A

DESSERTATION REPORT

On

“Analytical Study Of Foreign Direct Investment In India “

AT

Pune, Maharashtra 411033.”

Submitted By

SACHIN GADEKAR

(MBA-INTERNATIONAL BUSINESS )

Submitted To

In partial fulfillment of the requirement for the award of the degree of

Master of Business Administration(2013-2015)

Under the guidance of

Prof. RAJESH GADE

RAJIV GANDHI BUSINESS SCHOOL, TATHAWADE, PUNE

ACKNOWLEDGEMENT

The attitude bliss and emphasis that accompanies the successful completion of my task would be incomplete

without the expression of appreciation towards those who helped me colour the mosaic of this dissertation

with the tiles of their knowledge, expertise, experience and co-operation.

I extend my special thanks to my Respected Guide, Prof. RAJESH GADE who has motivated and inspired

me throughout my dessertation work with her timely guidance, help, support and supervision.

SACHIN GADEKAR

DECLARATION

I do hereby declare that this dissertation work entitled “Analytical Study Of Foreign Direct

Investment In India “ with reference to Submitted by me to the University of Pune for the partial

fulfillment of the requirement for the award of Master of Business Administration (MBA) is a record of my own research work. The report embodies the finding based on my study and observation and has not

been submitted earlier for the award of any degree or diploma to any Institute or University.

SACHIN GADEKAR

Place: Pune

Date:-

INDEX

Serial No.

CONTENTS

Page No.

1.

INTRODUCTION

1

2.

REVIEW OF LITERATURE

20

3.

OBJECTIVE & SCOPE OF THE STUDY

22

4.

DATA ANALYSIS & INTERPRETATION

23

5.

FINDINGS , SUGGESTIONS & CONCLUSION

39

6.

REFERENCES & BIBLIOGRAPHY

40

5

CHAPTER 1

INTRODUCTION

1.1 Abstract

Foreign direct investment (FDI) influences the host country’s economic growth through

the transfer of new technologies and know-how, formation of human resources,

integration in global markets, increase of competition, and firms’ development and

reorganization. Empirically, a variety of studies considers that FDI generate economic

growth in the host country. However, there is also evidence that FDI is a source of

negative effects. Given this ambiguity of results, the present paper makes a review of the

existing theoretical and empirical literature on the subject, intending to shed light on the

main explanations for the divergence of results in different studies. The main idea that

stands out in this review is that the effects of FDI on economic growth are dependent on

the existing or subsequently developed internal conditions of the host country (economic,

political, social, cultural or other). Thus, the host countries authorities have a key role in

creating the conditions that allow for the leverage of the positive effects or for the

reduction of the negative effects of FDI on the host country’s economic growth.

1.2Introduction

Consistent economic growth, de-regulation, liberal investment rules, and operational

flexibility are all the factors that help increase the inflow of Foreign direct investment or

FDI.FDI or Foreign Direct Investment is any form of investment that earns interest in

enterprises which function outside of the domestic territory of the investor. FDIs require a

business relationship between a parent company and its foreign subsidiary. Foreign direct

business relationships give rise to multinational corporations. For an investment to be

regarded as an FDI, the parent firm needs to have at least 10% of the ordinary shares of

its foreign affiliates. The investing firm may also qualify for an FDI if it owns voting

power in a business enterprise operating in a foreign country.

India now with consistent growth performance and abundant high-skilled affordable

manpower provides enormous opportunity for investment both domestic and foreign.

Foreign direct investment (FDI) causes a flow of money into the economies which

stimulates economic activity, increases employment and induces the long run aggregate

supply and brings in best practices. The FDI policy was liberalized progressively through

6

review of the policy on an ongoing basis and allowing FDI in more industries under the

automatic route.

FDI inflows had declined globally in 2009 and 2010. While India was able to largely

insulate itself from the decline in global inflows in 2009-10, FDI flows had moderated in

2010-11. The slowdown in FDI inflows could mainly be attributed to a lagged effect of a

pause in implementing investment decisions, which could range between one to two

years, depending upon the sector and size of individual projects. A number of global

investors had then remained cautious about making large investments in new sectors,

given the fragility of the global recovery. However, the months of April-June, 2011 have

shown a strong revival compared to the last two years. June 2011 witnessed second

highest inflow in last 11 years of US$ 5.656 billion, representing an increase of nearly

310%, in US $ terms, over the FDI equity inflows of US $ 1.380 billion received in June,

2010.

Therefore, we can say that there is a credible reversal of downward trend in FDI inflows

in the current financial year, where a significant upward trend in the FDI inflows is

evident. FDI equity inflows, for the first quarter of the current financial year (April-June,

2011), have been US $ 13.441 billion, representing an increase of almost 133%, in US $

terms, over the FDI equity inflows of US $ 5.772 billion for the corresponding period of

the last financial year (April-June, 2010). Commenting on the recovery Shri Anand

Sharma, Union Minister of Commerce and Industry said, “There is a continuing effort on

the part of the Government to make the FDI policy more investor friendly. The release of

the final edition of the consolidated FDI Policy Circular effective from April 2011 is a

step in this direction. We have incorporated a number of significant changes in the policy

and announcement of the policy for FDI in Limited Liability Partnership (LLPs), are

indicators of the Government’s strong commitment towards that end.”

India continues to be one of the favoured destinations for FDI. In fact, the UNCTAD

World Investment Report (WIR) 2010, in its analysis of global trends and sustained

growth of Foreign Direct Investment (FDI) inflows, reported India as the second most

attractive location for FDI for 2010-2012.

There has been a continuing and sustained effort to make the FDI policy more liberal and

investor-friendly. Significant rationalization and simplification of the policy has,

7

therefore, been carried out in the recent past. For example, a major exercise has been

undertaken for consolidation of FDI policy, with the aim of simplifying FDI policy,

promoting clarity of understanding of foreign investment rules among foreign investors

and sectoral regulators, as also for having a single policy platform. The process of

consolidation involved integration of 178 Press Notes, covering various aspects of FDI

policy, which had been issued since 1991, as also a large number of other regulations

governing FDI. The document was released as ‘Circular 1 of 2010′, on 31 March, 2010,

as per the commitment made. The document has also been updated at six monthly

intervals, to ensure that it remains current and updated.

1.3 Meaning & Definitions -

Meaning –

A foreign direct investment (FDI) is a controlling ownership in a business enterprise in

one country by an entity based in another country.

Foreign direct investment is distinguished from portfolio foreign investment, a passive

investment in the securities of another country such as public stocks and bonds, by the

element of "control". According to the Financial Times, "Standard definitions of control

use the internationally agreed 10 percent threshold of voting shares, but this is a grey area

as often a smaller block of shares will give control in widely held companies. Moreover,

control of technology, management, even crucial inputs can confer de facto control."

The origin of the investment does not impact the definition as an FDI, i.e., the investment

may be made either "inorganically" by buying a company in the target country or

"organically" by expanding operations of an existing business in that country.

Definitions –

Broadly, foreign direct investment includes "mergers and acquisitions, building new

facilities, reinvesting profits earned from overseas operations and intra company loans".

