`“A STUDY ON FORIGN DIRECT INVESTMENT WITH REGARD TO ECONOMIC

GROWTH IN INDIA ”

MASTER OF BUSINESS ADMINISTRATION

of
BENGALURU NORTH UNIVERSITY

Submitted By
Name: SRIKANTH B
Reg No.: MB192201

Under the guidance of

Dr. ANANTHA MURTHY
ASSOCIATE PROFESSOR

CMR CENTRE FOR BUSINESS STUDIES

OMBR LAYOUT, BANASWADI BANGALORE
2020-21
 DECLARATION BY THE STUDENT

I hereby declare that “A STUDY ON EMPLOYEE

COMMITMENT TOWARDS THE ORGANIZATION” is the
result of the project work carried out by me under the guidance of
Dr. ANANTHA MURTHY in partial fulfillment for the award of
Master’s Degree in Business Administration by Bengaluru North
University.
I also declare that this project is the outcome of my own efforts and
that it has not been submitted to any other university or Institute for
the award of any other degree or Diploma or Certificate.

Place: Bangalore Name : Srikanth B

Date: Register Number: MB192201
 #5, Bhuvanagiri
CENTRE FOR OMBR Layout, Banaswadi
Bangalore 560043
BUSINESS
T: +91 80 25453077
STUDIES F: +91 80 25453088
E: info@cmr.ac.in
www.cmr.ac.in

CERTIFICATE OF ORIGINALITY

Date: 13/03/2021

This is to certify that the project titled “A STUDY ON FORIGN DIRECT INVESTMENT
WITH REGARD TO ECONOMIC GROWTH IN INDIA ” is an original work of Mr.
SRIKANTH B; bearing University Register Number MB192201 and is being submitted in
partial fulfillment for the award of the Master’s Degree in Business Administration of
Bengaluru North University. The report has not been submitted earlier either to this
University /Institution for the fulfillment of the requirement of a course of study Mr.
SRIKANTH B is guided by Prof. ANANTHA MURTHY who is the Faculty Guide as per
the regulations of Bengaluru North University.

Signature of Faculty Guide Signature of Director / Principal /HOD

Date Date

Affiliated to Bangalore University, Approved by AICTE, New Delhi

Recognized by the Government of Karnataka
 ACKNOWLEDGEMENT

This report bears imprint of many people who have directly or indirectly
made a significant contribution towards my project. I thank for kindness
shown and contribution made by various people in this endeavour.

I sincerely feel that the credit of the project work could not be narrowed
down to only one individual. As the work is the outcome of integrated
effort of all those concerned with it, through whose able cooperation and
effective guideline I would achieve its completion. The project was a
great source of learning and a good experience that made me aware of
professional culture and conduct that exists in an organization.

I would like to thank Prof. ANANTHA MURTHY project guide, who

gave willingly her time and shared her experiences and knowledge in
this field. This project would not have been completed without her
interest in my project.

I would like to express my gratitude to Director Dr. MP Hrishikesh, for

his continuous inspiration, guidance and valuable suggestion that
helped me in every step.

SRIKANTH B
MBA (2019-2021)
REG NO:- MB192201
CONTENTS

Page
Chapter Particulars
No.

1 INTRODUCTION 1

REVIEW OF LITERATURE AND RESEARCH

2 9
DESIGN

3 PROFILE OF THE INDUSTRY 17

4 DATA ANALYSIS AND INTERPRETATION 26

FINDINGS, CONCLUSIONS AND

5 41
RECOMMENDATIONS

6 LEARNING OUTCOME 45

BIBLIOGRAPHY 47

ANNEXURE 49
LIST OF TABLES:
TABLE NO. DESCRIPTION PAGE
NO.
Table 4.1 Financial year-wise FDI equity (inflows and outflows) 27
Table 4.2 Sectors attracting the highest foreign direct investment (FDI) equity 29
inflows in India
Table 4.3 Sectors attracting the highest foreign direct investment (FDI) equity 32
inflows India
Table 4.4 Statement on country-wise FDI inflows with respect to the financial 35
year for the period 2007-08

Table 4.5 Statement on country-wise FDI inflows respect to the financial year 38
for the period 2019-20
LIST OF GRAPHS:
GRAPH NO. DESCRIPTION PAGE
NO.
Graph 4.1 Year-wise equity inflows and outflows 28
Graph 4.2 Sectors attracting the highest foreign direct investment (FDI) 30
equity inflows in India
Graph 4.3 Sectors attracting the highest foreign direct investment (FDI) 33
equity inflows in India
Graph 4.4 Pie-diagram representation of the country-wise foreign direct 36
investment inflows in India for the year 2008-09

Graph 4.5 Pie-diagram representation of the country-wise foreign direct 37

investment inflows in India for the year 2019-20

Graph 4.6 Pie-diagram representation of the country-wise foreign direct 39

investment inflows in India for the year 2008-09

Graph 4.7 Pie-diagram representation of the country-wise foreign direct 40

investment inflows in India for the year 2019-20
 ABSTRACT

Since the 1980s, FDI in India has grown at a spectacular rate, and the global markets for it
has become more competitive. Developing countries are becoming highly attractive for
potential investors, since they offer investors a range of “created” assets. The present study
has made attempts to assess the determinants. The study will also focus on trends and
patterns of FDI growth in India.
It may be apparent from the above discussion that FDI is a predominant and vital factor
about influencing the contemporary process of worldwide economic development. The
study attempts to research the important dimensions of FDI in India. The study puts
together the patterns, main determinants and investment flows to India. The study also
examines the rate of growth of FDI in India for the period 2008-2020. The period under
study is considered important for various reasons.
 Chapter 1:
INTRODUCTION

1|Page
 INTRODUCTION 1.1

Foreign direct investment was presented in 1991 under, Foreign Exchange Management
Act - FEMA, by then Finance Minister, Manmohan Singh. As Singh consequently turned
into Prime Minister, this has been one of his best political issues, even in the 2012 race.
India prohibited abroad corporate bodies (OCB) to put resources into India.

Beginning from a gauge of under $1 billion in 1990, an ongoing UNCTAD review

anticipated India as the second most imperative FDI goal (after China) for transnational
companies amid 2010-2012. according to the information, the parts that pulled in higher
inflows were administrations, media communications, development exercises, and PC
programming and equipment. Mauritius, Singapore, US, and UK were among the main
wellsprings of FDI.

Foreign direct investment (FDI) is speculation of remote resources into residential

structures, equipment and association. FDI mirrors the targets of getting an enduring
interest by a resident in one economy (Direct Investor) in resident inhabitant in the
economy other than speculator (Direct investment enterprise). The enduring premium
suggests the current of a long relationship between the direct investor and the venture with
a noteworthy degree effect on the administration of the undertaking. The direct investment
includes both the inceptive transaction between the two substances and all the ensuing
capital transactions among them and among affiliated undertakings, both fused and
unincorporated.

The FDI has been a compulsive and overreaching goal among the policymakers and leaders
in developing countries. The FDI is the biggest source of external financing in the industrial
development of many developing countries. Acknowledging the importance of FDI
governments throughout the world, they dare to open up their economies to promote the
flow of trade, information technology, investment and finance for industry development

2|Page
international money markets by means of commercial debt and even depositary receipts on
Indian equity.

