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    Indias Fdi Policies

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    Neha Ahuja Chadha
    India has undergone major reforms to its foreign direct investment (FDI) policies since the early 1990s. Prior to liberalization, India took a cautious approach and limited foreign equity ownership to 40% in most sectors to promote self-reliance and protect domestic industries. Since liberalizing, India has introduced automatic approval routes for certain sectors and increased limits in many industries. Current FDI policy varies by sector but allows up to 100% foreign ownership in many cases. Other countries like Brazil, Sri Lanka, and China also liberalized FDI policies over time, offering preferential treatment and incentives to attract more foreign investment and technology.

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    Indias Fdi Policies

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    Neha Ahuja Chadha
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    India has undergone major reforms to its foreign direct investment (FDI) policies since the early 1990s. Prior to liberalization, India took a cautious approach and limited foreign equity ownership to 40% in most sectors to promote self-reliance and protect domestic industries. Since liberalizing, India has introduced automatic approval routes for certain sectors and increased limits in many industries. Current FDI policy varies by sector but allows up to 100% foreign ownership in many cases. Other countries like Brazil, Sri Lanka, and China also liberalized FDI policies over time, offering preferential treatment and incentives to attract more foreign investment and technology.

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    FDI POLICIES

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    Indias Fdi Policies(1)

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    India has undergone major reforms to its foreign direct investment (FDI) policies since the early 1990s. Prior to liberalization, India took a cautious approach and limited foreign equity ownership to 40% in most sectors to promote self-reliance and protect domestic industries. Since liberalizing, India has introduced automatic approval routes for certain sectors and increased limits in many industries. Current FDI policy varies by sector but allows up to 100% foreign ownership in many cases. Other countries like Brazil, Sri Lanka, and China also liberalized FDI policies over time, offering preferential treatment and incentives to attract more foreign investment and technology.

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    Attribution Non-Commercial (BY-NC)
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    26 views14 pages

    Indias Fdi Policies

    Uploaded by

    Neha Ahuja Chadha
    India has undergone major reforms to its foreign direct investment (FDI) policies since the early 1990s. Prior to liberalization, India took a cautious approach and limited foreign equity ownership to 40% in most sectors to promote self-reliance and protect domestic industries. Since liberalizing, India has introduced automatic approval routes for certain sectors and increased limits in many industries. Current FDI policy varies by sector but allows up to 100% foreign ownership in many cases. Other countries like Brazil, Sri Lanka, and China also liberalized FDI policies over time, offering preferential treatment and incentives to attract more foreign investment and technology.

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    of 14

    INDIAS FDI POLICIES VS OTHER COUNTRIES

    FDI POLICY FRAMEWORK- INDIA

    Policy regime is one of the key factors driving investment flows to a country. Ability of a nation to attract foreign investment essentially depends upon its policy regime - whether it promotes or restrains the foreign investment flows. There has been a sea change in Indias approach to foreign investment from the early 1990s when it began structural economic reforms encompassing almost all the sectors of the economy.

    PRE- LIBRELISATION PERIOD & POST LIBERLIZATION PERIOD

    India had followed an extremely cautious and selective approach while formulating FDI policy in view of the dominance of import-substitution strategy of industrialization.

    Objective To self reliant


    Dual nature of policy intention: FDI through foreign collaboration was welcomed in the areas of high technology and high priorities to build national capability idea was discouraged in low technology areas to protect and nurture domestic industries. The regulatory framework was consolidated through the enactment of Foreign Exchange Regulation Act (FERA), 1973 under this policy foreign equity holding in a joint venture was allowed only up to 40 per cent

    exemptions were extended to foreign companies engaged in export oriented businesses


    Govt established special economic zones (SEZs) & designed liberal policy and provided incentives for promoting FDI in these zones with a view to promote exports

    POST LIB FDI POLICIES A series of measures that were directed towards liberalizing foreign investment included:

    Introduction of dual route of approval of FDI RBIs automatic route and Governments approval (SIA/FIPB) route Sectors working under automatic route do not require any prior approval of the Central Government of RBI to attract Foreign Direct Investment.

    F DI Policy under Automatic Route

    Investment proposals falling under the automatic route and matters related to FEMA are dealt with by RBI,

    FDI Policy under Government Approval

    The proposals which involve foreign investment or foreign technical collaboration is grantedpermission by the Foreign Investment Promotion Board (FIPB)

    Automatic permission for technology agreements in high priority industries Removal of restriction of FDI in low technology areas as well as liberalization of technology imports Permission to Non-resident Indians (NRIs) and Overseas Corporate Bodies (OCBs) to invest up to 100 per cent in high priorities sectors Liberalization of the use of foreign brands name Signing the Convention of Multilateral Investment Guarantee Agency (MIGA) for protection of foreign investments.