In a narrow sense, foreign direct investment refers just to building new facilities. The

numerical FDI figures based on varied definitions are not easily comparable. As a part of

the national accounts of a country, and in regard to the GDP equation Y=C+I+G+(X-

M)[Consumption + gross Investment + Government spending +(exports - imports)],

where I is domestic investment plus foreign investment, FDI is defined as the net inflows

of investment (inflow minus outflow) to acquire a lasting management interest (10

8

percent or more of voting stock) in an enterprise operating in an economy other than that

of the investor. FDI is the sum of equity capital, other long-term capital, and short-term

capital as shown the balance of payments. FDI usually involves participation in

management, joint-venture, transfer of technology and expertise. Stock of FDI is the net

(i.e., inward FDI minus outward FDI) cumulative FDI for any given period. Direct

investment excludes investment through purchase of shares. FDI is one example of

international factor movements.

1.4 Types -

Horizontal: where the company carries out the same activities abroad as at home (for

example, Toyota assembling cars in both Japan and the UK.

Vertical: when different stages of activities are added abroad. Forward vertical FDI is

where the FDI takes the firm nearer to the market (for example, Toyota acquiring a car

distributorship in America) and Backward Vertical FDI is where international integration

moves back towards raw materials (for example, Toyota acquiring a tyre manufacturer or

a rubber plantation).

-Conglomerate: where an unrelated business is added abroad. This is the most unusual

form of FDI as it involves attempting to overcome two barriers simultaneously - entering

a foreign country and a new industry. This leads to the analytical solution that

internationalization and diversification are often alternative strategies, not complements.

FDI can take the form of Greenfield entry or takeover.

Greenfield entry implies assembling all the elements from scratch as Honda did in the

UK, whereas foreign takeover means the acquisition of an existing foreign company - as

Tata’s acquisition of Jaguar Land Rover illustrates.

Foreign takeover is often covered by the term 'mergers and acquisitions’ (M&As) but

internationally, mergers are vanishingly small, accounting for less than 1 per cent of all

foreign acquisitions.

This choice of entry mode interacts with ownership strategy – the choice of wholly

owned subsidiaries versus joint ventures to give a 2x2 matrix of choices – Greenfield

wholly owned ventures, Greenfield joint ventures, wholly owned takeovers and joint

foreign acquisitions - giving foreign investors choices that they can match to their own

capabilities and foreign conditions

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1.5 Methods

The foreign direct investor may acquire voting power of an enterprise in an economy

through any of the following methods:

1. by incorporating a wholly owned subsidiary or company anywhere

2. by acquiring shares in an associated enterprise

3. through a merger or an acquisition of an unrelated enterprise

4. participating in an equity joint venture with another investor or enterprise[

1.6 Forms of FDI incentives

Foreign direct investment incentives may take the following forms:

1. low corporate tax and individual income tax rates

2. tax holidays

3. other types of tax concessions

4. preferential tariffs

5. special economic zones

6. EPZ – Export Processing Zones

7. Bonded warehouses

8. Maquiladoras

9. investment financial subsidies

10. free land or land subsidies

11. relocation & expatriation

12. infrastructure subsidies

13. R&D support

14. derogation from regulations

15. Governmental Investment Promotion Agencies (IPAs) use various marketing strategies

inspired by the private sector to try and attract inward FDI, including Diaspora

marketing.

16. by excluding the internal investment to get a profited downstream.

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1.7 Foreign Investment Policy

Government of India facilitates Foreign Direct Investment (FDI) and investment from

Non-Resident Indians (NRIs) including Overseas Corporate Bodies (OCBs),

predominantly owned by them, to complement and supplement domestic investment.

Foreign technology induction is encouraged both through FDI and through foreign

technology collaboration agreements. Foreign Direct Investment and Foreign technology

collaboration agreements can be approved either through the automatic route under

powers delegated to the Reserve Bank of India (RBI) or otherwise by the Government.

Automatic Approval

In pursuance of Government's commitment to early implementation of the second phase

of the economic reforms and with a view to further liberalizing the FDI regime, all items/

activities have been placed under the automatic route for FDI/NR1 and OCB investment,

except the following:

1. All proposals that require an Industrial Licence which includes

a. the item requiring an Industrial Licence under the Industries (Development and

Regulation) Act, 1951;

b. foreign investment being more than 24% in the equity capital of units manufacturing

items reserved for small scale industries; and

c. all items which require an Industrial Licence in terms of the locational policy notified by

Government under the New Industrial Policy of 1991.

2. All proposals in which the foreign collaborator has a previous venture/tie-up in India.

3. All proposals relating to acquisition of shares in an existing Indian company in favour of

a foreign/NRI/OCB investor

4. All proposals falling outside notified sectoral policy/caps or under sectors in which FDI

is not permitted and /or whenever any investor chooses to make an application to the

FIPB and not to avail of the automatic route

All proposals for investment in public sector unit as also for EOU/EPZ/EHTP/STP units

would qualify for automatic route subject to the above parameters. The modalities and

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procedures for automatic route would remain the same and RBI would continue to be

concerned agency for monitoring / reporting as per existing procedure. FDI/NRI/OCB

investment under the automatic route shall continue to be governed by the notified

sectoral policy and equity caps.

Foreign Technology Collaboration Agreements

RBI also gives automatic permission for foreign technology agreement in all areas of

electronics provided:

1. Lump sum payment of the price of the technology does not exceed USD 2 million and

2. Royalty payments do not exceed 5% of domestic sales and 8% of exports. (The royalty

rates are net of taxes).

3. The payments are subject to an overall ceiling of 8 percent of total sales over a period of

10 years from the date of agreement or over 7 years period from the date of

commencement of commercial production, whichever is earlier.

Application for investment under the automatic process are to be made to the RBI and

approval is generally granted within three weeks.

Investment Proposals under Hardware and software Technology Parks, Export Oriented

Units and Export Processing Zones

Foreign investment up to 100 percent is welcome in electronics and software industries

set up exclusively for exports. The units set up under these programs are bonded factories

eligible to import, free of duty

Procedure for approval

4. Once the investment in equity has been approved, the import of capital goods,

components and raw materials or the engagement of foreign technicians for short

durations do not require any additional approvals.

5. Approval of the Ministry of Home Affairs is not needed for hiring of foreign nationals

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holding a valid employment visa.

6. Approval for setting up units in EPZs is given by the Board of Approvals in the Ministry

of Commerce.

7. Approval for setting up EOUs outside the Zones is given by the SIA, Ministry of

Industry.

8. Approval for setting up EHTP and STP units are cleared by the Inter Ministerial Standing

Committee (IMSC) setup under the Chairmanship of the Secretary, Department of

Electronics.

9. Proposals involving foreign direct investment not covered under automatic route are

considered by the Foreign Investment Promotion Board (FIPB).

10. Government approval

The FDI/ Foreign technology collaboration agreement proposals which do not conform to

the guidelines for automatic approval require Government approval through the Foreign

Investment Promotion Board (FIPB). The Government has set up a special 'Foreign

Investment Promotion Board' (FIPB) as a fast track mechanism to invite and facilitate

foreign investments in large projects in India, which are considered beneficial to the

Indian economy but are not covered by the automatic approval process and norms under

which SIA is authorized to grant investment approvals.

