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Foreign Direct Investment (FDI) into India:
Where Do They Originate From?
Ramkishen S. Rajan* and Sasidaran Gopalan**
* George Mason University (GMU) and National University of Singapore (NUS)
** The Hong Kong University of Science and Technology (HKUST)
Structure
1. Preliminaries and Definitions
2. Trends in Global FDI Inflows
3. FDI Inflows to India
4. Reassessing Bilateral FDI Inflows to India
5. Reconciling FDI and M&A Data
6. Conclusions
2
New foreign equity flows (either Mergers & Acquisitions (M&As)
of existing local enterprises or Greenfield investments). – 10%
threshold. Less than 10% regarded as foreign portfolio investment (FPI).
M&A versus Brownfield.
Intra-company debt transactions.
Reinvested earnings.
Refers to a source of external financing rather than net
physical investment or real activity.
At an operational level FDI consists of three broad
aspects:
3
1. Preliminaries and Definitions
Global FDI inflows reached the pre-global financial crisis (GFC) average in 2013.
Rapid growth share of FDI flows to developing economies since the early 2000s
and in 2012-2013 they overtook developed economies.
4
Source: UNCTAD WIR
Global FDI Inflows 1992-2013 (US$ Billions)
0
500
1000
1500
2000
2500
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Developed Economies Developing Economies Transition Economies World
2. Trends in Global FDI Flows
Developed economies received about 70% of global FDI inflows on average till
2000 and since then on downward trend reaching 40% in 2013.
Share of FDI inflows to developing and transition economies tripled from about
20% in 2000 to 60% in 2013.
5
Source: UNCTAD WIR
FDI Inflows by Category 1992-2013 (% Share in Global FDI Flows)
0
10
20
30
40
50
60
70
80
90
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Developed Economies Developing Economies Transition Economies
6
Top 20 Host Economies for FDI Flows, 2012-2013
(US$ Billions)
9 of the 20 largest recipients were
developing countries with BRIC
economies figuring in the list.
Tax havens and Offshore Financial
Centers (OFCs) are also among top host
economies of FDI flows.
Source: UNCTAD WIR (2014)
Components of FDI: Reinvested Earnings
7
Share of Inward FDI Flows Financed Through Reinvested Earnings,
By Region, 2005-2011 (Percent)
Source: UNCTAD WIR (2013)
Retained earnings component of FDI rising since GFC especially for developing
economies – two-fifths of total FDI.
Country-specific data not easily available.
Rising importance of
M&As in FDI flows
globally at least till the
GFC.
Increasing ratio of M&A-
to-FDI in two notable
phases: 1992-2000 and
then again from 2004-2008
broadly.
M&A picking up again
post 2013.
8
Source: UNCTAD WIR (2014)
0
500
1000
1500
2000
2500
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
World M&A World Greenfield World FDI Inflows
Trends in Type of FDI Projects, 2003-13 (US$ Billions)
Note: Greenfield is value of announced projects; M&A is value of cross-border deals
Ratio of M&A to FDI: 1992-2013
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
Ratio of M&A to FDI
Components of FDI: M&A versus Greenfield
Caveat: Macroeconomic Implications of FDI
9
KAB = -CAB = (I - S) + (G -T)
Greenfield I rises, CAB worsens and net capital inflows.
M&A: I rises, CAB worsens and net capital inflows.
S falls, CAB worsens and net capital inflows.
No change in I or S, CAB same, no net capital inflows.
“Over 96% of FDI ..(in pharma).. during this period has been in brownfield
investment, thereby merely a substitution of domestic capital by foreign capital rather than
being an addition.” (Internal DIPP note based on Hindu Business Line, 2013)*
Macroeconomic implications of M&A not as obvious as Greenfield
investments.
(Note: Excludes secondary effects on Y and T).
* Source: “DIPP Seeks to Restrict FDI in Brownfield Pharma Projects,” The Hindu Business Line, September 11, 2013.
FDI flows to both developed and developing countries have been concentrated in the
services sector.
55% of FDI inflows to services sector go to finance and business activities in developed
economies; Corresponding share for developing economies is about 35%.
Developing economies: Of the 27% FDI flows to manufacturing sector in
developing economies, unspecified industries take up 18%, including pharmaceuticals.