The exponential growth of FDI in both the developed and developing nations is perhaps
most notable and striking features of the globalized world in today. The rate of FDI flows
has risen faster in the past two decades than almost all other measures of economic
operations worldwide. developing nations, in particular, regarded FDI as the healthiest type
of international investment, because it not only supplements domestic savings, foreign
currency but also increases growth through technology spills.

India is the 7th largest as well as the 2nd most populated nation in the world in South Asia.
India also has long been regarded for its culture's diversity, its people's inclusiveness and
the alignment of geography. Today, the biggest democracy in the world has become a
global resource both for manufacturing and services in the industry. Its field of technical
ability, its English-speaking population with an increasingly available income and its
growing market combined to make India a viable partner for the global industry.
Investment opportunities in India are now at a peak recently.
The induction of foreign technology can be promoted through FDI and cooperation
agreements with foreign technology. Foreign technology cooperation is acquired by RBI
or government approvals in sectors that have resources yet do not have the necessary
technology. The total amount of approval recorded by the RBI and FIPB for the period
2016 to 2017 is 2432.65 (in Million). Country-wise 8 proposals were approved by the
FIPB. Technical cooperation has had a positive effect on the regional company. It has
helped to make technology transfers.
An Indian firm may receive foreign direct investment on the following two routes:
1. Automatic Route: The FDI does not require prior approval of either the
Government or the Reserve Bank of India in sectors/activities to the extent
permitted under the automatic route.
2. Government Route: In activities not covered by the automatic route, the FDI
requires prior government approval, which is considered to be the Foreign

3|Page
 Investment Promotion Board (FIPB), the Directorate of Economic Affairs and the
Finance Ministry.

FDI is prohibited in the following sectors of Industry: as on (2019-20)

• Lottery business
• Gambling & Betting
• Chit fund businesses
• Nidhi company
• Real estate businesses and building of farm-houses- This does not include the
construction of townships, residential and commercial buildings, roads, bridges and
Real Estate Investment Trusts (REITs).
• All kinds of Cigarette manufacturers.
• Atomic energy
• Railway transport
• Trading in Transferable Development Rights (SDRs)
• Business-to-Consumer E-Commerce

1.2 IMPACT OF FDI

India needed an injection rescue economy, which collapsed in 1991, with double-digit
inflation, thus the then Finance Minister, Dr.Manmohan Singh, tried to build confidence in
the design and goals of the reforms( Bawa 2002). In 1991, foreign exchange reserves
amounted to only US$ 1 billion. During the pre-reform period, the FDI inflow was nearly
nil. Over the past 14 years, the Indian economy's overall economic performance has been
better than in the pre reform period. Foreign exchange reserves amount to US$ 190.6
billion as at 29 July 2012. In the post-reform period in India, the FDI was produced to the
extent of Rs.347664 crores. Rs.81326 crore from 1992 - 93 to 2012 - 13 was more than
portfolio net investment from foreign institutional investors (FII). It should be noted that
FII 's gross purchases were extended to Rs.301186 crore and gross revenue to Rs.239860

4|Page
crore during the same time-span. This shows the confidence of the foreign investors in
Indian Economy particularly in the post of re-forms period.

Recent impact on FDI (February 2021)

• ONGC Videsh Ltd invested a total of $96.15 million in various joint ventures and
wholly owned subsidiaries in Russia, Mozambique, Myanmar, Sudan, Colombia,
Vietnam and Azerbaijan.
• TATA Steel invested 1 billion in its wholly owned subsidiary in Singapore.
• Sun Pharmaceutical industries invested 100 million in a joint venture in the US.
• JSW Steel made a investment of $62.85 million in its WoS/JVs in Netherlands and
US.
• GMM Pfauldler Ltd engaged in pharma equipment manufacturing, invested $45.33
million in its joint venture in Luxemborg.

1.3 GOVERNMENT POLICY TOWARDS FDI

Illustrates of the current foreign direct investment policy:

• Investments in the new form of FDI are currently an important part of economic
policy in the country. Foreign investment will boost economic growth through
capital inflows, cross-border technology flows, and modern organizational
practices. According to the policy outlines, many of the FDI is taking an automatic
path without limiting the scope of foreign ownership.
• In 1991, an industrial policy introduced an innovation through an automatic route
that did not require the approval of the Indian Government. It was restricted to 35
industries and had an investment limit of 51 percent, but only RBI needed approval.
The scope of the Automatic Route was subsequently expanded and the requirement
for RBI approval was also discontinued.
• In the automatic route, 100% FDI is authorized by foreign /NRI investors who do
not need prior approval in most sectors, including services.

5|Page
 • Investors are only required to notify the RBI regional office concerned within 30
days of purchase of inward remittance and to submit the required documents to that
office to foreign investors within 30 days of issuing the shares.
• There are 9 sectors where FDI is not permitted at all. There are 23 kinds of sectors
where FDI is allowed subject to sector caps and/or sector-specific conditions. While
the ceiling is statutory in sectors such as insurance, finance, and SSI units, the
ceiling is only managerial in all the other cases.

The FDI Investment Automatic Route is open to existing companies that propose to induce
foreign equity. Moreover, it is worth noting that the automatic route is for the fresh equity
issue of Indian companies. If there is any transfer of existing shares from any citizen or
non - citizen holder, government approval followed by prior approval from the Indian
Reserve Bank is required.

1.4 FDI IN INDIA

The industrial policy unveiled by the Indian government in 1948 focused on industrial
growth and the nation's overall development. The primary confidence was placed in the
areas of sustained production increase and the fair and equitable transmission of grain
crops. After the adoption of the constitution, industry policy was subsequently revised and
the amended policy was enacted in 1956. In addition, the policy was further amended in
1973, 1977 and 1980 in order to fulfill the continuing challenges facing the global
economy. A comprehensive industrial policy statement was issued again on 24 July 1991.
Foreign investment and technology acquisition needed for India's economic development
would only be permitted if it is in the interests of the country. Even existing collaborations
will not be renewed in other areas. In fact, the government offered to issue an illustrative
list of industries where no foreign collaboration, financial or technical, is considered
necessary since indigenous technology has fully adopted in this field. Thus the entire
emphasis was on preventing foreign investment.

The 1991 resolution, issued following economic reform initiatives, stated that foreign
investment and cooperation in technology would be welcome in order to gain higher

6|Page
technology, increase exports and widen the manufacturing facility. Foreign investment was
recognized to benefit from technology development, marketing expertise, the introduction
of modern management techniques and new export promotion opportunities. Since then,
FDI has gained prominence across the globe and has been recognized as an instrument that
facilitates international economic integration.

1.5 IMPORTANCE OF THE STUDY

Out of the above discussion, it is clear that FDI is a dominant and essential variable in
undermining the contemporary global economic - development process. The study tries to
analyze the significant FDI dimensions in India. The study examines trends and patterns,
key determinants and investment flow to India. The study also examines the growth of FDI
in India. For a variety of reasons, the study time period is important.

In the first place, India opened for business to the private sector in July 1991 and liberalized
its entire economy. Secondly, also by liberalizing their markets in the 1980s, the
experiences of South East Asian countries became stars of growth and prosperity in the
mid-1990s. Thirdly, India's 1st-generation economic reform experience and the nation's
growth performance were considered safe territory for FDI, which led to India's 2nd-
generation economic reforms in the first decade of this century. Fourthly, the attitude of
both developed and developing nations towards FDI is changing considerably. They
consider FDI to be the most appropriate form of external financing. Fifthly, increased
competition for Foreign direct investment among developing countries in particular.