Investment Proposals outside the Purview of the RBI

Other proposal including in services sector which do not conform to the guidelines for

automatic approval or seeking higher foreign equity investment are approved by the

Secretariat for Industrial Assistance (SIA) in the Ministry of Industry.

Their entire requirement of capital goods, raw materials and components, spares and

consumables, office equipments etc. Deemed export benefits are available to suppliers of

these goods from the Domestic Tariff Area (DTA). A part of the production from such

units is permitted to be sold in the DTA depending upon the level of the value addition

achieved.

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1.8 Foreign Direct Investment in India-

Apart from being a critical driver of economic growth, foreign direct investment (FDI) is

a major source of non-debt financial resource for the economic development of India.

Foreign companies invest in India to take advantage of cheaper wages, special investment

privileges like tax exemptions, etc. For a country where foreign investments are being

made, it also means achieving technical know-how and generation of employment.

The continuous inflow of FDI in India, which is now allowed across several industries,

clearly shows the faith that overseas investors have in the country's economy.

The Indian government’s policy regime and a robust business environment have ensured

that foreign capital keep flowing into the country. The government has taken many

initiatives in recent years such as relaxing FDI norms across sectors such as defense, PSU

oil refineries, telecom, power exchanges and stock exchanges, among others.

Market Size

According to a recent report by global credit rating agency Moody’s, FDI inflows have

increased significantly in India in the current fiscal. This, according to Moody’s, is due to

India’s current pro-growth policies. Net FDI inflows totalled US$ 14.1 billion in the first

five months of 2014-15, representing a 33.5 per cent increase from the same period in

2013-14.

Total FDI inflows into India in the period April 2000–November 2014 touched US$

350,963 million. Total FDI inflows into India during the period April–November FY15

was US$ 18,884 million.

Mauritius is again emerging as the largest source of FDI in India, accounting for an

inflow of US$ 83,730 million in the April 2000-November 2014 period. According to

official data, the inflow of foreign investment from Singapore amounted to US$ 29,193

million, followed by the UK at US$ 21,761 million and Japan at US$ 17,557 million

during April 2000-November 2014.

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Investments

The government has announced that foreign investors can put in as much as Rs 90,300

crore (US$ 14.65 billion) in India’s rail infrastructure through the FDI route, according to

a list of projects released by the Ministry of Railways. The Rs 63,000 crore (US$ 10.22

billion) Mumbai-Ahmadabad high-speed corridor project is the single largest. The other

big ones include the Rs 14,000 crore (US$ 2.27 billion) CSTM-Panvel suburban corridor,

to be implemented in public-private partnership (PPP), and the Rs 1,200 crore (US$

194.79 million) Kachrapara rail coach factory, besides multiple freight line,

electrification and signalling projects.

Israel-based world's seventh largest agrochemicals firm ADAMA Agrochemicals,

formerly known as Makhteshim Agan Industries, plans to invest at least US$ 50 million

over the next three years. ADAMA's global president and Chief Executive Chen

Lichtenstein said the idea was to expand both manufacturing and research and

development facilities in India aimed at growing better than the average industry growth.

Apple - world's most admired electronics brand - that sells devices such as the iPhone,

iPad tablet and iPod media player – is planning to open 500 'iOS' stores in India in its

first major push that will include moving into smaller towns and cities.

The Department of Industrial Policy and Promotion (DIPP) has moved a Cabinet note to

allow 100 per cent FDI in medical devices as part of a strategy to not only reduce imports

but also promote local manufacturing for the global market, which will be worth over

US$ 400 billion next year.

Real estate private equity FDI is set to double after the Indian government ended the

three-year lock-in and has introduced 100 per cent FDI for completed assets, according to

JLL India. With India now allowing 100 per cent FDI in the construction sector, real

estate private equity investment could double – and boost demand from overseas property

buyers, according to sector experts.

FDI real estate private equity, which is currently estimated at around US$ 1billion - US$

1.5 billion per annum, could reach to up to US$ 3 billion in the next few years, according

to leading agency, JLL India.

15

The Ministry of Finance has announced that it has cleared 15 FDI applications, including

that of Panacea Biotech and Sanofi-Synthelabo (India), and recommended HDFC Bank's

proposal to hike foreign holding to the Cabinet for consideration.

Government Initiatives-

India’s cabinet has cleared a proposal which allows 100 per cent FDI in railway

infrastructure, excluding operations. Though the initiative does not allow foreign firms to

operate trains, it allows them to do other things such as create the network and supply

trains for bullet trains etc.

The government has notified easier FDI rules for construction sector, where 100 per cent

overseas investment is permitted, which will allow overseas investors to exit a project

even before its completion. It also said that 100 per cent FDI will be permitted under

automatic route in completed projects for operation and management of townships, malls

and business centres.

With the objective of encouraging foreign firms to transfer state-of-the-art technology in

defence production, the government may increase the FDI cap for the sector to 74 per

cent from 49 per cent at present. India is expected to spend US$ 40 billion on defence

purchases over the next 4-5 years, mostly from abroad.

The Union Cabinet has cleared a bill to raise the foreign investment ceiling in private

insurance companies from 26 per cent to 49 per cent, with the proviso that the

management and control of the companies must be with Indians.

The Reserve Bank of India (RBI) has allowed a number of foreign investors to invest, on

repatriation basis, in non-convertible/ redeemable preference shares or debentures which

are issued by Indian companies and are listed on established stock exchanges in the

country.

In an effort to bring in more investments into debt and equity markets, the RBI has

established a framework for investments which allows foreign portfolio investors (FPIs)

to take part in open offers, buyback of securities and disinvestment of shares by the

Central or state governments.

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1.9 Sector Specific Foreign Direct Investment in India

Hotel & Tourism: FDI in Hotel & Tourism sector in India

100% FDI is permissible in the sector on the automatic route. The term hotels include

restaurants, beach resorts, and other tourist complexes providing accommodation and/or

catering and food facilities to tourists. Tourism related industry include travel agencies,

tour operating agencies and tourist transport operating agencies, units providing facilities

for cultural, adventure and wild life experience to tourists, surface, air and water transport

facilities to tourists, leisure, entertainment, amusement, sports, and health units for

tourists and Convention/Seminar units and organizations.

For foreign technology agreements, automatic approval is granted if

i. up to 3% of the capital cost of the project is proposed to be paid for technical and

consultancy services including fees for architects, design, supervision, etc.

ii. up to 3% of net turnover is payable for franchising and marketing/publicity support fee,

and up to 10% of gross operating profit is payable for management fee, including

incentive fee.

