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flow of FDI in India
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FOREIGN DIRECT INVESTMENT FLOWS IN INDIA –
AN EMPIRICAL ASSESSMENT
BY: M SAIRAM
Siva Sivani Institute of Management
IMPORTANCE OF STUDY
As Foreign Direct Investment (FDI) is one and only major instrument of attracting economic integration in any economy.
OBJECTIVES OF STUDY
RESEARCH OF METHODALAGY
This study covers the following objectives:
To study the trends and pattern of flow of FDI. To identify the factors which influence the flow of FDI in India.
The data is collected from secondary sources and RBI website. The magnitude of FDI inflows is analyzed for a period from 2000 to
2014. The factors which influence the flow of FDI into the country is analyzed during post period i.e., 2000 to 2014.
FOREIGN DIRECT INVESTMENT
Foreign direct investment (FDI) is an investment in a business by an investor from another country for which the foreign investor has control over the company purchased.
Economic Growth
Trade
Employment and skill levels
Technology diffusion and knowledge
transfer
Linkages and spillover to
domestic firms
WHY FDI ?
Foreign investment was introduced in 1991 under Foreign Exchange Management Act (FEMA), driven by then finance minister Manmohan Singh.
FDI IN INDIA
Foreign investments provide a great stimulus for growth to the Indian economy.
FLOW OF FDI
FDI Portfolio
Wholly owned subsidiaries
Joint ventures
Acquisitions
Investments inGDR’S &FCCB’s
FII
Engineering & Manufacturing sectors
Roads & Highways, Ports and Harbors
Industrial model towns/industrial parks
Hotels & Tourism
Pollution Control and Management
Advertising & Film industry
Power generation (hydro-electric, coal/lignite, oil or gas based)
Information Technology including E-Commerce
100% FDI ALLOWED SECTORS
SECTORS WERE FDI IS NOT ALLOWED
Atomic Energy Lottery Business Gambling and Betting Business of Chit Fund Nidhi Company. Agricultural (excluding Floriculture, Horticulture, Development of seeds,
Animal Husbandry, Pisciculture and cultivation of vegetables, mushrooms, etc. )
Housing and Real Estate business (except development of townships, construction of residen tial/commercial premises, roads or bridges etc..,)
Trading in Transferable Development Rights (TDRs). Manufacture of cigars, cheroots, cigarillos and cigarettes, of tobacco or of
tobacco substitutes.
COUNTRIES INVESTING IN INDIA
42%
14%11%
9%
6%
6%
4%
4%
2% 1%
MAURITIUS
SINGAPORE
U.K.
JAPAN
U.S.A.
NETHERLANDS
CYPRUS
GERMANY
FRANCE
SWITZERLAND
71%
25%
4%
equity Re invested earnings other capital
DIRECT INVESTMENTS TO INDIA
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-130.00
500.00
1000.00
1500.00
2000.00
2500.00
184.04292.45
243.97 198.30 269.47
394.57
1026.52
1394.21
1907.00
1578.00
1324.00
1548.16 1465.82
Direct Investment to India Rupees Billion
Direct Investment to India Rupees Billion
FDI BY INDIA & TO INDIA
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
(blank)0
500
1000
1500
2000
2500
Sum of Direct Investment to IndiaSum of FDI by India
INVESTMENTS IN SECTORS
27%
15%
11%
8%
8%
7%
6%
6%
5%
5%
SERVICES SECTOR
CONSTRUCTION DEVELOPMENT
TELECOMMUNICATIONS
COMPUTER SOFTWARE & HARDWARE
DRUGS & PHARMACEUTICALS
AUTOMOBILE INDUSTRY
CHEMICALS (OTHER THAN FERTILIZERS)
POWER
METALLURGICAL INDUSTRIES
HOTEL & TOURISM
FACTORS AFFECTING FDI
Cost of production
Economic conditions
Government policies
Political factors
Profitability
Ease of doing business