Foreign direct investment (FDI) is the direct investment by the company in another nation
in manufacture or business in a nation, by either purchasing a company in that country or
by expanding the operations of an existing company in that same country. In contrast to
equities and bonds, foreign direct investment in the passive investment in other country's
securities, such as shares and bonds. FDI is also a source of money for the study. This new
money has enabled India to invest in areas requiring a boost and monetary attention and to
tackle the ongoing problems which attempt to challenge India. The Indian Government

7|Page
conceived the series of reforms to promote investment in India in 1998 and 1999. FDI is
allowed through financial cooperation, private equity or preferential allocations, via euro
issues and joint ventures on the capital markets. FDI in the arms, atomic, rail, coal mining
or mining industries are not permitted. FDI can function in a number of areas, such as the
generation, distribution, and transmission of electricity.

8|Page
 Chapter 2:
REVIEW OF
LITERARTURE AND
RESEARCH DESIGN

9|Page
 2.1 INTRODUCTION

Definition of FDI in India:

Foreign direct investment (FDI) is the direct investment by an individual or company of

another country in a country's production or business, either by purchasing a firm in the
target country or by expanding the operations of an existing company in that country. In
contrast to portfolio investment, foreign direct investment is a passive investment in other
country's securities, such as equities and bonds.

Types:

1. Horizontal FDI occurs when a company duplicates its domestic activities through
FDI at same value chain level in a host country.
2. Vertical FDI occurs when a company moves in an upward or downward direction
through FDI in different value chains, i.e. When companies carry out value-adding
actions in a host country, stage by stage in a vertical fashion.
3. Conglomerate FDI is where investment is made in a different industry. In other
words, it is not directly linked to the investors business.

Methods:

The direct foreign investor can acquire the voting rights of an economic enterprise using
the following practices:
• By joining anywhere a completely- owned subsidiary or company.
• By acquiring related company shares.
• By a merger or acquisition of an unconnected firm.
• Participate with another investor or company in an equity joint venture.

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 2.2 REVIEW OF LITERATURE

 Aggarwal et.al(2012) reviews on the need for FDI in India, the sector-wise and year
round analysis of FDI in India and the ranking of sectors based on the highest FDI
inflows. The results indicated that Mauritius has invested heavily in India, followed
by Singapore, Japan, and the United States. It has also shown that there was an
enormous increase in the FDI inflows in India between 2000 and 2011.

 Mittal and Agarwal (2012) have analyzed the inflows and outflows of FDI ever
since the post-liberalization era in general. The purpose of the whole paper was to
conduct a review of FDI in different sectors. The figures showed the trend of FDI
inflows and FII in India and the geographical distribution of FDI at the end of this
examination.

 Rao and Dhar (2011) attempted to address the ambiguity enveloping the definition
and in - compliance of international standards in the measurement of FDI inflows.
The study found that portfolio speculators and round-the-clock investments
contributed significantly to India's reported FDI inflows, thus blurring the
distinction between direct and client base investors on the one hand and foreign and
domestic investors on the other. These investors have also exploited the tax regime.

 Gopalan et.al( 2009) examined that India's rise has also led to the generation of a
substantial literature on the determinants and characteristics of inflows and
outflows at an aggregate level, both as the source and host of FDI.

 According to Patil (2012), the impact of FDI on the retail sector in India has be
varied. According to one point of view, US evidence is empirical evidence that FDI
does not lead to a collapse in existing employment opportunities in the retail sector.
The unorganized retail sector contributes approximately 14% of GDP and absorbs

11 | P a g e
 about 7% of our workforce. This problem of labor, consequent to the FDI, is
therefore of primary importance.

 Batra et.al (2010) re-examines Robert Mundell's famous thesis that free trade
capital mobility is the perfect substitute for the Heckscher-Ohlin model. Under very
relevant rules that, according to many economists, have led to the international
harmonization of factor gains, free trade is less than free international investment
in a polluted environment. This happens even if the commodity prices and the
rewards of the factors are the same for both policies. The practical aspect of a thesis
is that the world will be better out by reducing trade volumes while removing all
FDI barriers that currently hamper the service industries.

 Nunnekamp et.al (2012) evaluated the location choices at the Indian district level
of 6020 foreign investors. Using conditional logic models, we find that the
clustering of FDI is strongly driven by the cattle of investors from both countries,
the same from other countries. The behavior of non- resident Indians and German
investors are, however, markedly different.

 Hossain et.al (2012) investigated short-term and long-term co-integration and

casual relationships between FDI and economic output or Gross Domestic Product
(GDP) in Bangladesh, Pakistan and India between 1992 and 2014. Three models
econometric, viz. Increased Dickey-Fuller (ADF) test,2-step co-integration test
Engle-Granger, Vector Error Correction Mechanism (VECM). Granger Causality
(GC) was also used in this study to find the directional relationship between FDI
and GDP. The findings suggest that there is no long-term and short-term co-
integration between FDI and GDP in Bangladesh and India. However, we find the
long-term and short-term co-integration between them in Pakistan. In contrast, the
results of the GC suggest that there is no causal relationship between GDP and FDI
for Bangladesh but that there is one way or nonlinear relationship between Pakistan
and India, which means that FDI produced economic production in Pakistan.

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 Sanjo and Yasuo( 2009) studied the country risk fiscal competition for FDI by using
a two-country economic model of different business sizes. We show also that the
trade off between the country size and the country risk ad local disadvantage affects
a foreign company's choice of location. Given that the foreign company faces the
same country risk probabilities in both rich and developed countries when deciding
where to invest, large relative to the low- risk country, the foreign company benefits
from choosing the high-risk bigger country even if the future host country's
government enforces a lump sum tax. In view of the situation in which foreign
countries face different country risk probabilities in each host nation, our results
suggest that the important issue for the foreign company will be whether the host
country is the higher cost or lower cost, but on whether the host country is at high
risk.

 Huang et.al(2012) developed the idea that China's economic reforms were designed
to attract FDI, while India did the opposite. We empirically evaluate how these
completely different reform approaches affect the perceptions of foreign enterprises
(FIE) and domestic firms about the business environment of the host country. Using
data from the World Bank survey, we find that FIEs in India perceive more
obstacles to business and development in addition to domestic firms, in particular
issues regarding goverment regulations and legal institutes. FIEs in China, on the
contrary, find public officials more helpful in promoting business advancement and
recognize financial and legal constraints comparable to those in their home
countries. These perception differences between the types of company owners are
consistent with the divergent strategies of FDI policies adopted by the two biggest
developing countries.

 Sinha(2012) reported to TOI on the record of FDI outflows that domestic

constraints such as economic policy flip-flops, coupled with economic weakness,
have led foreign firms to raise their categorized FDI investments more and more

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 from India during the last three years ended September 2011. Since the 2000s, FDI
into India has increased exponentially. However, some of this money has been
resettled over the past three years and Global borrowing has compelled firms to sell
their Indian investments and redistribute funds to their own native country.

 Subramanian et.al (2010) debated patterns in India's external FDI over the last
decade and a half and attempted to identify the factors that drive it. The objective
of the study was to provide lawmakers with observations into levers that would help
to encourage FDI outflows and stimulate further foreign investment research from
developing economies. The paper also explored major policy problems affecting
India's external FDI over the last decade and a half and the relationship between the
external FDI and another macro-economic indicators such as GDP and Fischer
Open Differential.