Private Sector Banking:

Non-Banking Financial Companies (NBFC)

49% FDI is allowed from all sources on the automatic route subject to guidelines issued

from RBI from time to time.

a. FDI/NRI/OCB investments allowed in the following 19 NBFC activities shall be as per

levels indicated below:

1. Merchant banking

2. Underwriting

3. Portfolio Management Services

4. Investment Advisory Services

5. Financial Consultancy

6. Stock Broking

7. Asset Management

8. Venture Capital

9. Custodial Services

10. Factoring

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11. Credit Reference Agencies

12. Credit rating Agencies

13. Leasing & Finance

14. Housing Finance

15. Foreign Exchange Brokering

16. Credit card business

17. Money changing Business

18. Micro Credit

19. Rural Credit

b. Minimum Capitalization Norms for fund based NBFCs:

i) For FDI up to 51% - US$ 0.5 million to be brought upfront

ii) For FDI above 51% and up to 75% - US $ 5 million to be brought upfront

iii) For FDI above 75% and up to 100% - US $ 50 million out of which US $ 7.5 million

to be brought upfront and the balance in 24 months

c. Minimum capitalization norms for non-fund based activities:

Minimum capitalization norm of US $ 0.5 million is applicable in respect of all permitted

non-fund based NBFCs with foreign investment.

d. Foreign investors can set up 100% operating subsidiaries without the condition to

disinvest a minimum of 25% of its equity to Indian entities, subject to bringing in US$ 50

million as at b) (iii) above (without any restriction on number of operating subsidiaries

without bringing in additional capital)

e. Joint Venture operating NBFC's that have 75% or less than 75% foreign investment

will also be allowed to set up subsidiaries for undertaking other NBFC activities, subject

to the subsidiaries also complying with the applicable minimum capital inflow i.e. (b)(i)

and (b)(ii) above.

f. FDI in the NBFC sector is put on automatic route subject to compliance with

guidelines of the Reserve Bank of India. RBI would issue appropriate guidelines in this

regard.

Insurance Sector: FDI in Insurance sector in India

FDI up to 26% in the Insurance sector is allowed on the automatic route subject to

obtaining license from Insurance Regulatory & Development Authority (IRDA)

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Telecommunication: FDI in Telecommunication sector

i. In basic, cellular, value added services and global mobile personal communications by

satellite, FDI is limited to 49% subject to licensing and security requirements and

adherence by the companies (who are investing and the companies in which investment

is being made) to the license conditions for foreign equity cap and lock- in period for

transfer and addition of equity and other license provisions.

ii. ISPs with gateways, radio-paging and end-to-end bandwidth, FDI is permitted up to 74%

with FDI, beyond 49% requiring Government approval. These services would be subject

to licensing and security requirements.

iii. No equity cap is applicable to manufacturing activities.

iv. FDI up to 100% is allowed for the following activities in the telecom sector :

a. ISPs not providing gateways (both for satellite and submarine cables);

b. Infrastructure Providers providing dark fiber (IP Category 1);

c. Electronic Mail; and

d. Voice Mail

The above would be subject to the following conditions:

e. FDI up to 100% is allowed subject to the condition that such companies would divest

26% of their equity in favor of Indian public in 5 years, if these companies are listed in

other parts of the world.

f. The above services would be subject to licensing and security requirements, wherever

required.

Proposals for FDI beyond 49% shall be considered by FIPB on case to case basis.

Trading: FDI in Trading Companies in India

Trading is permitted under automatic route with FDI up to 51% provided it is primarily

export activities, and the undertaking is an export house/trading house/super trading

house/star trading house. However, under the FIPB route:-

i. 100% FDI is permitted in case of trading companies for the following activities:

exports;

bulk imports with ex-port/ex-bonded warehouse sales;

cash and carry wholesale trading;

19

other import of goods or services provided at least 75% is for procurement and sale of

goods and services among the companies of the same group and not for third party use or

onward transfer/distribution/sales.

ii. The following kinds of trading are also permitted, subject to provisions of EXIM

Policy:

a. Companies for providing after sales services (that is not trading per se)

b. Domestic trading of products of JVs is permitted at the wholesale level for such trading

companies who wish to market manufactured products on behalf of their joint ventures in

which they have equity participation in India.

c. Trading of hi-tech items/items requiring specialized after sales service

d. Trading of items for social sector

e. Trading of hi-tech, medical and diagnostic items.

f. Trading of items sourced from the small scale sector under which, based on technology

provided and laid down quality specifications, a company can market that item under its

brand name.

g. Domestic sourcing of products for exports.

h. Test marketing of such items for which a company has approval for manufacture

provided such test marketing facility will be for a period of two years, and investment in

setting up manufacturing facilities commences simultaneously with test marketing.

Power: FDI In Power Sector in India

Up to 100% FDI allowed in respect of projects relating to electricity generation,

transmission and distribution, other than atomic reactor power plants. There is no limit on

the project cost and quantum of foreign direct investment.

Drugs & Pharmaceuticals

FDI up to 100% is permitted on the automatic route for manufacture of drugs and

pharmaceutical, provided the activity does not attract compulsory licensing or involve use

of recombinant DNA technology, and specific cell / tissue targeted formulations.

FDI proposals for the manufacture of licensable drugs and pharmaceuticals and bulk

drugs produced by recombinant DNA technology, and specific cell / tissue targeted

formulations will require prior Government approval.

20

Roads, Highways, Ports and Harbors

FDI up to 100% under automatic route is permitted in projects for construction and

maintenance of roads, highways, vehicular bridges, toll roads, vehicular tunnels, ports

and harbors.

Pollution Control and Management

FDI up to 100% in both manufacture of pollution control equipment and consultancy for

integration of pollution control systems is permitted on the automatic route.

Call Centers in India / Call Centres in India

FDI up to 100% is allowed subject to certain conditions.

Business Process Outsourcing BPO in India

FDI up to 100% is allowed subject to certain conditions.

Special Facilities and Rules for NRI's and OCB's

NRI's and OCB's are allowed the following special facilities:

1. Direct investment in industry, trade, infrastructure etc.

2. Up to 100% equity with full repatriation facility for capital and dividends in the following

sectors:

i. 34 High Priority Industry Groups

ii. Export Trading Companies

iii. Hotels and Tourism-related Projects

iv. Hospitals, Diagnostic Centers

v. Shipping

vi. Deep Sea Fishing

vii. Oil Exploration

viii. Power

ix. Housing and Real Estate Development

x. Highways, Bridges and Ports

xi. Sick Industrial Units

xii. Industries Requiring Compulsory Licensing

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xiii. Industries Reserved for Small Scale Sector

3. Up to 40% Equity with full repatriation: New Issues of Existing Companies raising

Capital through Public Issue up to 40% of the new Capital Issue.

4. On non-repatriation basis: Up to 100% Equity in any Proprietary or Partnership engaged

in Industrial, Commercial or Trading Activity.

5. Portfolio Investment on repatriation basis: Up to 1% of the Paid up Value of the equity

Capital or Convertible Debentures of the Company by each NRI. Investment in

Government Securities, Units of UTI, National Plan/Saving Certificates.

6. On Non-Repatriation Basis: Acquisition of shares of an Indian Company, through a

General Body Resolution, up to 24% of the Paid Up Value of the Company.

7. Other Facilities: Income Tax is at a Flat Rate of 20% on Income arising from Shares or

Debentures of an Indian Company.

Certain terms and conditions do apply.

