fdi poilicy in india (1)
TRANSCRIPT
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GROUP MEMBERS
POOJA MISHRA92
KHUSHBU MISTRY94
MAYUR MOHITE96
PRASAD MORYE
FDI POLICIES IN INDIA
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Agenda Introduction
FDI in Retail
FDI in Pharma
FDI in Aviation FDI in Banking & Insurance
Conclusion
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INTRODUCTION
Foreign direct investment (FDI) is a
direct investment into production or business in a
country
by a company in another country
by buying a company in the target country or
by expanding operations of an existing business in
that country.
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Types of FDI
By direction By target By motive
•Inward
•Outward
•Horizontal
•Vertical
•Resource seeking
•Market seeking
•Efficiency seeking
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• Sustaining a high level of investment
• Technological gap
•Exploitation of natural resources
•Understanding the initial risk
•Development of basic economic infrastructure
•Improvement in the balance of payments position
•Foreign firm’s helps in increasing the competition
NEED OF FDI
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Pre-1991 FDI was allowed selectively up to 40% under FERA
This period was dominated by the Congress party
1991 35 high priority industry groups were placed on the Automatic Route for FDI up
to 51%
Minority Congress government: Initiated economic reforms in a big way
1997 Automatic Route expanded to 111 high priority industry groups up to 100%/ 74%/
51%/50%
United Front Government: Inclusive of ‘left parties’, was perceived as
traditionally opposed to FDI, but continued with the reforms.
2000 All sectors placed on the Automatic Route for FDI except for a small negative list
BJP coalition government:(coalition of Left and Right wing parties) was
traditionally seen as opposed to FDI, but continued with economic reforms.
Post 2000 Many new sectors opened to FDI; viz., insurance (26%), integrated townships
(100%), mass rapid transit systems (100%), defence industry (26%), tea
plantations (100%), print media (26%).
Sectoral caps in many other sectors relaxed;
BJP coalition government: pursued reforms vigorously and initiated second
generation reforms.
Progressive Liberalization
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21
8.5 8.14 7.39 7.15
47.81
0
10
20
30
40
50
60
Service I.T Housing Construction Power Other
SECTOR WISE FDI INFLOW
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0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
45.00%
Percentage of Total FDI Inflows
COUNTRY WISE FDI INFLOWS TOINDIA
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0
5
10
15
20
25
30
35
40
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
FDI inflows to India
USD (Billion)
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RETAIL SECTOR
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FDI IN RETAIL SECTOR
• 51% FDI in Multi Brand Retail• Increased FDI limit in single brand retail from
49% to 100%• Minimum Investment to be done is $100 million.• 50% of the investment should be done in
improving the back-end infrastructure.• 30% of all raw materials have to be procured
from the small and medium enterprises.• Permission to set retail stores only in cities with
a minimum population of 10 lakhs
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IMPLICATIONS
• Job opportunities
• Benefit to the farmers Reduction in wastages
• Growth opportunities for retailers
• Benefit to stressed companies
• Real Estate companies
Pros:
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Cons:
• Predatory pricing
• What about the middle men ?
• Small scale enterprise
• Contribution through public
revenue
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AVIATION
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FDI in Aviation
Civil Aviation sector includes Airports, Airlines,etc.
Airports: Greenfield Projects – 100% - AutomaticRoute
Existing Projects – 100% - Automatic up to74% Governmentroute beyond 74%
Airlines: Scheduled Air Transport Service/Domestic Scheduled Passenger Airline - 49% -(100% for NRIs) – Automatic Route
Non-Scheduled Air Transport Service - 74%
(100% for NRIs) - Automatic up to 49% -
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Pros of FDI in Aviation
One of the few aviation markets in the worldwhich is under-served and has vast growthpotential
Most of the Indian air operators are in crisis and
in dire need of infusion of capital A move which will help distressed airline
companies
New airlines
Increased competition FDI will infuse cash flow
improve the current account deficit situation of theairline sector.
Better International Connectivity
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Cons of FDI in Aviation
Fear of a takeover of Indian airlines by the Globalgiants.
Security Issues
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Key Conditions Set By Government
Company should be registered in India and hasits principal place of business in India.
At least two-thirds of the Directors should becitizens of India.
Security clearance before deployment
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Impact on Indian Airline Companies High Debt ridden kingfisher Airline
Spice jet
Air India
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Shortcomings Only a handful of global airlines are making
profits
Permission to invest may not be through theautomatic route
Price war in the market.
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FDI IN MINING SECTOR
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FDI in Mining
Mining and Exploration of Metal and Non- Metal Ores – 100% - Automatic
Mining of Coal and Lignite for Captive Consumption – 100% - Automatic
Setting up Coal Processing Plants – 100% -
Automatic
Mining and mineral separation of titanium bearingminerals and ores – 100% - Government
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Impacts
Efficient Raw material utilization
Upgradation of technology
Increase in production and exports of ores Improvement in the growth rate of mining sector
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BANKING AND INSURANCE
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FDI in Banking and InsuranceIndustry
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FDI in Banking – Private Sector
Cap/Equity- 74% including investment by FIIs(Paid-up Cap)
Route for FDI - Automatic up to 49%
Government route beyond 49%and up to 74%
Limit of 10% on voting rights for banking(Parliamentary Approvals for any changes)
Subsidiary or Branches not both
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FDI in Banking – Public Sector Cap/Equity - 20% (FDI and Portfolio Investment)
under Banking Companies (Acquisition &Transfer of Undertakings) Acts 1970/80.
Entry Route – Government
RBI still holds Prime control
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FDI in Insurance Cap – 26% Route – Automatic
License from IRDA for undertaking insuranceactivities.
As prescribed in the Insurance Act, 1938.
Major Reason : Huge potential in Rural Markets
Current- 16,8600 Cr to Rs 1,230,000 Cr (USD
312 B)
C O ff f
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Conclusion – Overall Effect of FDI
Increased Competition – Efficiency, Cost Benefits
Increased inclusion of rural markets.
Implementation of modern technology, management
efficiency and operational efficiency Larger Capital Inflows – Good for economy
Impact on Kirana stores (Unorganized Sector)
Dilution of Equity – Loss of Management Control
CHALTA
HAI!