2.3 STATEMENT OF THE PROBLEM

Since the early 1980s in India, FDI has steadily grown at a significant rate and the global
market is becoming more competitive. Developing Nations are becoming attractive
investment destinations, partly only because they offer an array of " created investments to
investors. The present study attempted to evaluate the determinants. The study will focus
on FDI growth trends and developments in India.

NEED FOR THE STUDY:

From the above discussion, it is clear that FDI is a dominant and essential factor in deciding
the contemporary global economic development process. The study tries to evaluate the
significant FDI dimensions in India. The study identifies patterns, key determinants and
flows of investment to India. The study also looks at India's FDI growth rate for 2008-
2020. For numerous reasons, the study time period is considered important.

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SCOPE OF THE STUDY:

This study aims to analyze the FDI and its growth in India. It also concentrates on FDI
determinants and needs, annual analysis, sectoral analysis, and FDI sources and reasons.
One of the economic aspects of globalization is that foreign direct investment is increasing.
India was able to generate FDIs even during crisis period better than the developed
countries. The FDI in India, in particular, has followed a positive growth rate in recent
years. Since 1991, the govt has been focusing on the liberalization of foreign direct
investment policies.

2.4 OBJECTIVES OF THE STUDY

The main objectives of the study are as follows:

 To study the growth and trend of FDI inflows and outflows from 2008-09 to 2019-
20 for a period of twelve years.
 To understanding the trends of sectoral inflows of FDI in India.
 Analyzing the financial contribution of current top investing nations to India's FDI
inflows.
 To understand sustainment of a high level investment.
 The main objective is to know about which sector the industries are investing into.

2.5 RESEARCH METHODOLGY

A research design is a plan or model for a formula study. It sets out the methods and
procedures to acquire the information necessary to solve any problem. The research design
is an arrangement of the condition for collecting and analyzing data in a way that combines
relevance to the research specific purpose with the procedural economy, it is like a roadmap
to ensure that we do not go off track, but rather that it guides where we want to go or plan
to go. A research design minimizes the risk of haphazard information collection and
ensures that the needs of researchers are met.

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RESEARCH DESIGN:

The study’s main current focus is on understanding the increase in foreign direct
investment in India. The study in question is descriptive:
• Data Collection :

The study only requires secondary data. Secondary data are collected from the
following sources:

o RBI's official website,

o DIPP report Economic survey
o FDI articles from newspapers and magazines
• Sampling design:

Secondary data were collected from different journals, magazines, and books,
especially from the Department of Industrial Policy and Promotion, the Ministry of
Commerce and Industry, etc. The study is based on the 2008-2018 timeframe.

ANALYSIS AND INTERPRETATION:

We used descriptive statistics such as average, percentage, regression and correlation. The
annual compound growth rate is calculated by having taken the nth root of the total growth
rate where 'n’ is the no. of years in the period under consideration.
1
� �
𝑁𝑁𝑁𝑁 𝑂𝑂𝑂𝑂 𝑌𝑌𝑌𝑌𝑌𝑌𝑌𝑌
𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸 𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉
𝐶𝐶𝐶𝐶𝐺𝐺𝐺𝐺 = [𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵 𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉𝑉] -1

Data collected were analyzed using Microsoft Excel.

Presentation :

Bar chart, Pie chart, table wherever necessary for presenting the analyzed data.

16 | P a g e
 Chapter 3:
PROFILE OF THE
INDUSTRY

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 3.1 FDI IN INFRASTRUCTURE

The long-term sustainability of global economic growth requires equivalent infrastructure

growth. Infrastructure is termed a prerequisite for productivity growth, as it is, the wheel
of economic activity, if not the' engine. ' The availability of sufficient quality, volume, and
efficiency of modern infrastructure is the major determinant of a country's economic
growth for a rapidly growing economy.

The infrastructure sector has become the biggest focus area for the government (GOI).
India plans to spend US $1.4 trillion on infrastructure during 2019-23 to have a sustainable
development of the country. The Government has suggested investment of Rs.5,000,000
crore (US$750 billion) for railways infrastructure from 2018-30. The GOI focuses
aggressively on reducing India's unemployment problem and wants to generate shareholder
interest in the sector. The GOI focuses aggressively on reducing India's infrastructure
deficit and wants to generate shareholder interest in the sector. The GOI provides investors
with full access to most major infrastructure sectors, along with roads and bridges; ports
and harbors, power stations and airports. To further enhance the attractiveness of the
infrastructure, the GOI has broadened tax holidays and supported the establishment of
public private partnership (PPP) projects.

Drawing on the numerous new opportunities in the industry, a number of major players,
including foreign players, have begun to participate in the construction of the infrastructure
industry. Foreign Players like Toyo Engineering, Jacobs H and G, Technimont and Aker
Solutions now invest heavily in major infrastructure space in the country. Land acquisition
and ecological clearance issues, together with rapidly rising interest rates and inflation,
hinder Private investment projects, in particular, the prompt completion of projects. In
addition, the business environment in India can regularly block foreign money injections
into the industry.

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FDI Investments in Indian Infrastructure:

The GOI welcomes FDI investments in the infrastructure sector. India is looking more like
a financial market. In the financial service sector, the majority of FDI investment funds
arise. The growth rate of the economy, the population facing difficulties and education
have helped to increase the FDI base in the financial services industry. Other industries,
including infra - structure, have not been in the forefront until now. The recent decisions
have benefited the retail and education sector, and many stakeholders have already
conveyed their interest in the country.

3.2 FDI IN AUTOMOTIVE STRUCTURE

India became the fourth largest auto market in 2019 displacing Germany with about 3.99
million units sold in the passenger and the second - largest medium- and heavy-duty
commercial vehicles (MHCBs) and two-wheeler segment dominates the market in terms
of volume owing to a growing middle class and a young population. The industry has
attracted Foreign Direct Investment worth US$ 24.53 billion between April 2000 and June
2020. India's automotive industry drawn 78 FDI deals in 2014, a rise of 28% compared
with the same period in 2012. Although the industry accounted for 8% of the total FDI
projects in India, most jobs were created (16%). In 2002, the GOI established the
automotive policy to generate the FDI to establish the nation as a production and export
base. The policy automatically approves investments in foreign equity up to 100% in the
production of motor vehicles and automotive components. The automotive industry in
India has 5 key manufacturing centers: Chennai (Tamil Nadu), Pune (Maharashtra),
National Capital Region (NCR), Pantnagar (Uttarakhand) and Sanand (Gujarat). These
countries have encouraged investment, including tax breaks, facilitated access to resources
and guaranteed access to technology. In order to once again promote automotive exports,
the GOI has actually created the Focus Market Scheme (FMS), which gives manufacturers
cash funding of up to 5% for vehicle exports. India is an attractive destination for investors
in automotive production due to its highly – skilled workforce, lower - cost supplier base
and strong retail demand. In addition, India is increasingly seen as a base for manufacturing
and exporting cars, competing with Thailand, Asia's current automotive production hub.
19 | P a g e
Yet according to study, analysts think that improvements in quality and service and a
greater focus on Research and development will increase the possession of India's
automotive component players in the global supply chain for automobiles. Indian
automotive industry (including manufacturing) is expected to reach Rs.16-18 trillion by
2026.