    Sector Specific Limits of Foreign Investment in India


    SECTOR FDI CAP ENTRY ROUTE

    AGRICULTURE

    100%

    AUTOMATIC

    TEA SECTOR (PLANTATIONJ)


    Manufacturing 1. Alcohol- Distillation & Brewing

    FIBP

    100%

    AUTOMATIC

    2. Coffee & Rubber processing & Warehousing.

    100%

    AUTOMATIC FIBP
    AUTOMATIC AUTOMATIC AUTOMATIC

    3. Defence production
    4. Hazardous chemicals and isocyanates

    26%
    100% 100% 100%

    5. Industrial explosives -Manufacture 6. Drugs and Pharmaceuticals INDUSTRY mining of diamonds & precious stones; gold, silver and minerals. Coal and lignite mining for captive consumption by power projects, and iron & steel, cement production SERVICES BANKING(PVT) INSURANCE Telecommunications

    100%

    AUTOMATIC

    79%(FDI+FII) FII NOT MORE THAN 49% 26% 74% (including FDI, FII, NRI, FCCBs, ADRs/GDRs, convertible preference shares, etc.

    AUTOMATIC AUTOMATIC Automatic up to 49% and FIPB beyond 49%.

    RETAIL

    51%

    FIBP

    Foreign direct investment, net outflows (% of GDP)


    1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 2005 2006 2007 2008 2009 2010 2011 1.48 1.37 1.18 0.91 0.79 Foreign direct investment, net outflows (% of GDP) 1.57

    0.32

    Foreign direct investment, net inflows (% of GDP)


    4

    3.5
    3 2.5 2 1.5 1 0.5 0 -0.5 Foreign direct investment, net inflows (% of GDP)

    FDI FDI POLICY FRAMEWORKCONTRIBUTION (INDIA) INDIA

    Policy regime is one of the key factors driving investment flows to a country.

    Ability of a nation to attract foreign investment essentially depends upon its policy regime - whether it promotes or restrains the foreign investment flows.
    There has been a sea change in Indias approach to foreign investment from the early 1990s when it began structural economic reforms encompassing almost all the sectors of the economy.

    FDI POLICY FRAMEWORKFDI POLICY FRAMEWORK- BRAZIL INDIA

    The Brazilian FDI regime has remained liberal and has been plausible in its sum financial output for its economy. FDI inflows into Brazil favored the capital intensive or technology intensive industrial production sectors of the economy. FDI regulatory regime was substantially liberal. It may be noted that, majority of the Brazilian politicians view FDI as an employment generating avenue and also as a modernizing vehicle for the Brazilian economy. In the year 1991 the Brazilian information-technology sector opened its doors to foreign companies. They were free to enter and operate in the Brazilian IT sector. They also put an end to the state monopoly in oil, gas and telecommunications.

    FDI POLICY FRAMEWORKSRI FDI POLICY FRAMEWORKLANKA INDIA


    There are basically two distinctive phases in Sri Lankas FDI policy.

    The first phase was from 1948-1977, when the public sector was the dominant entity and controlled the countrys resources. The second distinctive phase is of course the post 1977 period, when Sri Lanka launched its economic reform which favored private-sector led, export-oriented development including a greater role for FDI. Many barriers were dismantled, including trade and payment barriers, the exchange rate was unified, agricultural and export taxes were restructured, administered prices were adjusted, and restrictions on pricing and investment by the private sector were reduced. The most important feature of FDI policy measure in Sri Lanka was the establishment in 1992 of the Board of Investment (BOI), with wide powers of tax relief and administrative discretion in all matters related to FDI.

    INWARD FDI POLICY FRAMEWORK- CHINA


    Encouragement to FDI has been an integral part of the Chinas economic reform process. It has gradually opened up its economy for foreign businesses and has attracted large amount of direct foreign investment. new regulations permitted joint ventures using foreign capital and setting up Special Economic Zones (SEZs) The concept of SEZs was extended to fourteen more coastal cities in 1984. Foreign joint ventures were provided with preferential tax treatment, the freedom to import inputs such as materials and equipment, the right to retain and swap foreign exchange with each other, Simpler licensing procedures in 1986. Additional tax benefits were offered to export-oriented joint ventures and those employing advanced technology.

    Priority was given to FDI in the agriculture, energy, transportation, telecommunications, basic raw materials, and high-technology industries, and FDI projects which could take advantage of the rich natural resources and relatively low labour costs in the central and northwest regions.
    Chinas policies toward FDI have experienced roughly three stages: gradual and limited opening active promoting through preferential treatment, promoting FDI in accordance with domestic industrial objectives.

    FDI) used in China industry / FDI Used in China by by industry/sector the year 2011 sector forfor the year 2011

    FDI Used in China by industry/sector for the year 2011(excluding manufacturing & real estate)

    FDI in Different Countries

    THANK YOU

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