Improvement in Export CompetitivenessImprovement in Export Competitiveness Employment GenerationEmployment Generation Benefits to ConsumersBenefits to Consumers Revenue to GovernmentRevenue to Government Resilience FactorResilience Factor Low cost ProductsLow cost Products Employment OpportunitiesEmployment Opportunities Economic growthEconomic growth Better realization to farmersBetter realization to farmers
DisadvantagesDisadvantages
Fall in domestic savingsFall in domestic savings Contribution of foreign firms to public Contribution of foreign firms to public
revenue through corporatetaxes is revenue through corporatetaxes is comparatively less because of liberal tax comparatively less because of liberal tax concessions concessions
income inequalities income inequalities The technology is generally capital-The technology is generally capital-
intensive which does not suit the needs of intensive which does not suit the needs of a labor-surplus economy a labor-surplus economy
Foreign firms may influence political decisiForeign firms may influence political decisions ons
ConclusionConclusion
After considering all the aspects After considering all the aspects related to FDI, we can conclude that, related to FDI, we can conclude that, though there are slight though there are slight disadvantages of it, but it is very disadvantages of it, but it is very important or we can say life blood for important or we can say life blood for a developing country for there a developing country for there economic growth and stability and economic growth and stability and for developed country, to continue for developed country, to continue their stability.their stability.
Questions…?Questions…?