Sectoral Trends
10
Source: UNCTAD WIR (2014)
Primary, 7.5%
Manufacturing, 17%
Services, 71%
Sectoral Share of Global Inward FDI Flows in Developed Economies (2010-2012) Sectoral Share of Global Inward FDI Flows in Developing Economies (2010-12)
Primary, 12%
Manufacturing, 27%
Services, 59%
3. FDI Inflows to India
11
Source: UNCTAD WIR (2014)
Trends in India’s FDI Inflows , 1992-2013
0
0.5
1
1.5
2
2.5
3
3.5
0
5
10
15
20
25
30
35
40
45
50
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
India (US$ Billion; LHS) India (% Share of World FDI Inflows; RHS)
Rising importance of FDI Flows since early 2000s with inflows highest before the GFC.
Share in world FDI flows peaked at 3% in 2009, averaging 1.5% over 2001 and 2013.
12
FDI Inflows to India (% Share of GDP)
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
World FDI Inflows (% of World GDP)
India FDI Inflows (% of India's GDP)
FDI inflows to India as a share of GDP peaked at 4% in 2008.
2008-09 only time India’s FDI-to-GDP share higher than world average.
On average, FDI inflows as share of GDP to India between 2008 and 2013 higher
than corresponding share between 2001 and 2008.
Source: UNCTAD and World Bank
13
FDI Inflows (% Share of GDP)
Source: UNCTAD and World Bank
0
5
10
15
20
25
30
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Singapore (RHS) China (LHS) India (LHS)
With China’s consistently declining share of FDI-to-GDP, India slightly higher
ratio since 2013 (happened in 2008 but reason quite different then).
FDI Inflows to India
Value of announced Greenfield FDI projects in India in 2012-2014 back to
2003-2004 levels.
Concerning decline in 2013 in absolute value and in global share.
14
Source: UNCTAD WIR (2013)
0
1
2
3
4
5
6
7
8
0
10
20
30
40
50
60
70
80
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Value of Greenfield FDI (US$ Billion; LHS) % Share of World Greenfield FDI (RHS)
UNCTAD reports bilateral FDI data with an informative
geographic breakdown, but ….
Nature of FDI data reported is misleading
15
4. Reassessing Bilateral FDI Inflows to India
Assessing de facto real linkages between countries harder when data is
based on flow of funds than ultimate ownership.
OFCs and Tax Havens
OECD (2000): Tax haven is a jurisdiction which has: “no or only nominal taxes
(generally or in special circumstances) and offers itself or is perceived offer itself, as a place
to be used by non residents to escape tax in their country of residents; laws or
administrative practices which prevent the effective exchange of information lack of
transparency and the absence of requirement that the activity be substantial.”
16
OFCs, tax havens and special purpose entities (SPEs) playing a significant
role in global FDI flows -- Round-tripping and Trans-shipping.
IMF Financial Stability Forum (2000): “…jurisdictions that attract a high level of
non-resident activity. Traditionally, the term OFC has implied some or all of the
following (but not all OFCs) operate this way: Low or no taxes on business or investment
income; no withholding taxes; light and flexible incorporation and licensing regimes; light
and flexible supervisory regimes; flexible use of trusts and other special corporate vehicles;
no need for financial institutions and/or corporate structures to have a physical presence;
an inappropriately high level of client confidentiality based on impenetrable secrecy laws;
unavailability of similar incentives to residents.”
17
OFCs and Tax Havens
OECD (2000): 41 Tax
Havens*
Andorra; Anguilla; Antigua and Barbuda; Aruba; Bahamas; Bahrain; Belize;
Bermuda; British Virgin Islands; Cayman Islands; Cook Islands; Cyprus;
Dominica; Gibraltar; Grenada; Guernsey, Sark and Alderney; Isle of Man;
Jersey; Liberia; Liechtenstein; Malta; Marshall Islands; Mauritius; Monaco;
Montserrat; Nauru; Netherlands Antilles; Niue; Panama; Saint Kitts &
Nevis; Saint Lucia; Saint Vincent and the Grenadines; Samoa; San Marino;
Seychelles; Turks and Caicos Islands; US Virgin Islands; Vanuatu.