1.10 Investment Risks in India

1) Sovereign Risk India is a vibrant parliamentary democracy and has been one since its political independence from British rule more than 50 years ago. There is no serious revolutionary

movement in India; hence there is no conceivable possibility of the state collapsing. Sovereign Risk in India is therefore zero for both "foreign direct investment" and

"foreign portfolio investment." It is however advisable to avoid investing in the extreme north-eastern parts of India because of terrorist threats. Kashmir in the northern tip is also a troubled area, but investment opportunities in Kashmir are anyway restricted by law.

2) Political Risk

India suffered political instability for a few years due to the failure of any party to win an absolute majority in Parliament. However, political stability has returned since the

previous general elections in 1999. However, political instability did not change India's economic course though it delayed certain decisions relating to the economy.

The political divide in India is not one of policy, but essentially of personalities. Economic liberalization (which is what foreign investors are interested in) has been

accepted as a necessity by all parties including the Communist Party of India (Marxist). Thus, political instability in India, in practical terms, posed no risk to foreign direct

investors because no policy framed by a past government has been reversed by any successive government so far. You can find a comparison in Italy which has had some 45

governments in 50 years, yet overall economic policy remains unchanged. Even if

22

political instability is to return in the future, chances of a reversal in economic policy are next to nil.

As for terrorism, no terrorist outfit is strong enough to disturb the state. Except for

Kashmir in the north and parts of the north-east, terrorist activity is either non-existent or too weak to be of any significance. It would take an extreme stretching of the imagination to visualise a Bangladesh-type state-disrupting revolution in India or a Kuwait-type

annexation of India by a foreign power.

Hence, political risk in India is practically non-existent.

3) Commercial Risk

Commercial risk exists in business in any country. Not each and every product or service can be readily sold, hence it is necessary to study the demand/supply situation for a

particular product or service before making any major investment. There is a large number of market research firms in India (including our own) which will study

demand/supply situation for any product/service and advise the potential investor accordingly in exchange of a professional fee. The India One Stop website provides some accurate statistics and insights into the most viable sectors for foreign direct investments.

4) Risk of Foreign Sanctions

India did not seem to be in the good books of the United States government due to its nuclear weapons and missiles development policy. However, US President Bill Clinton's

state visit to India in 2000 was a massive hit which even saw the President dancing with a crowd of colorfully dressed women in the northwestern state of Rajasthan. Subsequent to

the visit, visits between the two countries at different levels took place, and the US government has all but come to terms with the reality of a nuclear-armed India.

Background to the sanctions: The US had imposed some sanctions against India because of its nuclear tests in May 1998. But these sanctions have been theoretical and

even such theoretical sanctions were relaxed within months of their imposition. Given the fact that US foreign policy in the post-Cold War era is dictated by its economic interests, it anyway seemed most unlikely that Iraq or Libya-type sanctions would ever be imposed

on India. India is highly self-sufficient in terms of basic technology and requirements, hence the threat sanctions could not bring India to its knees. The United States seems to

understand this which is perhaps why it never went ahead with really biting sanctions against India.

Regardless of how strong the threat of sanctions were, the US President's above-mentioned state visit to India has laid to rest all doubts. In fact, the United States has

often referred to India as a great potential trading partner as well as, perhaps, a politically strategic partner in Asia. India's rapidly improving relations with Israel has only lent further momentum to India-US bonding.

23

Given the fact that the United States has somehow managed for itself the role of the world's policeman (a role to which India is explicitly opposed), other countries – notably

Japan and Australia – have also toned down their opposition to India's nuclear weapons programme. In other words, it is now business as usual for the world vis-à-vis India.

It is however theoretically possible that relations with the United States can go sour again in the future. If that happens, India's sheer self-sufficiency in all matters except in the not-

so-critical cutting edge technologies, will ensure that no sanction will hurt more than a mosquito bite on an elephant.

The threat of foreign sanctions is therefore of academic and speculative value.

1.11 Limitation of the study –

1. More requirement of time ‘

2. High cost

24

Chapter 2

Literature Review –

From a review of a range of literature sources, this section describes the benefits that FDI

can bring to an economy and examines the impact of increased FDI on economic growth

and skills demand.

2.1 Benefits Of FDI-

1)More consumer savings

One of the biggest advantage of FDI is that it will increase the savings of Indian

consumer as he will get good quality products at much cheaper rates. Consumer savings

are likely to increase 5 to 10% from FDI.

2) Higher remuneration for farmers

Another advantage of FDI is that it will help a lot in improving the miserable condition of

Indian farmers who are committing suicides on daily basis because of lesser return from

their agricultural produce. But FDI will certain help a lot in improving their conditions as

the farmers are going to get 10 to 30 %higher remuneration because of FDI.

3) Increase in employment opportunities

FDI is certainly going to increase the employment opportunities in India by providing

around 3 to 4 million new jobs. Not only this another 4 to 6 million jobs will be created in

logistics, labour etc. because of FDI.

4) Increase in government revenue

Government revenues are certainly going to increase a lot because of FDI. Government

revenues will increase by 25 to 30 billion dollars which is a really big amount. This

government revenue can help a lot in the development of Indian economy.

25

2.2) Impact of increased FDI-

1) Destruction of small entrepreneurs

The biggest fear from FDI is that it is likely to destroy the small entrepreneurs or small

kirana shops as they will not be able to withstand the tough competition of big

entrepreneurs as these entrepreneurs are going to provide all the goods to the consumers

at much lesser prices.

2) Shrinking of jobs

Many critics of FDI are of the view that entry of big foreign chains like Wal-Mart,

Carrefour etc. are not going to generate any jobs in reality in India. At best the jobs will

move from unorganized sector to organized sector while their number will remain the

same or lesser but not more.

3) No real benefit to farmers

Critics of FDI are also of the view that it is a fallacy that the farmers are going to benefit

in any way because of the entry of foreign chains in India rather it will make the Indian

farmers a slave of these big chains & the farmers will entirely be on their mercy. Thus,

FDI is only going to deteriorate the already miserable conditions of Indian farmers.

26

CHAPTER 3

OBJECTIVE & SCOPE

Objectives:

1. To study the trends and pattern of flow of FDI.

2. To assess the determinants of FDI inflows.

3. To evaluate the impact of FDI on the Indian economy.

4. To know the flow of investment in India

Scope -

1. Domestic capital is inadequate for purpose of economic growth.

2. Foreign capital is usually essential, at least as a temporary measure, during the period

when the capital market is in the process of development.

3. Foreign capital usually brings it with other scarce productive factors like technical

knowhow, business expertise and knowledge.

27

CHAPTER 4 –DATA COLLECTION & ANALYSIS

DATA COLLECTION

In this project secondary data are used.

Secondary data-

is data collected by someone other than the user. Common sources of secondary data for

social science include censuses, organisational records and data collected through

qualitative methodologies or qualitative research. Primary data, by contrast, are collected

by the investigator conducting the research.

Secondary data analysis saves time that would otherwise be spent collecting data and,

particularly in the case of quantitative data, provides larger and higher-quality databases

that would be unfeasible for any individual researcher to collect on their own. In addition,

analysts of social and economic change consider secondary data essential, since it is

impossible to conduct a new survey that can adequately capture past change and/or

developments.

28

4.1 FDI equity inflows (month-wise) during the financial year 2014-15:

In this table shows FDI equity inflows (month-wise) during the financial year 2014-15.

