3. INTRODUCTION
Foreign Direct Investment, or FDI, is a type of investment that
involves the injection of foreign funds into an enterprise that
operates in a different country of origin from the investor.
It usually involves participation in management, joint
venture, transfer of technology and expertise.
FDI can be classified:
Inward FDI and Outward FDI
4. FDI IN INDIA
A recent UNCTAD survey projected India as the second most
important FDI destination (after China) for transnational
corporations during 2010–2012.
The sectors which attracted higher inflows were services,
telecommunication, construction activities and computer software
and hardware.
Mauritius, Singapore, the US and the UK were among the leading
sources of FDI.
5. In 2008-09, FDI stood at $27.3 billion.
FDI in 2009-10 was $24.2 billion
In 2010-11, FDI into India declined to $19.43 billion, a
significant decrease from both 2008 and 2009
Foreign direct investment (FDI) in India may cross $35
billion in 2011-2012 as against $19.4 billion in the last
financial year
6. FDI BENEFITS
Economic Growth
Linkages and
spillover to Trade
domestic firms
Technology
diffusion and Employment
knowledge and skill levels
transfer
7. OBJECTIVE OF THE STUDY
The objective of this study being conducted is:
To study the trends and patterns of flow of FDI.
To explore the sector wise distribution of FDI inflows in
order to point out the dominating sector which has
attracted the major share
To assess the determinants of FDI inflows.
To evaluate the impact of FDI on the Indian Economy.
8. RESEARCH METHODOLOGY
The study is based on secondary data.
The required data has been collected from various sources
i.e. Asian Development Bank’s Reports, various Bulletins
of Reserve Bank of India, publications from Ministry of
Commerce, Govt. of India, Economic and Social Survey
of Asia and from websites of World Bank, IMF, WTO,
RBI, UNCTAD etc.
9. HYPOTHESIS
The study has been taken up with the following hypothesis:
Flow of FDI shows a positive trend over the period 1991-2011.
FDI has had a positive impact on economic growth of the
country.
10. AMOUNT
(in US $ bn) FDI INFLOWS IN INDIA
30
25
20
15
10
5
0
2005-06 2006-07 2007-08 2008-09 2009-10
YEARS
11. TOP INVESTING COUNTRIES
2% Mauritius
2%
4% 4% 3%
5% Singapore
7% USA
UK
9% Netherlands
Japan
11% Cyprus
53% Germany
UAE
France
12. SECTOR WISE DISTRIBUTION
Services Sector
4% 4%
6% 3% Computer Software & hardware
6%
Telecommunications
10% Housing & real Estate
Construction Activities
31%
Power
11%
Automobile Industry
Metallurgical Industries
12%
13% Petroleum & Natural Gas
Chemicals
14. MANUFACTURING SECTOR
India ranks 2nd most favored destination for foreign investments
after China.
India ranks among the top 12 producers of manufacturing value
added (MVA).
In textiles, the country is ranked 4th after China, USA and Italy.
Ranked 5th in electrical machinery and apparatus.
15. 6th position in the basic metals category
7th in chemicals and chemical products
10th in leather, leather products, refined petroleum
products and nuclear fuel
12th in machinery and equipment and motor vehicles.
16. SERVICE SECTOR
India's large service industry accounts for more than 50% of
the country's GDP.
Attracted $3.12 billion FDI in the first seven months of
2009-10
22 per cent of the total FDI inflows of $17.64 billion in the
April-October for service sector
In 2008-09, attracted the maximum FDI worth USD 6.11
billion
17. CURRENT ISSUES WITH FDI IN
SERVICES SECTOR
Very weak linkages of service sector with the Indian
economy (only few cities).
Requires highly skilled workers.
Employee Welfare in time of crisis.
18. FDI IN RETAIL- ADVANTAGES
Generates huge employment
Increased investment in technology
The huge tax revenue generated.
The consumer gains from the wide variety of choices and a
more diversified basket.
19. FDI IN RETAIL-DRAWBACKS
Foreign Players would displace the unorganized retailers
because of their superior financial strengths.
The entry of large global retailers such as Wal-Mart would
kill local shops and millions of jobs.
Increase in real estate prices and marginalize domestic
entrepreneurs
20. TRADING SECTOR
This sector shows an exponential rise in inflows from 2006
onwards.
Total numbers of 20 technical and 1111 financial
collaborations have been approved since 2005.
Trading for wholesale received highest percentage (84.25%)
of total FDI inflow followed by trading (for exports) with
9.04%, e-commerce with (2.38%) during 2006-08 2008.
21. CONSULTANCY SECTOR
Consultancy Sector received US$ 1.1 bn which is 1.14% of
total inflows received since 2008.
Mumbai (38.76%) and New Delhi (13.01%) received major
percentages of inflow .
Out of the 125 technology transfers, 40 technical
collaborations are approved with USA, 21 with UK, and 14
with Germany.
22. EDUCATION SECTOR
100% FDI is allowed in education sector.
India with the added advantage of having large pool of
skilled people with secondary and tertiary level of
education attracts foreign firms in science, R & D, and
high technology products and services.
23. CONSTRUCTION SECTOR
The amount of FDI till Dec. 2008 is US$ 4.9 billion which is
6.15% of the total inflows received .
In India Delhi, Mumbai, and Hyderabad receives maximum
amount (viz. US$ 1245.61, 1000.5, and 943.22 billion) of
investment.
Out of the total technology transfers ,9 technical and 223
financial collaborations have been approved till December
2008
24. AUTOMOBILE INDUSTRY
FDI inflows during Jan 2005 to Dec. 2009 is US$ 3.2
billion which is 4.09% of the total inflows received.