IMF FSF (2000): 46 OFCs
Also listed in IMF (2006): “OFC
Assessment Program – A Progress
Report”
Bahrain; Belize; Bermuda; Cayman Islands; Cyprus; Gibraltar; Guernsey;
Isle of Man; Jersey; Macao SAR; Mauritius; Monaco; Montserrat; Samoa;
Seychelles; Singapore; Andorra; Anguilla; Antigua and Barbuda; Bahamas;
Barbados; British Virgin Islands; Cook Islands; Costa Rica; Dominica;
Liechtenstein; Netherlands Antilles; Niue; Palau; Panama; Saint Kitts and
Nevis; Saint Lucia; Saint Vincent and the Grenadines; Vanuatu; Aruba;
Grenada; Lebanon; Malaysia (Labuan); Marshall Islands; Nauru; Turks
and Caicos Islands; Hong Kong SAR; Ireland; Luxembourg; Malta;
Switzerland.
Notes: * We list only OECD non-member countries; UNCTAD WIR uses OECD classification
OFCs and FDI Flows
Rising importance of OFCs
in FDI flows.
Investments to OFCs
remain at historically high
levels.
Flows to OFCs have
boomed since 2007,
following the start of the
GFC.
18
Source: UNCTAD WIR (2013)
Note Hong Kong and Singapore are classified as OFCs as per the IMF definition but excluded by the
OECD list of tax haven jurisdictions. Netherlands is considered as a potentially harmful preferential tax
regime by the OECD but the IMF list does not list that as an OFC.
19
Paucity of studies tracking the actual ownership of FDI inflows to
understand the de facto real linkages at a bilateral level.
We examine trends in bilateral FDI inflows into BRIC economies
from 2001-12.
Focus here on India.
We propose an alternative framework by examining M&As which
could be more meaningful, caveats notwithstanding.
Main Sources of data:
Bilateral FDI: UNCTAD FDI/TNC Database (Latest year available: 2012).
Bilateral M&As: Dealogic (Latest year available: 2014).
Focus of Interest
FDI Inflows to India (Average between 2001 and 2012)
Case Study: India
20
Source of FDI inflows: Tax havens
and OFCs constitute over half of FDI
inflows on average over the last decade.
Of limited use in trying to understand
India’s extent of bilateral linkages.
Netherlands,6%
United Kingdom, 7
%
United States, 10%
Japan, 5%
Tax Havens, 43
%
Other Countries, 1
5%
Singapore, 8%
Cyprus, 5%
Mauritius, 95%
Within the tax havens close to 95% of
inflows originate from Mauritius
Breakdown of Tax Havens
Inconsistent data on FDI Inflows to India from various sources-- absolute
values of total FDI inflows do not match.
Case Study: India
21
Total World FDI Inflows to India
2008-09 2009-10 2010-11 2011-12 2012-13
DIPP (US$ Million) 27331 25834 21383 35121 22423
UNCTAD Bilateral FDI database (US$ Million) 22697 22461 14937 23474 18286
UNCTAD Country Factsheet (US$ Million) 47138.7 35657.3 27431.2 36190.4 24195.8
EIU WIS (US$ Million) 43830.4 35938.1 26773.2 34598.2 24249.6
However shares of source countries of FDI inflows into India broadly match between
UNCTAD (bilateral database) and DIPP.
Case Study: India
22
Mauritius, 37%
Singapore, 11%
UK, 9%
Japan, 6%
USA, 5%
Netherlands, 5%
Mauritius, 42%
Singapore, 12%
UK, 5%
Japan, 5.50%
USA, 6%
Netherlands, 6%
DIPP: FDI Inflows to India by Source Country Share (Average 2007-12) UNCTAD: FDI Inflows to India by Source Country Share (Average 2007-12)
Source: DIPP Source: UNCTAD
In 2013-14, Singapore overtook Mauritius as the leading source of FDI inflows to India
Case Study: India
23
Source: DIPP - FDI Inflows to India by Source Country Share (2012-13) Source: DIPP - FDI Inflows to India by Source Country Share (2013-14)
Mauritius, 42%
Singapore, 10%
UK, 5%
Japan, 10%
USA, 2.5%Netherlands, 9
%Mauritius, 20%
Singapore, 25%
UK, 13%
Japan, 7%
USA, 3.0%
Netherlands, 9%
Indian companies using OFCs (Singapore and Netherlands) and tax havens (Mauritius)
as intermediaries to purchase assets overseas or back in India.
Example: Tata Steel financed the Corus acquisition partly via consortium of banks at Tata
Steel UK as well as by its subsidiary Tata Steel Asia Singapore
24
India-Mauritius DTAA: Mauritius does not impose taxes on capital
gains.