3.3 FDI IN FINANCIAL SERVICES

In 2012, the total number of financial services projects across the country increased by
21%, while the total value of FDI projects risen by 75%. Due to high growth opportunities,
FDI remained low in the sector compared to developing economies due to special drawing
rights of capital accounts, lock-in of capital and there have been several laws. About 22
percent of the financial companies queried said that devaluation of capital is the main
concern of 21 percent of investors who believe that locking up equity is a major challenge
in the industry. Nevertheless, the demand for a variety of financial sector products from
debt to insurance is increasing. At present, only 47% of the Indian population has easy
access to banking covenants, whereas only 15% of the insurable total population have life
assurance coverage. This is a small part of the great big Indian economy, which illustrates
the national growth in the region. Experts from industry expect India to become the third
largest financial sector market in the world by 2025 and the third largest life insurance by
2015.As on November 2020, Assets Under Management (AUM) managed by mutual fund
industry stood Rs.30 lakh crore (US$ 407.39 billion). Inflow in India’s mutual fund
schemes via Systematic Investment Plan (SIP) route to reached Rs.82,453 crore (US$ 11.70
billion) in 2019. India's vast capacity in monetary aunty in retirement, in particular, will
attract more and more investors as the GOI relaxes investment restrictions. India is
expected to be the fourth largest private wealth market globally by 2028. The Association
is Mutual Funds in India (AMFI) is targeting nearly five-fold growth in AUM to Rs.95
Lakh crore (US$1.47 trillion) and more than three times growth in investor account to 130
million by 2025.

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 3.4 FDI IN RETAIL

The Indian urban population has grown and retail has been organized in India and it is the
fifth largest and preferred retail destination. Retail industry is expected to reach Rs.76.87
lakh crore (US$1.1 trillion) by 2020. India ranked 63 in the World Bank’s Doing Business
2020 publication. Moreover, a shift in preferences for branded goods; palatable spending
by credit/debit cards; and a higher proclivity to spend act in order as drivers for the industry.
However, the investors' confidence was diminished by the decision of GOI hold FDI in a
multi-brand retail policy. In 2012, investors were eagerly awaiting the liberalization of the
Indian retail sector, which allowed large-scale retailers to enter and establish a store. Not
just that but this plan supported the creation of 10 million jobs in India, it also offered a
way to reduce the bottlenecks in supply and inflation at food prices. And only days after
the plan was implemented, political disputes forced its withdrawal. This has somewhat
damaged the credibility of the GOI to international investors, who might otherwise decide
to look somewhere else in the coming year. The decision is a great deception to players
like Wal-Mart Stores Inc. and Tesco Plc, who planned to invest heavily in the country.
However, the GOI did not decrease from the current 51% by allowing 100% foreign
investment in single-mark retail.
This will assist some of the most well-known single - brand apparel companies that are
eager to enter India. The food & grocery, apparel & accessories, footwear, electronics,
beauty products, jewelry, furniture & furnishings sectors of India's retail sector are
primarily unorganized with only a relatively small percentage of the industry becoming
organized. The unorganized industry consists of such small' mom&pop' shops and general
stores. In view of India's burgeoning per capita income and purchasing power in the middle
class over the past decade, the national industry has invested enormous amounts of money
in organized retail under various models, such as hypermarkets, supermarkets, convenience
stores, and modernized retail outlets. The domestic retailers involved include Reliance
Fresh, Big Bazaar, Spencer is in the food & food industry; Croma, Reliance Digital in the
electronics industry, Pantaloons, Shopper's Stop, Provogue, Will-Lifestyle in Apparels
industry. However, domestic investment has mainly focused on the front-end retail bases,
whereas significant investments in the back - end investment needed to develop the

21 | P a g e
interconnected retail chain are lacking. As an emerging economy with a huge consumer
base (both rural and urban), India offers foreign investors immense opportunities.
Organized retail is estimated to grow by around USS 80 billion and unorganized retail by
around US$ 190 billion in the next four years. The FDI is one of India's great issues and a
politically explosive issue. The Central Government of India confirmed retail changes for
both multi-brand stores in November 2011.
FDI policies related to retail in India are as follows:
• FDI up to 100% allowable under automatic route for money and wide-scale trading
and export buying and selling.
• 51 percent FDI is permitted in the retailing of ' single brand,' but after government
permission from the Foreign Investment Promotion Board (FIBP).
• 100% FDI allows investment in new power trading, petroleum infra and the rest of
the industries require RBI or FIBP prior approval. - structure, monitoring, and
warehousing if the mining of rubber and coffee, diamonds and coal In India, multi-
brand retailing is prohibited.
• In India, multi-brand retailing is prohibited.

3.5 FDI IN CONSUMER PRODUCTS

In the CP sector, the number of projects increased by 31% in 2013. The industry accounted
for 100% of India's total foreign direct investment programs and generated more than
28,400 jobs. Consumer investors are particularly interested in reaching the rapidly
expanding middle class of India, which progressively easily affords consumer goods.
Investors have seen growth in the packaging and beverages sector in particular. India's vast
population and strong economic growth make it the fifth largest consumer country in
consumption terms by 2025. The intense competition of the growing middle class is only
part of the story, in fact, an emerging new semi-rural customer base can also buy consumer
products more and more. The special criteria of the consumer goods market in India have
forced companies to prosper with a highly diversified portfolio of products, refining to the

22 | P a g e
needs of Indian consumers. Inflation, however, catches up with the cost structures of
companies and has led to a rapid increase in the cost of input, packaging, and fuel.

3.6 FDI IN TELECOM SECTOR:

With the liberalization of the Indian telecommunications industry, the industry is

undergoing intense competition, particularly in cellular services. Competition is expected
to keep subscriber growth and price pressure high. The administration has also increased
the FDI limit for telecommunications from 49% to 74%. This improvement can also give
many players direct access to more capital in terms of economics and foreign capital to
expand their networks, thereby increasing competition. Currently, India is the world’s
second largest telecommunications market with a subscriber base of 1.16 billion and has
registered strong growth in the last decade. With daily increasing subscriber base, there
have been a lot of investment and development in the sector. FDI inflow into the telecom
sector during April 2000 – September 2020 totaled US$ 37.27 billion according to the data
released by Department for Promotion of Industry and Internal Trade (DPIIT).

GOVERNMENT INITIATIVES:
According to the consolidated FDI policy issued by DIPP, the Indian Government has
allowed 100 percent FDI for all telecom operations and has fast-tracked reforms in telecom
sector continuing to be proactive in providing room for growth for telecom companies.
Some key initiatives taken by government are as follows:
• Union Cabinet chaired by the Prime Minister, Mr. Narendra Modi approved a
proposal by Department of telecommunications for setting up of Public Wi-Fi
Networks by Public Data Office Aggregators (PDOAs) to provide public Wi-Fi
services through Public Data Offices (PDOs).
• Government of India allowed 100% FDI in Bharti Airtel.
• The government approved the Production Incentive Scheme (PLI) for Large-scale
Electronics Manufacturing. The scheme proposes production-linked incentive to
boost domestic manufacturing and attract large investments in mobile phone

23 | P a g e
 manufacturing and specified electronic components including Assembly, Testing,
Marking and Packaging (ATMP) units.
• Government of India has introduced Digital India programme under which all the
sectors such as healthcare, retail, etc will be connected through internet.
• Prime Minister, Mr. Narendra Modi launched a project to connect all 45,945
villages in Bihar with optical fiber internet service. This project will be completed
by March 31, 2021 at a cost of Rs.1,000 crore (US$ 135.97 million); Rs. 640 crore
(US$ 87.01 million) of capital expenditure will be funded by Department of
Telecommunications.
• The Union Cabinet approved to sign a Memorandum of Understanding (MoU)
between the Ministry of Communication and Information Technology and the
Department of Digital, Culture, Media and Sports (DCMS) of United Kingdom
Government on cooperation in the field of telecommunications/information and
communication technologies (ICTS).