It ranks 5th in the list of sectors in terms of cumulative FDI
approved from August 1991 to Dec 2008.
In India Mumbai, New Delhi and Ahmedabad received
major chunks of investment i.e. 36.98%, 26.63% and
9.47%).
25. COMPUTER HARDWARE
AND SOFTWARE
This industry fetched 3636 numbers of foreign
collaborations out of which, 125 are technical and 3511 are
financial in nature.
Also it received US$ 8.9 billion which constitute 11.43% of
the total FDI inflows during the period during 2005-2007.
Among Indian locations Mumbai received 22.44% of
investment followed by Bangalore (10.8%), and Chennai
(9.90%).
26. TELECOMMUNICATION
SECTOR
Telecommunication sector ranks 2nd in the list of sectors in
terms of cumulative FDI.
Out of cumulative FDI inflows , this Sector received an
inflow of US$ 8.2 billion, which is 8.4% of the total FDI
inflows during last few years.
New Delhi attracts highest percentage (32.58%) of FDI
inflows after 2005.
28. FDI AND ECONOMIC
DEVELOPMENT
FDI has an important impact on country’s trade
balance, increasing labour standards and skills, transfer of
technology, skills and the general business climate.
FDI also provides an opportunity for technological transfer and
up gradation, access to global managerial skills and practices
,optimal utilization of human capabilities and natural
resources, making industry internationally competitive,opening
up export markets,access to international quality goods and
services and augmenting employment opportunities.
29. India’s share in global FDI has increased considerably, but
the pace of FDI inflows has been slower than
China, Singapore, Brazil, and Russia.
Indian economy is largely agriculture based andt here is
plenty of scope in food processing, agriculture services
and agriculture machinery. FDI in this sector should be
encouraged.
Research and Development expenditure shows unexpected
negative sign. This could be attributed to the fact that
R&D sector is not receiving enough FDI as per its
requirement. but this sector is gaining more attention in
recent years.
33. INFRASTRUCTURE SECTOR
Infrastructure sector received 28.6 percent of total FDI
inflows from 2008 to 2010
Initially, the inflows were low but there is a sharp rise in
FDI inflows from 2006 onwards
Mauritius (with 56.3 percent) and Singapore (with 8.54
percent) are the two major investors in this sector.
Infrastructure sector received a total of. 2528 numbers of
foreign collaborations in India.
34. SERVICE SECTOR
Service sector in India attracts the maximum FDI inflows
amounting to Rs. 106992 crores,
Service sector has been able to put the economy on a
proper gliding path by contributing 55 percent to GDP
There is a continuously increasing trend of FDI inflows in
services sector with a steep rise in the inflows from 2006
onwards.
35. AUTOMOBILE SECTOR
The FDI in Automobile Industry has experienced huge growth in
the past few years that contributes for 6% of total FDI inflows
from 2006-2011.
The increase in the demand for cars and other vehicles is powered
by the increase in the levels of disposable income in India.
The introduction of tailor made finance schemes, easy repayment
schemes has also helped the growth of the automobile sector.
36. EDUCATION SECTOR
Education sector attracted foreign investors in the present
decade and received a whopping 308.28 million of FDI
inflows during 2010.
Mauritius remains top on the chart of investing countries
investing in education sector
Bangalore received highest percentage of 80.14% of FDI
inflows in India.
37. HOUSING AND REAL ESTATE
SECTOR
Housing and Real Estate sector received cumulative FDI inflows
in India for Rs 37,615crore upto 2010.
New Delhi and Mumbai are the two top cities which received
highest percentage of FDI inflows (34.7% and 29.8%).
Housing sector shows an exponentially increasing trend after
2006 as major investment (61.96%) in this sector came from
Mauritius.
38. CONSULTANCY SECTOR
Consultancy sector received 1.14% of total FDI inflows during
2000 to 2008.
Consultancy is one sector which is still in its development phase.
Among the subsectors of consultancy sector management
services received highest amount of FDI inflows apart from
marketing and design and engineering services.
In India, Mumbai received heavy investment in the consultancy
sector. Consultancy sector shows a continuous increasing trend
of FDI inflows from 2006 onwards.
40. RECOMMENDATIONS
The government should provide additional incentives to foreign
investors to invest in states where the level of FDI inflows is quite
low.
Government should ensure the equitable distribution of inflows
among states and must give more freedom to states, so that they
can attract inflows at their own level.
Government must target at attracting specific types of FDI that will
be able to generate spillovers effects in the overall economy like
investing in human capital, R&D activities, environmental
issues, productive capacity, sectors with high income elasticity of
demand.
41. The policy makers should focus more on attracting
diverse types of FDI and should design policies where
foreign investment can be utilized as means of enhancing
domestic production, savings, and exports and also as
medium of technological learning and diffusion and also
in providing access to the external market.
Government must exercise strict control over inefficient
bureaucracy, red - tapism, and the rampant corruption, so
that investor’s confidence can be maintained for attracting
more FDI inflows to India.
42. CONCLUSION
The increased flow of FDI in a country has given a major boost to
the country's economy.
FDI has provided better access to technologies for the local
economy.
FDI has lead to indirect productivity gains through spillovers.
Multinational firms have increased the degree of competition in
host-country markets which will force existing inefficient firms to
invest more in physical or human capital.
43. • Service sector has been the most sought after sector in
India for Foreign Direct Investments.
• India, with its skilled labor and manpower has the
potential to overtake China as the most preferred
destination for Foreign Investments.
• Hence measures must be taken in order to ensure that the
flow of FDI in our country continues to grow.