(Table no. 4.1)

Financial Year

2014-15

( April-March )

Amount of FDI Equity inflows

(In Rs. Crore)

(In US$ mn)

1. April, 2014 10,290 1,705

2. May, 2014 21,373 3,604

3. June, 2014 11,508 1,927

4. July, 2014 21,022 3,500

5. August, 2014 7,783 1,278

6. September, 2014 16,297 2,678

7. October, 2014 16,288 2,655

8. November, 2014 9,486 1,537

2014-15 ( from

April, 2014 to

November, 2014) #

114,047 18,884

2013-14 (from

April, 2013 to

November, 2013) #

92,994 15,458

%age growth over

last year

( + ) 23 % ( + ) 22 %

( Source : secondary data )

29

(Graph no.4.1)

Interpretation - In the above table 4.1 shows that the fdi equity inflows in the months

April 2004 was 10,290(In Rs. Crore) and the month of November was 9,486 due to

changes in return on investment and other environmental factors. The % growth FDI

over last year increase by ( + ) 23 %.

0

5,000

10,000

15,000

20,000

25,000

(In Rs. Crore)

(In Rs. Crore)

30

4.2 SECTORS ATTRACTING HIGHEST FDI EQUITY INFLOWS:

In this table shows sectors attracting highest fdi equity inflows.(Table no. 4.2)

Ran

ks

Sector 2012-13

( April -

March)

2013-14

(April-

March)

2014-15

(April-

Novembe

r,

Cumulativ

e

Inflows

(April ’00 -

November

‘14)

% age to

total

Inflows (In

terms of

US$)

1. SERVICES SECTOR ** 26,306

(4,833)

13,294

(2,225)

11,189

(1,847)

196,759

(41,307)

18 %

2. CONSTRUCTION

DEVELOPMENT:

TOWNSHIPS,

HOUSING, BUILT-UP

INFRASTRUCTURE

7,248

(1,332)

7,508

(1,226)

4,240

(703)

112,797

(24,009)

10 %

3. TELECOMMUNICATI

ONS

(radio paging, cellular

mobile, basic telephone

services)

1,654

(304)

7,987

(1,307)

14,726

(2,472)

81,446

(16,635)

7 %

4. COMPUTER

SOFTWARE &

HARDWARE

2,656

(486)

6,896

(1,126)

5,241

(862)

64,911

(13,679)

6 %

5. DRUGS &

PHARMACEUTICALS

6,011

(1,123)

7,191

(1,279)

6,903

(1,154)

62,974

(12,751)

5 %

6. AUTOMOBILE

INDUSTRY

8,384

(1,537)

9,027

(1,517)

9,379

(1,539)

57,575

(11,351)

5 %

7. CHEMICALS (OTHER

THAN FERTILIZERS)

1,596

(292)

4,738

(878)

2,830

(470)

48,063

(10,137)

4 %

8. POWER 2,923

(536)

6,519

(1,066)

3,317

(550)

45,972

(9,450)

4 %

31

( Source : secondary data )

Interpretation - In the table 4.2 shows service sectors is attracting highest fdi equity

inflows tan other sectors because of Indian government gives 100% fdi & other

incentives .

Ran

ks

Sector 2012-13

( April -

March)

2013-14

(April-

March)

2014-15

(April-

Novembe

r,

Cumulativ

e

Inflows

(April ’00 -

November

‘14)

% age to

total

Inflows (In

terms of

US$)

9. METALLURGICAL

INDUSTRIES

7,878

(1,466)

3,436

(568)

1,323

(219)

39,572

(8,294)

4 %

10 HOTEL & TOURISM 17,777

(3,259)

2,949

(486)

3,288

(544)

39,496

(7,662)

3 %

32

4.3 FDI EQUITY INFLOWS (MONTH-WISE) DURING THE CALENDAR

YEAR 2014: In this table shows fdi equity inflows (month-wise) during the calendar

year 2014

(Table no. 4.3)

(Source : secondary data)

Interpretation -In the above table 4.3 shows that the fdi equity inflows in the year

2013was 122,664 (In Rs. Crore) and the year 2014 was 122,664(In Rs. Crore) due to

changes in return on investment and other environmental factors. The % growth FDI

over last year increase by ( + ) 32 %.

Calendar Year 2014

(Jan.-Dec.)

Amount of FDI Equity inflows

(In Rs. Crore)

(In US$ mn)

1. 13,589 2,189

2. 12,557 2,017

3. 21,558 3,533

4. 10,290 1,705

5. 21,373 3,604

6. 11,508 1,927

7. 21,022 3,500

8. 7,783 1,278

9. 16,297 2,678

10. 16,288 2,655

11. 9,486 1,537

Year 2014 (up to November,

2014) #

161,751 26,623

Year 2013 (up to November,

2013) #

122,664 20,936

%age growth over last year ( + ) 32 % ( + ) 27 %

33

4.4 SHARE OF TOP INVESTING COUNTRIES FDI EQUITY INFLOWS

(Financial years):

Amount Rupees in crores (US$ in million)

In this table shows the share of top investing countries fdi equity inflows (financial

years).( Table no. 4.4)

1. MAURITIUS 51,654

(9,497)

29,360

(4,859)

31,336

(5,205)

401,821

(83,730)

35 %

2. SINGAPORE 12,594

(2,308)

35,625

(5,985)

22,698

(3,747)

148,504

(29,193)

12 %

3. U.K. 5,797

(1,080)

20,426

(3,215)

5,971

(998)

106,856

(21,761)

9 %

4. JAPAN 12,243

(2,237)

10,550

(1,718)

7,789

(1,289)

88,433

(17,557)

7 %

5. NETHERLANDS 10,054

(1,856)

13,920

(2,270)

14,690

(2,429)

70,988

(13,665)

6 %

6. U.S.A. 3,033

(557)

4,807

(806)

8,248

(1,358)

63,978

(13,286)

6 %

7. CYPRUS 2,658

(490)

3,401

(557)

2,837

(470)

38,567

(7,916)

3 %

8. GERMANY 4,684

(860)

6,093

(1,038)

3,725

(615)

35,331

(7,134)

3 %

9 FRANCE 3,487

(646)

1,842

(305)

3,229

(530)

21,935

(4,409)

2 %

10. SWITZERLAND 987

(180)

2,084

(341)

1,116

(184)

14,264

(2,892)

1 %

TOTAL FDI

INFLOWS

FROM ALL

COUNTRIES

*

121,907

(22,423)

147,518

(24,299)

114,047

(18,884)

1,158,477

(236,586)

- -

(Source : secondary data)

34

Interpretation - In the table shows the share of top investing country in India is

MAURITIUS by investing 35 % fdi in equity because of Indian government gives more

initiative to foreign investors and restrict the barriers.

4.5 STATEMENT ON RBI’S REGIONAL OFFICES (WITH STATE COVERED)

RECEIVED FDI EQUITY INFLOWS -

In this table statement on RBI regional offices (with state covered) received fdi equity

inflows .

( Table no. 4.5)

S

No.

