FDI Final

Foreign
Direct
Investment
Presented by:
Mohit Bhute A09
Jay Darji A11
Jayesh Gamre A23
Karan Gundecha A33
Rahul Handgar A35
Kushal Jain A38
Introduction
• History
Introduction
• Policies
• Effect of the LPG Model on FDI
EVOLUTION OF FDI IN INDIA
1948-1969
Post independence period ranging from 1948 – 1969 was observed to be an era of protection and closed economy where
a very minor proportion of foreign investors were participating and moving their investment capital cautiously to India
(Host country), in view of Swadeshi Movement.
1969-1991
This era witnessed an initiation and boon to Indian economy as India started adopting Monopolistic And Restrictive
Trade Practices Act (MRTP) in 1970 and , Foreign Exchange Regulation Act (FERA) 3 was passed in the year 1973 and
took force from January 1, 1974.
1991-2000
During this period Foreign Exchange Regulation Act (FERA) was replaced by Foreign Exchange Management Act
(FEMA)4 with a revolutionary liberalization in the procedural aspects followed for foreign investment in India.
2000-2007
In the Year 2000 BRICS summit played a vital role by in interlinking of the global economy. The high economic growth
rate was seen as a result of the investment of foreign capital in various active sectors. This phase is considered to be the
phase of global optimism and global boom.
2 0 0 7 - 2 0 11
During this phase, India remained resistant to global economic recession. Growth rate decreased marginally due to poor
fund flow. The government of India eventually approved foreign investors to have 100% owned subsidiary of the
companies set up in India.
2 0 11 - 2 0 1 5
Although global economies started recovering from recession during this period, India witnessed slow growth rate which
is attributed to a deficit in the current account and capital outflow. Pathetically, currency depreciation, high inflation,
depreciating forex reserves, excessive crude oil/ gold import duties are some more reasons for the said scenario.
• 2015-2022
India received the highest annual FDI inflows of USD 84.8
billion in FY 21-22. India's computer software and hardware
industry attracted the highest FDI equity inflow amounting to
US$ 14.46 billion, followed by the automobile industry at US$
6.99 billion, trading at US$ 4.53 billion and construction
activities at US$ 3.37 billion. India also had major FDI flows
coming from Singapore at US$ 15.87 billion, followed by the
US (US$ 10.54 billion), Mauritius (US$ 9.39 billion) and the
Netherlands (US$ 4.62 billion). The state that received the
highest FDI during this period was Karnataka at US$ 22.07
billion, followed by Maharashtra (US$ 15.43 billion), Delhi
(US$ 8.18 billion), Gujarat (US$ 2.70 billion) and Haryana
(US$ 2.79 billion). In 2022 (until August 2022) India received
811 Industrial Investment Proposals which were valued at Rs.
352,697 crores (US$ 42.78 billion).
IMPORTANCE OF FDI
• Foreign direct investment is significant for developing economies and emerging markets where companies need funding and expertise
to expand their international sales.
• Private investment in infrastructure, energy, and water is a critical driver of the economy as helps in increasing jobs and wages.
• Diversifies investor portfolios: Individual investors have the potential to achieve greater portfolio efficiency (return per unit of risk),
as FDI diversifies their holdings outside of a specific country, industry, or political system .
• Provides technology to developing countries: Recipient businesses receive "best practices" management, accounting, or legal
guidance from their investors. By adopting these practices, they enhance their employees' lifestyles. That raises the standard of living
for more people in the recipient country. FDI rewards the best companies in any country. It reduces the influence of local governments
over them.
• Provides financing to developing countries: Recipient countries see their standard of living rise. As the recipient company benefits
from the investment, it can pay higher taxes. Unfortunately, some nations offset this benefit by offering tax incentives to attract FDI.
• Promotes stable, long-term lending: Another advantage of FDI is that it offsets the volatility created by “hot money." That's when
short-term lenders and currency traders create an asset bubble. They invest lots of money all at once, then sell their investments just
as fast.
CONS OF FDI :
• Not suitable for strategically important industries: Countries should not allow foreign ownership of companies in strategically
important industries.
• Investors have less moral attachment: Foreign investors might strip the business of its value without adding any. They could sell
unprofitable portions of the company to local, less sophisticated investors
• Unethical access to local markets: They can use the company's collateral to get low-cost, local loans. Instead of reinvesting it, they lend
the funds back to the parent company.
• In 2020, developing countries received over half of the total global FDI. Most of those investments went to less-developed
countries in Asia and Oceania.
• Trade agreements are a powerful way for countries to encourage more FDI. One great example of this is the North Atlantic
Free Trade Agreement (NAFTA), the world's largest free trade agreement.
• It increased FDI among the United States, Canada, and Mexico to $731 billion in 2015.
• Today, India has become one of the most attractive destinations for foreign direct investments thanks to liberalized norms,
easy policies and subsidized rates.
• Foreign investors are also willing to invest in the country due to lower labor costs, market diversification, subsidies, and
preferential tariffs.
• A foreign investor can invest in an Indian business through the following means:
• Acquiring voting stock in a foreign company
• Mergers and acquisitions
• Joint ventures with foreign corporations
• Starting a subsidiary of a domestic firm in a foreign country
$97 mn in 1991 to $82 bn in 2021
reforms made India a go-to destination for FDI
STATEMENT ON COUNTRY-
WISE FDI EQUITY INFLOW
FROM APRIL 2000 TO MARCH 2022
STATEMENT ON SECTOR-
FROM APRIL 2000 TO MARCH 2022
STATEMENT ON STATE-
FROM OCTOBER 2019 TO MARCH 2022
THANK YOU!

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• It increased FDI among the United States, Canada, and Mexico to $731 billion in 2015.

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