3.7 BANKING SECTOR

The country's banking industry is the biggest financial intermediary. According to Nirmala
Sitharaman, the challenges faced by the Indian banking industry can be classified as 3C
consolidation, convergence, and competition. These 3Cs would be the major drivers for the
banking sector, which is still well behind global standards in the capital, technology, and
systems sectors.

Capital is the greatest fuel for economic growth for any nation. India exudes foreign capital
in many banking systems. The banking sector in India is sufficiently capitalized and
regulated as per Reserve bank of India (RBI). Financial and economic conditions are far
more superior than any other country in the world. Indian banking sector has witnessed the
roll out of innovative banking models like payments and small finance banks.
Currently FDI is permitted upto a maximum threshold of 74 percent of the paid-up capital
of the bank, provided there are no modifications of control and management in the private

24 | P a g e
sector of India. In 2018, Modi administration held meetings to increase foreign investment
limit in private sector banks at 100 percent from 74 percent and in-state run banks to 49
percent from 20 percent. Firms like Morgan Stanley, Edelwiess and ICICI Direct
appreciated the government’s decision and said that large, state-owned banks would be
benefitted if the government implements its plan. FDI can act as vaccine to the banking
sector. It can help in boosting the nation’s economy via funds transfer of capital and hence
resulting in effective utilization of resources. Allowing FDI in banking sector will help the
transfer of technology and best administration practice.

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Chapter 4: DATA
ANALYSIS AND
INTERPRETATION

26 | P a g e
This chapter involves the dealings with analysis & interpretation of the data which is
collected. The analyzed data is shown in the form of tables and charts. The table which
consists of the average, minimum, maximum, compound annual growth rate (CAGR) and
Standard deviation.
This following table is showing the year-wise financial data of the FDI inflows and
outflows over a period of 10 years i.e, 2008-09 to 2019-20.
1. TABLE: FINANCIAL YEAR-WISE FDI EQUITY

(INFLOWS AND OUTFLOWS)

FDI Inflows FDI Outflows

Year
INR ( Crs FDI Growth Growth
FDI
) (USD) Rate % Rate %
2008-09 142,829 31,396 14344
2009-10 123,120 25,834 -18% 17281 20%
2010-11 97,320 21,383 -17% 19257 11%
2011-12 165,146 35,121 64% 15928 -17%
2012-13 121,907 22,423 -36% 15346 -4%
2013-14 147,518 24,299 8% 12608 -18%
2014-15 189,107 30,931 27% 18625 48%
2015-16 262,322 40,001 29% 15437 -17%
2016-17 291,696 43,478 9% 16782 9%
2017-18 288,889 44,857 3% 19268 15%
2018-19 309,867 44,366 -1% 18456 -4%
2019-20 353,558 49,977 +13% 20699 12%
Minimum 97,320 21,383 0 12608 0
Maximum 353,558 49,977 0 20699 0
Annual
207773 34505 0 13739
Average
CAGR 7.8 % 3.9 % 3.1%
Std. Deviation
102297 9884 0.24752525 2074 0.19565531

Source : As per the DIPP’s, FDI database.

27 | P a g e
Table 1 shows that the: FDI inflows in 2008-09 were Rs. 142829 crores and increased for
Rs. 353558 crores in the year 2019-20 with the Compound Annual growth rate of 7.8%.
Whereas in terms of US Dollars the FDI inflow was 31,396$ in the 2008-09 which
increased by 49977$ in the year 2019-20, with a Compound Annual growth rate of 3.9%.

The above table also represents that the FDI outflows in USD for the year 2008-09 was
14344$ which is again increased to 20699$ in the year 2019-20, with the Compound
Annual growth rate of 3.1%.

YEAR-WISE FDI EQUITY INFLOWS AND OUTFLOWS

60000

50000

40000

30000

20000

10000

0
2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20

FDI Inflows (USD mn) FDI Outflows (USD mn)

This graphical representation reveals that FDI inflows are higher than FDI outflows in all
the years. In the year, 2019-20 the FDI outflows are the highest i.e. 20699$ and the FDI
outflows were lowest in the year 2013-14 i.e. 12608$.

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 2. TABLE : SECTORS ATTRACTING THE HIGHEST
FOREIGN DIRECT INVESTMENT (FDI) EQUITY
INFLOWS IN INDIA.

Service Computer
Year Infrastructure Telecom Power
Sector Software
2008-09 28516 8792 11727 7329 4382
2009-10 19945 13469 12270 4127 6138
2010-11 15054 7590 7542 3551 5796
2011-12 24656 15236 9012 3804 7678
2012-13 26306 7248 1654 2656 2923
2013-14 13294 7508 7987 6896 6519
2014-15 19963 4582 17372 13564 3958
2015-16 45415 727 8637 38351 5662
2016-17 58214 703 37435 24605 7473
2017-18 29819 3472 39264 33246 8912
2018-19 63909 1503 18337 45297 9538
2019-20 55429 4350 30940 54250 13546
Minimum 13294 703 7987 2656 2923
Maximum 63909 15236 39264 54250 13546
Annual
33376 6265 16848 19806 82525
Average
CAGR 5% - 5% 8% 18% 9%
Std
16936 4347 11935 17807 2744
Deviation

29 | P a g e
SECTORS ATTRACTING THE HIGHEST FOREIGN DIRECT
INVESTMENT (FDI) EQUITY INFLOWS IN INDIA.

70000

60000

50000

40000

30000

20000

10000

0
2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20

Service sector Infrastructure Telecom Coomputer software Power

Source : As per the DIPP’s, FDI database.

Note: (1) **The Services sector includes Financial, Banking, Non-Financial/Business,

Outsourcing, Insurance, Tech, Insurance, Testing & Analysis, and Research &
Development.

The above table we clearly understand that in the 2008-09 the FDI in the Service sector
was Rs. 28516.crs and has grown up to Rs. 63909.crs in the year 2018-19, so this clearly
indicates that the Service sector had made a significant growth of Rs. 35939.crs. It also
shows that there was a drastic fall in the FDI inflow from the year 2013-14 i.e. Rs.
13294.crs. Compared to 2012-13 it has suffered a loss of Rs. 13015.crs. Due to the drastic
fall of FDI inflows in a few years, the Service sector has 5% Compound Annual growth
rate.

30 | P a g e
In the Infrastructure sector the highest FDI inflow was in the year 2011-12 ie. Rs.
15236.crs, which showed the drastic falls in the inflows for the continuous 2 years 2015-
16 & 2016-17 amounting Rs. 703.crs & Rs. 727.crs respectively. Thus there is a negative
Compound Annual growth rate of -5%.