RBI’s -

Regional

Office2

State covered 2012-

13

( April

-

March)

2013-14

( April -

March)

2014-

15

(April-

Novem

ber,

2014)

Cumulativ

e

Inflows

(April ’00

-

November

‘14)

%age to total

Inflows

(in terms

of US$)

1 MUMBAI MAHARASHT

RA, DADRA &

NAGAR

HAVELI,

DAMAN &

DIU

47,359

(8,716)

20,595

(3,420)

22,080

(3,657)

336,169

(70,414)

30

2 NEW DELHI DELHI, PART

OF UP AND

HARYANA

17,490

(3,222)

38,190

(6,242)

19,606

(3,239)

226,377

(45,775)

19

3 CHENNAI TAMIL NADU,

PONDICHERR

Y

15,252

(2,807)

12,595

(2,116)

15,812

(2,607)

81,218

(15,803)

7

4 BANGALORE KARNATAKA 5,553

(1,023)

11,422

(1,892)

9,132

(1,498)

69,999

(14,174)

6

35

S

No.

RBI’s -

Regional

Office2

State covered 2012-

13

( April

-

March)

2013-14

( April -

March)

2014-

15

(April-

Novem

ber,

2014)

Cumulativ

e

Inflows

(April ’00

-

November

‘14)

%age to total

Inflows

(in terms

of US$)

5 AHMEDABA

D

GUJARAT 2,676

(493)

5,282

(860)

4,110

(678)

48,492

(10,188)

4

6 HYDERABA

D

ANDHRA

PRADESH

6,290

(1,159)

4,024

(678)

6,535

(1,082)

47,449

(9,728)

4

7 KOLKATA WEST

BENGAL,

SIKKIM,

ANDAMAN &

NICOBAR

ISLANDS

2,319

(424)

2,659

(436)

858

(142)

14,021

(2,884)

1

8 CHANDIGAR

H`

CHANDIGAR

H, PUNJAB,

HARYANA,

HIMACHAL

PRADESH

255

(47)

562

(91)

218

(36)

6,345

(1,328)

0.6

9 JAIPUR RAJASTHAN 714

(132)

233

(38)

3,212

(537)

6,770

(1,260)

0.5

10. BHOPAL MADHYA

PRADESH,

CHATTISGAR

H

1,208

(220)

708

(119)

600

(100)

6,095

(1,215)

0.5

11 KOCHI KERALA,

LAKSHADWE

EP

390

(72)

411

(70)

516

(85)

5,247

(1,066)

0.4

36

S.

No.

RBI’s -

Regional

Office2

State covered 2012-

13

( April

-

March)

2013-14

( April -

March)

2014-

15

(April-

Novem

ber,

2014)

Cumulativ

e

Inflows

(April ’00

-

November

‘14)

%age to total

Inflows

(in terms

of US$)

12 PANAJI GOA 47

(9)

103

(17)

206

(34)

3,863

(822)

0.3

13 KANPUR UTTAR

PRADESH,

UTTRANCHA

L

167

(31)

150

(25)

279

(46)

2,043

(418)

0.2

14 BHUBANESH

WAR

ORISSA 285

(52)

288

(48)

51

(9)

1,957

(397)

0.2

15 GUWAHATI ASSAM,

ARUNACHAL

PRADESH,

MANIPUR,

MEGHALAYA

, MIZORAM,

NAGALAND,

TRIPURA

27

(5)

4

(0.6)

9

(1)

361

(80)

0

16 PATNA BIHAR,

JHARKHAND

41

(8)

9

(1)

49

(8)

248

(47)

0

17 JAMMU JAMMU &

KASHMIR

0

(0)

1

(0.2)

25

(4)

26

(4)

0

1 18 REGION NOT INDICATED3

21,833

(4,004)

50,283

(8,245)

30,750

(5,122)

301,266

(60,861)

100.00

37

S.

No.

RBI’s -

Region

al

Office2

State

covered

2012-

13

( April

-

March)

2013-14

( April -

March)

2014-15

(April-November,

2014)

Cumulative

Inflows

(April ’00 -

November ‘14)

%age to total

Inflows

(in terms

of US$)

19 RBI’S-NRI SCHEMES

(from 2000 to 2002)

0 0 0 533

(121)

-

GRAND TOTAL 121,90

7

(22,424

)

147,518

(24,299)

114,04

7

(18,884

)

1,158,477

(236,586)

-

(Source : secondary data)

Interpretation - In the table shows that the highest FDI in Mumbai is 30 % because of

more of industries , infrastructure facilities & capital market are located.

38

4.6 STATEMENT ON SECTOR-WISE FDI EQUITY INFLOWS

In this table shows statement on sector-wise fdi equity inflows.

(Table no.4.6)

S.No

Sector

Amount of FDI Inflows %age with

total

FDI

Inflows (+)

(In Rs

crore)

(In US$

million)

1 SERVICES SECTOR* 196,758.65 41,307.13 17.47

2 CONSTRUCTION

DEVELOPMENT: Townships,

housing, built-up infrastructure

and construction-development

projects

112,796.94 24,009.03 10.15

3 TELECOMMUNICATIONS 81,445.68 16,634.55 7.03

4 COMPUTER SOFTWARE &

HARDWARE

64,911.14 13,678.93 5.78

5 DRUGS &

PHARMACEUTICALS

62,973.48 12,751.12 5.39

6 AUTOMOBILE INDUSTRY 57,575.16 11,351.26 4.80

7 CHEMICALS (OTHER THAN

FERTILIZERS)

48,063.27 10,137.35 4.29

8 POWER 45,971.95 9,450.06 4.00

9 METALLURGICAL

INDUSTRIES

39,572.31 8,294.08 3.51

10 HOTEL & TOURISM 39,496.34 7,661.60 3.24

11 TRADING 36,624.62 6,909.34 2.92

12 PETROLEUM 31,626.60 6,515.72 2.76

39

S.No

Sector

Amount

of FDI

Inflows

%age with

total

FDI Inflows

(+)

%age with

total

FDI

Inflows (+)

(In Rs

crore)

(In US$

million)

14 INFORMATION &

BROADCASTING

(INCLUDING PRINT MEDIA)

18,396.47 3,769.78 1.59

15 ELECTRICAL EQUIPMENTS 18,051.24 3,746.78 1.58

16 NON-CONVENTIONAL

ENERGY

18,041.99 3,444.67 1.46

17 INDUSTRIAL MACHINERY 16,792.28 3,254.92 1.38

18 CEMENT AND GYPSUM

PRODUCTS

14,617.13 3,084.29 1.30

19 CONSTRUCTION

(INFRASTRUCTURE)

ACTIVITIES

14,077.23 2,806.76 1.19

20 CONSULTANCY SERVICES 13,652.49 2,745.54 1.16

21 MISCELLANEOUS

MECHANICAL &

ENGINEERING INDUSTRIES

12,752.93 2,691.75 1.14

22 HOSPITAL & DIAGNOSTIC

CENTRES

13,026.27 2,546.67 1.08

23 FERMENTATION

INDUSTRIES

11,182.77 2,110.90 0.89

24 AGRICULTURE SERVICES 8,601.32 1,740.19 0.74

40

S.No

Sector

Amount

of FDI

Inflows

%age with

total

FDI Inflows

(+)

