Foreign direct investment in India has grown significantly over the past decade, with major inflows into the services sector. India ranks highly globally in manufacturing output but attracts a lower percentage of FDI into manufacturing than China. Allowing more FDI in retail and other restricted sectors could generate substantial employment and tax revenues while improving technology and skills in the domestic economy, though it may also displace some local businesses. Careful regulation is needed to ensure FDI's benefits are maximized.
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Foreign direct investment in India has grown significantly over the past decade, with major inflows into the services sector. India ranks highly globally in manufacturing output but attracts a lower percentage of FDI into manufacturing than China. Allowing more FDI in retail and other restricted sectors could generate substantial employment and tax revenues while improving technology and skills in the domestic economy, though it may also displace some local businesses. Careful regulation is needed to ensure FDI's benefits are maximized.
Foreign direct investment in India has grown significantly over the past decade, with major inflows into the services sector. India ranks highly globally in manufacturing output but attracts a lower percentage of FDI into manufacturing than China. Allowing more FDI in retail and other restricted sectors could generate substantial employment and tax revenues while improving technology and skills in the domestic economy, though it may also displace some local businesses. Careful regulation is needed to ensure FDI's benefits are maximized.
Copyright:
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Download as PPTX, PDF, TXT or read online from Scribd
Foreign direct investment in India has grown significantly over the past decade, with major inflows into the services sector. India ranks highly globally in manufacturing output but attracts a lower percentage of FDI into manufacturing than China. Allowing more FDI in retail and other restricted sectors could generate substantial employment and tax revenues while improving technology and skills in the domestic economy, though it may also displace some local businesses. Careful regulation is needed to ensure FDI's benefits are maximized.
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: An Indian Case Study
Presented to: Prof. Seema Laddha
6000 5000 4000 US $ million 3000 2000 1000 0
2% 4% 4% 3%
2%
Mauritius
5% 7%
Singapore USA UK
9%
Netherlands Japan
11% 53%
Cyprus Germany UAE France
Services Sector 6% 6% 4% 4% 3% Computer Software & hardware Telecommunications Housing & real Estate 31% Construction Activities Power Automobile Industry Metallurgical Industries 12% 13% Petroleum & Natural Gas
10%
11%
Chemicals
Foreign Direct Investment (FDI) up to 100% is permitted in all manufacturing activities except:-
Defense Industry
Cigars & Cigarette manufacturin g
Where the foreign investor has an existing joint venture in India in the same field.
Where more than 24% foreign equity is proposed to be inducted for manufacture of items reserve d for Small Scale sector
Ranked 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. In electrical machinery and apparatus, it is ranked 5th.
According to a United Nations Industrial Development Organization (UNIDO) analysis based on 2007 figures mentioned in the International Yearbook of Industrial Statistics 2009
Attracted only $3.4 billion of FDI in manufacturin g on an average every year from 2000 to 2008
67% of Chinas total FDI comes in the manufacturing sector compared to 37% in case of India (even 100% FDI in most manufacturing sectors)
Acc to FICCI Action plan, India can attract $12billion of FDI in the manufacturi ng sector per annum
FDI Inflows for Selected Sectors in India (Jan 2000 to September 2010) Sector Ship Building Industrial Machinery Agricultural Machinery Earth Moving Machinery Medical and Surgical Appliances FDI Inflows ($ million) 59.15 283.77 148.37 134.51 140.77
Computer hardware Defence
99.7 0.15
FDI in Service Sector (with focus on Insurance Sector)
India's large service industry accounts for more than 50% of the country's GDP It makes up more than 25% Employment Service sectors like telecommunication, IT enabled services, insurance, air transport are becoming prominent
FDI contribution to Services Sector
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.
FDI Policy in Services Sector
100% FDI is permitted for many service sectors (Real estate, construction, hotels, tourism, films, IT and IT enabled services, consultancy, renting, medical, education, advertising etc)
Phased manner: to allow domestic companies to
prepare for global competition (Banking, Insurance, Media, Retail Trade,
Restricted sectors in Services
Atomic Energy, Lottery Business, Gambling and Betting, Business of Chit Fund, and any activity/sector that is not opened to private sector investment. Besides the above, FDI is not allowed in plantations.
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
FDI in Retail.WHY INDIA?
Low share of organized retailing Increase in disposable income and customer aspiration Increase in expenditure for luxury items
FDI in Retail.Benefits Generate 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. The indirect benefits like better roads, online marketing, expansion of telecom sector etc. Will give a big push to other sectors like agriculture, small and
medium size enterprises.
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. Induce unfair trade practices like predatory pricing, in the absence of proper regulatory guidelines. Increase in real estate prices and marginalize domestic entrepreneurs
Reasons for low FDI
Multitude of taxes High Taxes Highest import duty on imported liquor used in hotels Service Tax on Tour Operators Inland Air Travel Tax
Regional Flow of FDI in India
lead to indirect productivity gains through spillovers.
provide better access to technologies for the local economy.
which will force existing inefficient firms to invest more in physical or human capital. provide training of labor and management which may make them become available to the economy in general.
given a major boost to the country's economy
Hence measures must be taken in order to ensure that the flow of FDI in both these countries continues to grow.