India-Mauritius DTAA arguably the most flexible with a “loophole” – no Limit-
of-Benefit (LOB) clause – holding companies in these tax havens could be used
to repatriate profits from India.
India-Singapore CECA: Key provision from the investment
perspective is the renewed Double Taxation Avoidance Agreement
(DTAA).
The India-Singapore DTAA is broadly modelled along the lines of the existing
Indian treaty with Mauritius -- exemptions for capital gains tax on profits from
sale of shares.
LOB clasue: Effectively an anti-abuse provision that restricts third country
residents to obtain benefits under a DTAA.
Sources of FDI Inflows into India
Over 2000-2012 on average, top ten sectors received just under two-fifths
FDI.
Pharma share around 4-5% of total FDI inflows into India.
Case Study: India
25
Source: DIPP
Services, 19%
Construction, 12%
Telecom, 7%
Computer and Hardware, 6%
Pharmaceuticals, 5%
Chemicals, 5%
Source: DIPP
Services, 17%
Construction, 8%
Telecom, 6%
Computer and
Hardware, 3%
Pharmaceuticals, 4%
FDI Inflows to India by Sector Share (Average: 2000-2012) FDI Inflows to India by Sector Share (Average: 2009-2013)
M&A data tracks the actual ownership of the purchases and sales
We use M&A data provided by Dealogic
Others: Bloomberg, Thomson Financial and Zephyr.
Data not always consistent (threshold, ownership, retained earnings, gross vs net,
etc).
To ensure a degree of comparability with the FDI data we have
only included M&As with over 10% equity.
26
5. Reconciling FDI and M&A Data
Ratio of BRICs M&A-to-FDI, 2001-2012
BRIC economies in general seem to have experienced an increase in the ratio of
M&A to FDI indicating its growing importance.
Ratios higher in Brazil and India than Russia and China.
27
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
Brazil Russia India China
2001-06
2006-12
2001-12
M&A Acquisitions in India
India
28
On average about 60% of total M&As involve Indian firms, i.e. domestic M&As.
Domestic M&As may happen through tax havens.
20
25
30
35
40
45
50
55
60
65
70
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Share of Other Countries in India's Inbound M&As
Inward M&A Acquisitions in India (Average between 2001 and 2012) by Acquirer
India
29
US is the single largest acquirer of Indian companies (28%) followed by the UK (23%) and then
Japan, Singapore and Malaysia together constituting about 20%.
Majority of the inbound acquisitions to India have been by the US, UK while Japan and
Singapore have lower shares as compared to FDI inflows.
Acquisitions by the US and UK in particular have been channelled via Mauritius.
Sources of FDI Inflows
2001-12
Netherlands 6%
United Kingdom 7%
United States 10%
Japan 5%
Tax Havens 43%
Singapore 8%
Other Countries 15%
United Kingdom, 23%
Japan, 11%
France, 5%
United States, 28%
Germany, 4%
Malaysia, 4%
Switzerland, 4% Singapore, 4%
Source: Dealogic
India
30
Inbound M&As in India by Sector (Average: 2010-2013)
Healthcare and Pharmaceuticals sector has seen the highest M&A share between 2010
and 2013, averaging about 18%.
From Merger Market Trend Report 2013: “Pharma, Medical & Biotech (PMB) dealmaking hit
US$ 4.2bn (38 deals)…from 2012 (US$ 1.4bn, 30 deals) with eight more deal
announcements…Represents a second consecutive annual rise by both value and
volume…PMB…the only sector to post a second successive increase in annual M&A
value or volume.
Source: Dealogic
Telecommunications, 17%
Food & Beverage, 6%
Healthcare and
Pharma, 18%
Computers & Electronics, 8%
Oil & Gas, 10%
Professional Services, 3%
Finance, 5%
Inbound M&As in India by Sector (Average: 2001-2012)
Telecommunications, 22%
Food & Beverage, 4%
Healthcare and
Pharma, 12%
Computers & Electronics, 1
2%
Oil & Gas, 9%
Professional Services, 4%
Finance, 7%
Inward M&A Acquisitions in Healthcare and Pharmaceuticals Sector by Non-Indian
Acquirers as a % Share of Total Inbound M&As (2001-2014)
Pharma in India
31
Pharmaceuticals, Medical and Biotech (Healthcare) deals as share of overall
M&A in India peaked in 2008 and 2010.
