Factors affecting Foreign Investment in India.pptx

Factors affecting foreign investments in India

1. Foreign Investment in India LECTURE 15

2. FDI is investment in real assets such as factories, offices ,lands ,buildings, capital goods etc. FII is investment in financial assets such as in bonds and stocks, denominated in national currency.

3. FORMS OF FOREIGN DIRECT INVESTMENT BY TARGET GREEN FIELD INVESTMENT- Direct investment in new facilities. TOYOTA IN UK AND TOYOTA IN NORTH AMERICA BROWN FIELD INVESTMENT FDI that involves the purchase of an existing plant or firm, rather then construction of a new plant. Contrasts with green field investment

4. Why need for Foreign Investment?

5. Need for Foreign Investment ​ Foreign investment can fill the gap between desired investment and locally  mobilised  savings . Local capital markets are often not well developed.​ Foreign investment can supply a package of needed resources such as management experience, entrepreneurial abilities, ​and   organisational  and technological skills.​ A number of underdeveloped countries (UDCs) possess huge mineral resources, do not possess the required technical skill  and expertise to accomplish this task. Therefore, they have to depend upon a foreign capital.​

6. A foreign investment plays a pivotal role in the development of ​ basic infrastructure s uch as transport and communication system, generation and distribution of electricity, development of irrigation facilities . A foreign investment provides the host country a better access to foreign markets . Enhanced export possibility contributes to the growth of the host economies by relaxing the demand side constraints on growth.​ Consumers in the developing countries stand to gain from a foreign investment through new products and improved quality of goods at competitive prices . The profit generation by a foreign investment in the host country contributes to the  corporate tax revenue.​

7. Determinants of Foreign Investment

8. Determinants of Foreign Investment ​ Factor endowments The availability of and access to basic inputs such as oil and gas, minerals, forestry products, skilled and unskilled,labour force, determines the extent of foreign investment in the country , P olitical Stability In many countries the political situation is very unstable. ​ The relevant rules and regulations of the host country that ​ are governing the foreign investment decided the quantum  ​of the latter. ​

9. Market size Price and Exchange rates Wage rates

10. Political Ideology & FDI

11. How Does FDI Benefit ? The Host Country/home country Home country : USA Host county : India

12. How Does FDI Benefit The Host Country?( India) There are four main benefits of inward FDI for a host country Resource transfer effects - FDI brings capital, technology, and management resources Employment effects - FDI can bring jobs BOP Effects

13. How Does FDI Benefit The Home Country? The benefits of FDI for the home country include The effect on the capital account of the home country’s balance of payments from the inward flow of foreign earnings The employment effects that arise from outward FDI The gains from learning valuable skills from foreign markets that can subsequently be transferred back to the home country

14. FDI in India :Government Policies ​ Pre-liberalization Policies ​ Indian capital needs to be supplemented by foreign capital not only because the national savings alone would not be enough for the rapid development of the country on the desired scale, but also because in many cases, scientific, technical, and industrial knowledge and capital equipment can best be secured along with the foreign capital.​ During the Second Plan period , the emphasis was on increasing the foreign exchange resources of the country, and increased foreign investment was encouraged in order to finance the import of the required plant and equipment.​

15. FDI IN INDIA Economic reforms L iberalization of FDI policy Effected the magnitude and the pattern of FDI inflows that were received by India.​

16. FDI POLICY IN INDIA T he Foreign Investment Promotion Board (FIPB) is being replaced by the Foreign Investment Facilitation Portal (FIFP) to speed up the FDI inflow and to increase the transparency in the FDI approvals in the country. FIFP replaced FIPB in May, 2017. Why FIFP replaced the FIPB? The basic reason behind the replacement of the FIPB is to increase the transparency and speed up the clearance procedure in the FDI proposals so that FDI inflow can be increased in the country.

17. What is the procedure for receiving Foreign Direct Investment in an Indian company? An Indian company may receive Foreign Direct Investment under the two routes as given under: Automatic Route FDI is allowed under the automatic route without prior approval either of the Government or the Reserve Bank of India in all activities/sectors as specified in the consolidated FDI Policy, issued by the Government of India from time to time.   Government Route FDI in activities not covered under the automatic route requires prior approval of the Government which are considered by the Foreign Investment Promotion Board (FIPB), Department of Economic Affairs, Ministry of Finance.

18. FDI caps Agriculture & Animal Husbandry 100 % automatic SINGLE BRAND RETAIL 100% MULTI BRAND RETAIL 51%

19. Upto 100% FDI permitted under Automatic & Government Air  transport services (Scheduled Air Transport Service/ Domestic Scheduled Passenger Airline; Regional Air Transport Service) – upto 49% (auto) (Upto 100% under automatic route for NRIs) + above 49% and up to 74% (Govt.) Banking (Private sector) – upto 49% (auto) + above 49% and up to 74% ( Govt ) Biotechnology (brownfield) – upto 74% (auto) + above 74% ( Govt ) Defence – upto 74% (auto) + above 74% ( Govt ) Healthcare (Brownfield) – upto 74% (auto) + above 74% ( Govt ) Pharmaceuticals (Brownfield) – upto 74% (auto) + above 74% ( Govt ) Private Security Agencies – upto 79% (auto) + above 49% and up to 74% ( Govt ) Telecom Services – upto 49% (auto) + above 49% ( Govt )

20. FDI Prohibited Atomic energy Lottery business Gambling and betting sector Plantation except tea

21. FDI inflows in India 2023 The total FDI inflows received in FY 2023, which includes equity inflows, reinvested earnings, and other capital sources, amounted to US$70.97 billion – a decrease from the US$84.83 billion recorded during FY 2022.  https://indianexpress.com/article/opinion/columns/indias-rise-is-the-big-story-so-wheres-the-fdi-8965716 / https:// www.youtube.com/watch?v=ht87dkjku2M https:// www.forbesindia.com/article/explainers/fdi-in-india-inflows/89609/1

22. Largest investing country in India, 2023 Singapore accounted for the highest FDI equity inflow to India, which was valued at over 17 billion U.S. dollars followed by the Mauritius with over six billion dollars.

23. FDI in India state wise, 2023 Maharashtra emerged as the top recipient of FDI with a total of US$14.80 billion. Karnataka followed with US$10.42 billion, while Delhi and Gujarat attracted US$7.53 billion and US$4.71 billion, respectively.

24. https:// dea.gov.in/sites/default/files/Draft%20ODI%20Factsheet%20Nov%202023.pdf

25. FDI confidence Index The FDI Confidence Index is constructed using primary data from a proprietary survey administered to senior executives of the world's leading corporations. Respondents include C-level executives and regional and business heads. The survey of 300 global executives by global consulting firm A T Kearney found that the US was ranked top destination in the world for foreign direct investment.

26. Lobbying ,  any attempt by individuals or private interest groups to influence the decisions of government