FDI – ISSUES AND

CHALLENGES• BABITA

• ARGHADYUTI BHATTACHARJEE

• ARCHANA

• ASHUTOSH KUMAR

• AVANEET JHA

• ARTI SHARMA

(GROUP 3,SEC-A,MBA-19)

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What is FDI ?A foreign direct investment (FDI) is a

controlling ownership in a business enterprise

in one country by an entity based in another

country.

FDI occurs when an investor based in one

country(the home country) acquires an asset in

another country(the host country) with the

intent to manage the asset.

Investment can take place for many reasons,

including to take advantage of Cheaper wages

Special investment privileges(eg tax

exemptions) offered by the country.

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Why FDI ?• Domestic capital is inadequate for

purpose of economic growth.

• Foreign capital is usually essential, at

least as a temporary measure, during

the period when the capital market is in

the process of development.

• Foreign capital usually brings it with

other scarce productive factors like

technical know how, business

expertise and knowledge.

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FDI in IndiaIndia has already marked its presence as one of

the fastest growing economies of the world. It

has been ranked among the top 3 attractive

destinations for inbound investments.

Since 1991, the regulatory environment in terms

of foreign investment has been consistently

eased to make it investor-friendly.

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Fig:- Countries with Top Inflows in India

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Issues & Challenges for FDI In India

1.Resource challenge

2.Equity Challenge

3.Political Challenge

4.Federal Challenge

5.Lack of clear cut and transparent policies for FDI

6.High tariff rates & corporate tax rate by international standards

7.Stringent labour laws

8. Land Acquisition Issues

9.Environmental rigid policies

10. The financial strength of foreign players would displace

the unorganized players.

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RECENT POLICY MEASURES

• 100% FDI allowed in medical devices

• FDI cap increased in insurance & sub-activities from 26% to 49%

• 100% FDI allowed in the telecom sector.

• 100% FDI in single-brand retail.

• FDI in commodity exchanges, stock exchanges & depositories, power exchanges, petroleum refining by PSUs, courier services under the government route has now been brought under the automatic route.

• Removal of restriction in tea plantation sector.

• FDI limit raised to 74% in credit information & 100% in asset reconstruction companies.

• FDI limit of 26% in defence sector raised to 49% under Government approval route. Foreign Portfolio Investment up to 24% permitted under automatic route. FDI beyond 49% is also allowed on a case to case basis with the approval of Cabinet Committee on Security.

• Construction, operation and maintenance of specified activities of Railway sector opened to 100% foreign direct investment under automatic route.

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FDI for different sectors IndiaSector Percentage

Agriculture 100%

Asset Reconstruction Companies 100%

Civil Aviation 100%

Commodity Exchanges 49%

Courier Services 100%

Credit Information Companies 74%

Defence 49%

Insurance 49%

Multi Brand Retail 51%

Pension 26%

Petroleum and Natural Gas 49%

Power Exchanges 49%

Print Media 49%

Private Sector Banks 100%

Public Sector Banks 20%

Railways 100%

Single Brand Retail 100%

Special Economic Zones 100%

Stock Exchanges/Clearing

Corporations49%

Tea Plantation 100%

Telecom 100%

Tourism 100%

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FDI & ‘Make in India’ Campaign

‘Foreign direct investment (FDI) into

equity jumped 48 per cent after the

launch of the 'Make in India'

programme, the commerce and

industry ministry said’

-Economic Times

(15.07.15)

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CONCLUSION

o With rapid globalization of many industries and vertical integration rapidly taking place on a global level, at a

minimum a firm needs to keep abreast of global trends In their industry that’s why our government must address

these issues utmost priority and liberalize policies.

o FDI flows to the countries that best fit the needs of the firms and provide them with the best chance for profit with

the most limited risk.

o New Government will take more incremental steps to restore investors' confidence and will make India into the

one of the most attractive destination for FDI in the world once again India will be known as the Dreamland for

investors.

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“PowerPoint may not be of any use for you in a presentation, but it may

liberate you in another way, an artistic way. Who knows.”-David Byrne

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