In the Telecom sector the highest FDI inflow was in the year 2019-20 ie. Rs. 39264.crs,
The lowest was in the year 2012-13 i.e. Rs.1654 crs, This sectors is picking up at a slow
pace and will continue to show positive inflows in the upcoming future. Thus there is a
positive Compound Annual growth rate of 8%.

In the Computer Software sector the highest FDI inflow was in the year 2019-20 ie. Rs.
54250.crs, The lowest was in the year 2012-13 i.e. Rs.2656 crs, This sector is similar with
regards to the telecom sector. Thus there is a positive Compound Annual growth rate of
18%.

In the Power sector the highest FDI inflow was in the year 2019-20 i.e. Rs.13546 crs. This
sector continues to surge and it is expected to have a positive outlook in future. The lowest
FDI inflow was in the year 2012-12. However, there is a positive Compound Annual
growth rate of 9%.

31 | P a g e
 3. TABLE : SECTORS ATTRACTING THE HIGHEST
FOREIGN DIRECT INVESTMENT FDI INFLOWS INDIA

Hotel
Petroleum Drugs and
Year Automobile Chemicals and
and gas Pharmaceuticals
Tourism

2008-09 5212 3427 1931 Nil Nil

2009-10 5893 1726 1328 1006 Nil
2010-11 5864 10612 2421 962 1405
2011-12 4347 18422 920 14605 4754
2012-13 8384 1596 570 6011 17777
2013-14 9027 4738 894 7191 2949
2014-15 15794 4077 1056 9211 4740
2015-16 16437 9684 942 4975 8761
2016-17 10824 9397 1354 5723 7840
2017-18 11202 7327 1546 5663 7279
2018-19 18309 13685 1224 1842 7590
2019-20 19753 7492 1956 3650 21060
Minimum 4347 1596 570 962 1405
Maximum 19753 18422 2421 14605 21060
Annual
Average 10486 7396 1345 5069 7012
CAGR 11% 6% 0% -1% -1%
Std.
Deviation 5192 4824 513 3786 6845

32 | P a g e
Source: As per DIPP's, FDI database.

From the above table, it depicts that the Automobile sector has grown significantly. In the
year 2011-12, it was Rs. 4347 crores and has grown up to Rs. 19753 crores in the year
2019-20 with a Compound Annual growth rate of 11%.

The table also shows that there is a significant increase in the chemical sector. It has grown
tremendously for the years 2010-11 and 2011-12 with among the highest rated FDI inflows
i.e. Rs. 10612 & Rs. 18422 crores respectively, but has a drastic fall in the FDI inflow in
the next year, 2012-13 with the inflows at Rs. 1596 crores. Even though the chemical sector
has grown significantly with the Compound Annual growth rate of 8%.
The Petroleum, Gas , Pharmaceuticals, Tourism continue to stay volatile. Petroleum has
given a Compound Annual growth rate of 0% . Pharmaceuticals and Tourism has given a
negative Compound Annual growth rate of -1%.
25000

20000

15000

10000

5000

0
2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20

Automobile Chemical Petroleum and gas Drug and Pharmaceutical Hotel and Tourism

From the chart, we get to infer that:

33 | P a g e
• The highest inflow in the Automobile sector was in the year 2019-20 & lowest in
2011- 12.
• The highest inflow in the Chemicals sector was in the year 2011-12 & lowest in
2012- 13.
• The highest inflow in the Petroleum and Gas Sector was in the year 2010-11 &
lowest in 2012-13
• The highest inflow in the Drugs and Pharmaceuticals was in the year 2011-12 &
lowest in 2010-11.
• The highest inflow in the Hotel and Tourism was in the year 2019-20 & lowest in
2010-11.

34 | P a g e
 4. TABLE : A STATEMENT ON COUNTRY-WISE FDI
INFLOWS WITH RESPECT TO THE FINANCIAL YEARS
FOR A PERIOD 2007-08 TO 2019-20.

Year MAURITIUS SINGAPORE U.K JAPAN USA

2008-09 50889 15727 3840 1889 8002

2009-10 49633 11295 3094 5670 9230
2010-11 23576 6198 1765 4141 4247
2011-12 46710 24712 36428 14089 4247
2012-13 51654 12594 5797 12243 5347
2013-14 29360 35625 20426 10550 4807
2014-15 55172 41350 8769 12752 11150
2015-16 54706 89510 5938 17275 27695
2016-17 105587 58378 9953 31588 15957
2017-18 102492 78542 5473 10371 13505
2018-19 57139 112362 9352 20556 176222
2019-20 57785 103615 10041 22774 150411
Minimum 23576 6198 1765 1889 4807
Maximum 105587 112362 36428 31588 176222
Annual
Average 47481 31160 8456 10047 8682
CAGR 1% 17% 8% 23% 27%
Std. Deviation 25585 27871 10082 7907 6927

Source : As per the DIPP’s FDI database.

35 | P a g e
The above table depicts the databases of the countries having the highest FDI in India from
2007-08. As per the report, it shows that the country Mauritius is the highest foreign
investment in India which averages for Rs. 47481 crores for 12 years. Highest investor
Mauritius followed by Singapore, Japan, USA, and U.K.
Mauritius with Compound Annual growth rate of 1% and the others respectively.

Pie-diagram representation of the country-wise foreign direct

investment inflows in India for the year 2008-09 and the year 2019-
20:

2008-09

10%

2%

5%

20%

63%

MAURITIUS SINGAPORE U.K. JAPAN USA

36 | P a g e
 2019-20

16%

MAURITIUS
43% SINGAPORE
U.K.
JAPAN
32% USA

6% 3%

37 | P a g e
 5. TABLE : A STATEMENT ON COUNTRY-WISE FDI
INFLOWS RESPECT TO THE FIANANCIAL YEARS FOR
A PERIOD 2007-08 TO 2019-20.

Year NETHERLANDS CYPRUS GERMANY FRANCE U.A.E

2008-09 3992 5983 2750 2098 1133

2009-10 4283 7728 2980 1437 2890
2010-11 3643 2746 473 1569 1289
2011-12 6698 7722 7452 3110 953
2012-13 10054 2658 4684 3487 655
2013-14 13920 3401 6093 1842 1562
2014-15 20960 3634 6904 3881 2251
2015-16 17275 3317 6361 3937 6528
2016-17 22633 4050 7175 4112 4539
2017-18 18048 2680 7391 3297 6767
2018-19 27036 2134 6187 2890 10385
2019-20 46071 6449 3467 13686 13787
Minimum 3643 2134 473 1437 655
Maximum 46071 7728 7452 13686 13787
Annual
Average 10125 3659 4355 3538 2380
CAGR 22% 0.6% 1.94% 16.91% 23.15%
Std.
Deviation 6975 1903 2288 3246 2180

Source : As per the DIPP’s, FDI database.

38 | P a g e
Table 5. depicts the country having the highest FDI in India 2019-20 with Rs. 46071 crores.
This report shows that the Netherlands has the highest foreign investment in India. After
Netherland, we have Germany, Cyprus, France, and U.A.E.

The Netherlands has the highest investment as well as the highest Compound Annual
growth of 22% whereas Cyprus coming third among these 5 countries in foreign investment
has a Compound Annual growth rate of 0.6%. Moreover, the other countries have a positive
CAGR percentage.