0
5
10
15
20
25
30
35
40
45
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Healthcare
Source: Dealogic
32
M&A into the Indian pharmaceutical sector represented about 15% of M&A in
that sector into (selected) developing economies between 2011 and 2013.
Source: UNCTAD WIR (2014)
Note: Developing countries include China, Taiwan, Indonesia, Vietnam, Malaysia, Thailand, Bangladesh, Kazakhstan, Philippines and Sri
Lanka. M&A data on developing economies from Mergermarket.
Pharma in India as a Share of Developing Countries
0
5
10
15
20
25
30
35
2011 2012 2013
M&A in Pharma in India (Share of Developing Economies)
M&A in Pharma
33
M&A in pharma a global
phenomenon not India specific
Driven by tax concerns in US,
follow-the-leader behaviour,
disappointment in returns from
massive R&D spending, need to
replenish drug pipelines with
upcoming patent expirations, cost
savings and synergies, low-costs
financing environment.
India -- attractive valuations, cost-
effective R&D capability, pipeline
of generic drugs.
Source: http://www.ascendant.hr/images/sector_studies/Global_Pharma_Biotech_2013.pdf
34
Ann. Date Bidder company Target company Seller company Bidder advisors Target/Seller advisors Deal Value (US$m)
27-Feb-13 Mylan Inc Agila Specialties Private Limited; and
Agila Specialties Asia Pte Limited
Strides Arcolab Limited FA: Morgan Stanley
LA: Barbosa, Mussnich &
Aragao; Morgan Lewis &
Bockius; Osler, Hoskin &
Harcourt; Platinum Partners;
Skadden Arps Slate Meagher &
Flom; Slaughter and May
FA: Jefferies; Moelis &
Company
LA: Borden Ladner Gervais;
DSK Legal; Haynes and
Boone; Herbert Smith
Freehills; Jones Day;
Pinheiro Neto Advogados
1,600
16-Dec-13 GlaxoSmithKline Plc GlaxoSmithKline Pharmaceuticals Ltd
(24.3% Stake)
FA: HSBC
LA: Slaughter & May
FA: -
LA: -
1,035
13-Dec-13 Torrent Pharmaceuticals Ltd Elder Pharmaceuticals Limited (Branded
Domestic Formulation Business)
Elder Pharmaceuticals Limited FA: Deloitte
LA: -
FA: Nomura Holdings
LA: Khaitan & Co
323
23-Nov-13 Pfizer Ltd Wyeth Ltd FA: Bank of America Merrill
Lynch LA: AZB & Partners
FA: Citi
LA: Advising FA: Davis Polk &
Wardwell
294
27-Nov-13 Kohlberg Kravis Roberts & Co LP Gland Pharma Limited Evolvence India Life Sciences
Fund
FA: Citi
LA: Amarchand & Mangaldas &
Suresh A Shroff & Co; Simpson
Thacher & Bartlett
FA: -
LA: AZB & Partners
200
30-Apr-13 Unilever NV Hindustan Unilever Limited (14.8% Stake) FA: HSBC; UBS Investment
Bank
LA: Linklaters; Talwar Thakore
& Associates
FA: Citi
LA: Advising FA: Davis Polk
& Wardwell
3,549
25-Aug-13 ONGC Videsh Limited Rovuma Offshore Area 1 Block (10%
Stake)
Anadarko Petroleum
Corporation
FA: Bank of America Merrill
Lynch
LA: Simmons & Simmons
FA: Citi
LA: -
2,640
25-Jun-13 ONGC Videsh Limited; and Oil
India Limited
Rovuma Offshore Area 1 Block (10%
Stake)
Videocon Mauritius Energy
Limited
FA: Bank of America Merrill
Lynch; Morgan Stanley
LA: Kochhar & Co; PLMJ -
Sociedade de Advogados;
Simmons & Simmons
FA: Credit Suisse; Standard
Chartered; UBS Investment
Bank
LA: Amarchand &
Mangaldas & Suresh A
Shroff & Co
2,475
24-Jul-13 Ambuja Cements Limited ACC Limited (50.01% Stake) Holcim Ltd FA: Axis Capital
LA: Amarchand & Mangaldas &
Suresh A Shroff & Co
FA: Citi
LA: Homburger
2,433
27-Feb-13 Mylan Inc Agila Specialties Private Limited; and
Agila Specialties Asia Pte Limited
Strides Arcolab Limited FA: Morgan Stanley
LA: Barbosa, Mussnich &
Aragao; Morgan Lewis &
Bockius; Osler, Hoskin &
Harcourt; Platinum Partners;
Skadden Arps Slate Meagher &
Flom; Slaughter and May
FA: Jefferies; Moelis &
Company
LA: Borden Ladner Gervais;
DSK Legal; Haynes and
Boone; Herbert Smith
Freehills; Jones Day;
Pinheiro Neto Advogados
1,600
Top Pharma, Medical & Biotech Deals Involving Indian Targets
Source: Merger Market India M&A Trend Report (2013).
