Foreign Direct Investment (Fdi)
Foreign Direct Investment (Fdi)
2) By Target
* Mergers and Acquisitions
* Horizontal FDI
* Vertical FDI
(a) Backward Vertical FDI
(b) Forward Vertical FDI
3) By Motive
* Resource-Seeking
* Market-Seeking
* Efficiency-Seeking
Investing in India – Entry Routes
Investing in India
Prior Permission
Automatic Route
(FIPB)
• When a firm invests in abroad in similar production activities as carried out in the home
country. MNE’s such as pepsi, coke kodak, HSBC, LG etc expanded internationally by a
way horizontal FDI.
• or
• Where the company carries out the same activities abroad as at home (for example toyota
assembling cars in both japan and u.k)
•
BY DIRECTION : INWARD FDI & OUTWARD FDI:-
Inward FDI:
• An inward investment involves an foreign entity either investing in or purchasing the goods
of a local company
• Example: Foreign firms taking control over domestic assets is termed as Inward FDI. From
an Indian perspective% direct investments made by foreign firms such as “Suzuki, Honda,
LG, Samsung GM etc.% in India are the examples of inward FDI
• Outward FDI:
domestic firms investing overseas and taking control over foreign assets is known as
outward FDI.From an Indian point of view direct investments overseas by Indian frms such
as Tata Motors, Infosys videocon ONGC etc are examples of FDI.
• An outward investment is a business strategy where a domestic firm expands its operations
to a foreign country either via acquisition or expansion of an existing foreign facility.
BY ENTRY MODES
• GREENFIELD INVESTMENT:- Greenfield investment
is the investment in a manufacturing ,office, etc.
significant jump in India’s ‘ease of doing business’ World Bank ranking since
2015.
FDI
400000
350000
300000
250000
200000 FDI
150000
100000
50000
0
2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0
1-9 2-9 3-9 4-9 5-9 6-9 7-9 8-9 9-0 0-0 1-0 2-0 3-0 4-0 5-0 6-0 7-0 8-0 9-1 0-1 1-1 2-1 3-1 4-1 5-1 6-1 7-1 8-1 9-2
9 9 9 9 9 9 9 9 9 0 0 0 0 0 0 0 0 0 0 1 1 1 1 1 1 1 1 1 1
19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20
The sectoral
trends of FDI flows to India from 1991-92 to 2019-20 ( pre & post MII )
service sector has the highest FDI inflows attracting 17% share followed by
Telecommunication and computer software attracts 8% and construction sectors is 7%.
Country – wise inflows of FDI from 2000 to 2018: MAURITIUS country has the highest
foreign investor in India with 35%. After Mauritius, Singapore and Japan invest the
highest FDI in India with 17% and 7% respectively.
The region wise FDI flows: Mumbai has registered largest FDI inflow amounting to 31%
of total inflow received in last 18 years.
New Delhi is the second preferred region for FDI inflow with 20% and
Chennai is the third preferred cities which are attracting FDI with 8% in India.
State wise FDI inflows show that Maharashtra, Delhi, Tamil Nadu Karnataka, Gujarat and
together accounted major percent of inflows because of the infrastructural facilities and
favourable business environment provided by these states.
Government policies
• Automatic Route:
• Fdi is allowed under the automatic route without prior
approval either of the Government or the Reserve bank
of India in all activities/sectors as specified in the
consolidated Fdi policy, issued by the government of
India from time to time.