%age with

total

FDI

Inflows (+)

(In Rs

crore)

(In US$

million)

26 PORTS 6,730.91 1,637.30 0.69

27 MINING 8,200.41 1,627.03 0.69

28 TEXTILES (INCLUDING

DYED,PRINTED)

7,433.11 1,511.23 0.64

29 ELECTRONICS 6,705.40 1,409.84 0.60

30 SEA TRANSPORT 6,531.73 1,366.52 0.58

31 PRIME MOVER (OTHER

THAN ELECTRICAL

GENERATORS)

6,295.94 1,200.31 0.51

32 EDUCATION 5,047.80 974.81 0.41

33 PAPER AND PULP

(INCLUDING PAPER

PRODUCTS)

4,296.96 905.45 0.38

34 MEDICAL AND SURGICAL

APPLIANCES

4,529.88 874.54 0.37

35 SOAPS, COSMETICS &

TOILET PREPARATIONS

4,417.47 846.73 0.36

36 MACHINE TOOLS 3,458.95 703.04 0.30

37 CERAMICS 3,124.69 668.03 0.28

38 RAILWAY RELATED

COMPONENTS

3,425.07 634.06 0.27

39 FERTILIZERS 2,915.52 543.12 0.23

40 AIR TRANSPORT 2,594.35 542.55 0.23

41

S.No

Sector

Amount

of FDI

Inflows

%age with

total

FDI Inflows

(+)

%age with

total

FDI

Inflows (+)

(In Rs

crore)

(In US$

million)

42 DIAMOND,GOLD

ORNAMENTS

2,302.60 472.40 0.20

43 GLASS 2,265.49 443.63 0.19

44 PRINTING OF BOOKS

(INCLUDING LITHO

PRINTING INDUSTRY)

2,212.61 427.88 0.18

45 AGRICULTURAL

MACHINERY

2,122.07 413.04 0.17

46 COMMERCIAL, OFFICE &

HOUSEHOLD EQUIPMENTS

1,447.36 298.26 0.13

47 RETAIL TRADING (SINGLE

BRAND)

1,549.92 275.38 0.12

48 EARTH-MOVING

MACHINERY

1,137.02 234.52 0.10

49 SCIENTIFIC INSTRUMENTS 952.67 170.65 0.07

51 TEA AND COFFEE

(PROCESSING &

WAREHOUSING COFFEE &

RUBBER)

489.53 107.08 0.05

52 TIMBER PRODUCTS 446.09 87.31 0.04

53 DYE-STUFFS 417.28 74.38 0.03

54 PHOTOGRAPHIC RAW FILM

AND PAPER

273.76 67.29 0.03

42

S.No

Sector

Amount

of FDI

Inflows

%age with

total

FDI Inflows

(+)

%age with

total

FDI

Inflows (+)

(In Rs

crore)

(In US$

million)

56 BOILERS AND STEAM

GENERATING PLANTS

314.80 63.33 0.03

57 SUGAR 267.39 55.90 0.02

58 GLUE AND GELATIN 204.29 36.68 0.02

59 COAL PRODUCTION 119.19 27.73 0.01

60 MATHEMATICAL,SURVEYI

NG AND DRAWING

INSTRUMENTS

39.80 7.98 0.00

61 DEFENCE INDUSTRIES 24.36 4.94 0.00

62 COIR 22.05 4.07 0.00

63 MISCELLANEOUS

INDUSTRIES

40,356.42 8,648.59 3.66

SUB-TOTAL

1,157,944.

00

100.00

236,465.19 100.00

64. RBI’S- NRI SCHEMES (2000-

2002)

533.06

121.33

-

GRAND TOTAL 1,158,477.

06

236,586.52 -

(Source : secondary data)

Interpretation - In this table 4.6 shows that the highest sector-wise fdi equity inflows

in service sector because of higher rate of returns, availability of labours in minimum

price & low risk.

43

CHAPTER 5

FINDINGS ,SUGGESTIONS & CONCLUSION -

Findings –

1. The highest sector-wise fdi equity inflows in service sector.

2. The highest FDI in Mumbai is 30 %

3. The share of top investing country in India is MAURITIUS by investing 35 % FDI in

equity.

4. The percentages of growth in FDI over last year increase by ( + ) 23 % in 2015.

Suggestions -

1. Reduce project level compliance burden on foreign investors

2. Provide greater clarity to foreign investor community

3. Ensure that foreign capital is not blocked in un-productive

4. Present necessary exit options to the foreign investors

Conclusion-

FDI, thus on one hand helps in increasing the output through usage of advanced

technology and management techniques and on the other it is a threat to local companies

in the country. Government should take steps in the direction of integrating foreign

investors with local businesses. This will help in overall economic development as well

as preservation of country’s heritage. MNCs should be allowed to set up in such a manner

that they help increase the standard of living of our country instead of sole profit making.

44

CHAPTER NO.6

REFERNCES & BIBLOGRAPHY-

REFERENCES

1. Chaturvedi Ila,(2011) "Role of FDI in Economic Development of India: Sectoral

Analysis" International Conference on Technology and Business Management, Jaipuria

Institute of Management, Ghaziabad

2. Goel Shashank, Kumar K. Phani , Rao Samasiva (2012), “Trends and Patterns of Fdi in

India and its Economic Growth” Asian Journal of Research in Business Economics and

Management vol. No.2(4)

3. K S Chalapati Rao, M R Murti, K V K Ranganathan, (1999)"Foreign Direct

Investments in the Post- Liberlization Period- An Overview", Journal of Indian School of

Political Economy, vol. (4), no. 11

4. Madem Srinu, Gudla Sandeep, Rao K Bhaskara,(2012)," Fdi Trends during the Last

Decade and its Effect on Various Sector in India", International Journal of Scientific and

Research Publications, vol. (12), no. 2

5. N.J. Sebastian, (2010), "Fdi in India and its growth linkages", National council of

applied economic research, Department of Industrial policy and promotion

6. R. Anitha (2012)" Foreign Direct Investment and Economic Growth in India"

International Journal of Marketing, Financial Services & Management Research, vol. (8),

no. 1

7. R. Nagaraj (2003)," Foreign Direct Investments in India in the 1990s Trends and

Issues", Economic and Political Weekly, vol. (38), no. 17, pp. 1701-1712

8. Sahni Priyanka(2012), " Trends and Determinants Of Foreign Direct Investment in

India: An Empirical Investigation", International Journal of Marketing and Technology,

vol. (8), no. 2

9. Singh Jasbir, Chadha Sumita, Sharma Anupama (2012) ,"Role of Foreign Direct

Investment in India: An Analytical Study" , International Journal Of Engineering and

Science, vol. no. 1(5), pp 34-42

45

Websites

10. http:// en.wikipedia.org/wiki/fdi

11. www.ibef.org/india-at-a-glance/foreign-direct- investment.aspx

12. www.fdi.in/ https://www.iaccindia.com/userfiles/files/FDI%20Manual%20-

%20Policy...

13. dipp.nic.in/English/Archive/FDI_Manual/FDI_Manual_text_Latest.pdf