Pie-diagram representation of the country-wise foreign investment

inflows in India for the year 2008-09 to the year 2019-20:

2008-09

7%

13% 25%
NETHERLANDS
CYPRUS
GERMANY
17% FRANCE
U.A.E

38%

39 | P a g e
 2019-20

16%

NETHERLANDS
CYPRUS
16% GERMANY
56% FRANCE
U.A.E
4%

8%

40 | P a g e
 Chapter 5:
FINDINGS,
CONCLUSIONS AND
RECOMMENDATIONS

41 | P a g e
 .
5.1 FINDINGS OF THE STUDY

• From the study, it has been interpreted that the year-wise FDI equity inflows
have grown significantly from the period of past 12 years.

• FDI has shown tremendous growth in the Service sector, which is almost 4
times than that of the first decade.

• The service sector is the one attracting the highest FDI and Computer Software
sector is the second sector attracting the highest inflows of FDI.

• Service sector made a tremendous and remarkable FDI inflow in the year 2016-
17 that is Rs. 58,214 crores and has maintained a constant average of inflows
in the decade.

• It is also analyzed that the Computer Software sector has the highest among all
the sectors in gaining the FDI inflows.

• This study shows that the FDI inflow has not made a great impact on the
Petroleum and Gas sector.

• It is also interpreted that Mauritius, Singapore, and the Netherlands are the 3
top countries which have the maximum FDI inflows in India.

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 • FDI plays a very predominant role in developing the Infrastructure as many of
the countries prefer to invest in the service, infrastructure, and the banking
sector.

• After all the above findings, we may conclude that FDI has a very good future
in the Retailing and real-estate sector in India.

5.2 CONCLUSION

It can be concluded from the observed and the made an analysis that the sectoral level of
Indian Economy, has risen in terms of outputs, productivity, and employment
opportunities, with the help of the Foreign Direct Investment especially in the Services
sector. The Indian service sector creates the right employment opportunities for high -
performance of skilled workers. However, on the other hand, FDI helps the bank and
insurance sectors to strengthen the Indian fiscal situation and help develop the country's
foreign exchange system. We can, therefore, infer that FDI helps to create jobs in this
country and even promotes small-scale industries and even enables countries to make a
worldwide impression through liberalization and globalization.

5.3 RECOMMENDATIONS:

 Infrastructure in India needs to be developed to capture more FDIS.

 Current FDI reforms must continue for economic growth.

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 The Govt is advised that service charges should be reduced to encourage foreign
investment by the FDI and allied.

 It is nice to give NRIs special advantages for investments in India, as they can rely
more on Indian companies to take the world's attention.

 The government should encourage FDI investments to invest their funds in sectors
like Cultivation, Energy, Agriculture, Infrastructure and other very important
sectors.

 The government must also encourage FDI investments in the Petroleum and Gas
sector as well as Hotels and Tourism sector.

44 | P a g e
Chapter 6: LEARNING
OUTCOME

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This project has helped me in understanding the role of Foreign Direct Investments (FDI)
in a nation’s participation in global economic development. It has helped me in realizing
facts that FDIs are a form of loans or equity instruments used to finance for developing
countries. It helps in bringing new technologies, management techniques, and market
access as well.
It has come to my knowledge that FDI investments help in Boosting International Trade,
helping in reducing regional and global tensions, sharing in culture, diversification in
order to minimize risk, Lower the labor cost and increase in efficiency, and finally helps
in getting Tax Incentive benefits to an organization.

46 | P a g e
 BIBLIOGRAPHY

RESEACRH PAPER

1. Aggarwal Shalini, Singla Ankush and Aggarwal Ritu, "International Journal of

Computational Engineering & Management", Vol. Issue, September 2012 ISSN
(Online):2230-7893.
2. Mittal Ms. Parul; Aggarwal Mr. Sandeep, "ZENITH International Journal of Business
Economics & Management Research" Vol.2 Issue 7, July 2012, ISSN 22498826.
3. Subramanian Ravi, Sachdeva Charu, and Morris Sebastian (2010) INDIA'S FDI
INFLOWS Trends and Concepts, Institute for Studies in Industrial Development,
Working Paper No. 2011/01.
4. Sasiddaran Gopalan and Ramkishen S. Rajan (June 2009) Outward Foreign Direct
Investment from India: Trends, Determinants and Implications, Working Paper,
Institute of South Asian Studies.
5. Huang, Yeshang, Tang, Heiwai The World Economy. Vol.35, Issue 1, 2012.
6. Sanjo, Yasuo European journal of health Economics- EUR J HEALTH ECON Vol.
10,2009.
7. Hossain, Anowar, Hossain Mohammad, Kamaal "Factors affecting employees no 2,
2009. motivation in the fast food industry" Vol. 05, 2012
8. Nunnenkamp, Peter, Mukim Megha, the clustering of in India: the importance of peer
effects." Applied economics letters, Taylor & Francis journals, Vol. 19(8), May 2012.
9. Patil Dr. Usha N, " Indian Streams Research Journal, Vol.2, Issue. 3 ISSN: 2230-7850
April 2012.
10. Batra, Ravi and Beladi, Hamid, "Review of International Economics" Vol. 18, issue 2,
21 May 2010.

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WEBSITES:
1. www.dipp.nic.in
2. www.fdi.gov.in
3. www.sebi.gov.in
4. www.rbl.org.in
5. www.indiamacroadvisors.com
6. www.ibef.org

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 ANNEXURE

RBI Website Database Statistics

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50 | P a g e
 MBA PROJECT
PROGRESS REPORT – 1
SL NO PARTICULARS
1 Name of the student SRIKANTH B

2 Registration number MB192201

3 Name of the college Guide DR ANANTHA MURTHY

4 Name of the Guide/external NA

guide(corporate)
5 Title pf the project “A STUDY ON FORIGN DIRECT
INVESTMENT WITH REGARD
TO ECONOMIC GROWTH IN
INDIA ”
6 Name and address of the NA
company/organization where
project undertaken with date of
starting
7 Progress report: A brief note I have mailed to my guide 4 times.
reflecting, Number of meeting with I have done field work in persons
Guides, places visited, libraries regarding and prepared
visited, books referred, meeting questionnaires for the study.
with persons, activities taken up, I have called 2 times for my guide to
preparations done for collection and clearing my doubts regarding
analysis of data etc.,) project.
I have referred website, articles and
journals for information.

Signature of the candidate signature of the college Guide

51 | P a g e
 MBA PROJECT
PROGRESS REPORT – 2
SL NO PARTICULARS
1 Name of the student SRIKANTH B

2 Registration number MB192201

3 Name of the college Guide DR ANANTHA MURTHY

4 Name of the Guide/external NA

guide(corporate)

5 Title pf the project “A STUDY ON FORIGN DIRECT

INVESTMENT WITH REGARD TO
ECONOMIC GROWTH IN INDIA ”

6 Name and address of the NA

company/organization where
project undertaken with date of
starting

7 Progress report: A brief note I have mailed to my guide 4 times.

reflecting, Number of meeting with I have done field work in persons
Guides, places visited, libraries regarding and prepared
visited, books referred, meeting questionnaires for the study.
with persons, activities taken up, I have called 2 times for my guide to
preparations done for collection clearing my doubts regarding
and analysis of data etc.,) project.
I have referred website, articles and
journals for information.

Signature of the candidate signature of the college Guide

52 | P a g e