Note: LA – Legal Advisor; FA – Financial Advisor
5. Conclusion
Significant share of FDI Inflows to BRIC economies from a
combination of tax havens and regional financial centers
India – Mauritius and Singapore.
Brazil – Netherlands, British Virgin Islands and Cayman
Islands.
Russia – Cyprus, British Virgin Islands, Netherlands.
China -- Hong Kong and British Virgin Islands.
Limits usefulness of such data to understand real linkages
between countries.
35
Conclusion
Alternatively, one can examine M&A data that tracks the actual
ownership of the purchases and sales.
Analysis reveals a far more informative geographic breakdown of
bilateral real linkages.
But some of the FDI data from OFCs and tax havens etc. is also round-
tripping back to host country which implies that they are not fully
comparable with M&A data.
Caution required in comparing the two sets of data (FDI versus
M&A) as the M&A data excludes Greenfield investments.
FDI data at a bilateral level may offer quite a misleading indication of
the extent of real linkages -- a point that researchers and analysts have
failed to adequately appreciate.
36
Thank You!
37
38
Ratio of Total M&A-FDI Inflows to India
Source: UNCTAD and World Bank
0.0
0.5
1.0
1.5
2.0
2.5
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
MA/FDI
Not all FDI is M&A (as it could be Greenfield as well) and not
all M&A data are necessarily FDI in nature.
FDI data – flow of funds from country.
M&A data – Company ownership
Caveat on M&A
39
FDI > M&A Greenfield
Retained earnings
Round-tripping
FDI < M&A Actual financial flows and not total deal value at completion
Net vs. Gross
No capital lows; share swapping
40
"The FIPB approval is currently required in mining, multi-brand
retail, public sector banking, defence (the FIPB route for FDI up to
26% and for FDI above 26% to the Cabinet Committee on
Security, clearance is needed on a case-to-case basis, where it is
likely to result in access to modern technology), brownfield pharma
projects, broadcasting, print media, existing airport projects (for
FDI above 74%), certain cases in civil aviation, satellites, single
brand retail (for FDI above 49%), and asset reconstruction
companies (FDI above 49%). Foreign investment into an Indian
company, engaged only in the activity of investing in the capital of
other Indian company/ies, will also require prior FIPB
approval, regardless of the amount or extent of foreign
investment.“
Source: http://www.financialexpress.com/article/economy/fipb-role-shrinks-amid-easier-fdi-flows/16714/
41
Q.5. Which are the sectors where FDI is not allowed in India, both under the
Automatic Route as well as under the Government Route?
Ans. FDI is prohibited under the Government Route as well as the Automatic Route in
the following sectors:
i) Atomic Energy
ii) Lottery Business
iii) Gambling and Betting
iv) Business of Chit Fund
v) Nidhi Company
vi) Agricultural (excluding Floriculture, Horticulture, Development of seeds, Animal
Husbandry, Pisciculture and cultivation of vegetables, mushrooms, etc. under controlled
conditions and services related to agro and allied sectors) and Plantations activities (other
than Tea Plantations) (c.f. Notification No. FEMA 94/2003-RB dated June 18, 2003).
vii) Housing and Real Estate business (except development of townships, construction of
residential/commercial premises, roads or bridges to the extent specified in Notification
No. FEMA 136/2005-RB dated July 19, 2005).
viii) Trading in Transferable Development Rights (TDRs).
ix) Manufacture of cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco
substitutes.
42
Cross-Border M&A Deals in Pharmaceuticals Targeted at
Developing and Transition Economies (2004-2013)
Transaction volumes in developing
and transition economies remain a
fraction of global cross-border M&A
activities in this industry but their
shares are expanding.
Source: UNCTAD WIR (2014)
Pharma in Developing Countries
