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Journal for Studies in Management and Planning

Available at

http://edupediapublications.org/journals/index.php/JSMaP/

e-ISSN: 2395-0463

Volume 02 Issue 11

November 2016

Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 265

FDI in India

Prof. Jagdeep Kumari

(Asstt. Prof. in Commerce Department) S.G.G.S Khalsa College,Mahilpur

E-mail: jagdeep2015@hotmail.com

ABSTRACT

Foreign Direct investment plays a very

important role in the development of the

nation. Sometimes domestically available

capital is inadequate for the purpose of

overall development ,that’s why FDI

needed.Broadly, foreign direct investment

includes "mergers and acquisitions, building

new facilities, reinvesting profits earned

from overseas operations and intra company

loans". In a narrow sense, foreign direct

investment refers just to building new

facility, a lasting management in an

enterprise operating in an economy other

than that of the investor. The present study

has focused on the trends of FDI Flow in

India. The study also highlights country wise

approvals of FDI inflows to India and the

FDI inflows in different sector .

Keywords:Foreign Direct investment,

Government, Approval route, Automatic

INTRODUCTION

Foreign Direct Investment is a type of

investment in to an enterprises in a country

by another enterprises located in another

country by buying a company in the target

country or by expanding operations of an

existing business .Foreign direct investment

is one of the measures of growing economic

globalization. Investment has always been

an issue for the developing economies such

as India. FDI depends on saving and

investment rate in any country. Foreign

Direct investment acts as a bridge to fulfill

the gap between investment and saving. In

the process of economic development

foreign capital helps to cover the domestic

saving constraint and provide access to the

superior technology that promote efficiency

and productivity of the existing production

capacity and generate new production

opportunity. Services, telecommunication,

construction activities, computer software &

hardware and automobile are major sectors

which attracted higher inflows of FDI in

India. Countries like Mauritius, Singapore,

US & UK were among the leading sources

of FDI in India. Foreign Direct Investment

in India increased by 4876 USD Million in

August of 2016. Foreign Direct Investment

in India averaged 1190.70 USD Million

from 1995 until 2016, reaching an all time

high of 5670 USD Million in February of

2008 and a record low of -60 USD Million

in February of 2014. In the long-term, the

India Foreign Direct Investment is projected

Page 2 of 3

Journal for Studies in Management and Planning

Available at

http://edupediapublications.org/journals/index.php/JSMaP/

e-ISSN: 2395-0463

Volume 02 Issue 11

November 2016

Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 266

to trend around 3271.57 USD Million in

2020, according to econometric models.

FDI POLICY FRAMEWORK IN INDIA

FDI inflow routes: An Indian company may

receive Foreign Direct Investment under the

two routes as given under:

1. Automatic Route: FDI in sectors

/activities to the extent permitted under the

automatic route does not require any prior

approval either of the Government or the

Reserve Bank of India.

2. Government Route: FDI in activities not

covered under the automatic route requires

prior approval of the Government which are

considered by the Foreign Investment

Promotion Board (FIPB)

FDI is not permitted in the following

sectors:

• Atomic Energy

• Railway Transport.

• Coal and lignite.

• Arms and ammunition

• Lottery Business

• Business of Chit Fund

• Mining of iron, manganese, chrome,

gypsum, sulphur, gold, diamonds,

copper, zinc.

• Gambling and Betting

• Agricultural (excluding Floriculture,

Horticulture, Development of seeds,

Animal Husbandry, mushrooms, and

cultivation of vegetables, etc. under

controlled conditions and services

related to agro and manufacturing

industries, short and long term

project in the field of healthcare,

education, research and

development.

FLOW OF FDI IN DIFFERENT

SECTORS

• 100% FDI allowed in Asset

Reconstruction Companies under the

automatic route

• 100% FDI under automatic route

permitted in Brownfield Airport projects

• FDI up to 100% under automatic route

permitted in Up-linking of Non-‘News

& Current Affairs’ TV Channels, Down- linking of TV Channels

• FDI up to 100% under automatic route

permitted in Teleports, Direct to Home,

Cable Networks, Mobile TV, Headend- in- the Sky Broadcasting Service

• Foreign equity cap of activities of Non- Scheduled Air Transport Service,

Ground Handling Services increased

from 74% to 100% under the automatic

route

• 74% FDI under automatic route

permitted in brownfield pharmaceuticals.

FDI beyond 74% will be allowed

through government approval route

• FDI limit for Private Security Agencies

raised to 74% (49% under automatic

route, beyond 49% and upto 74% under

government route)

Page 3 of 3

Journal for Studies in Management and Planning

Available at

http://edupediapublications.org/journals/index.php/JSMaP/

e-ISSN: 2395-0463

Volume 02 Issue 11

November 2016

Available online: http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 267

FDI limit for Scheduled Air Transport

Service/ Domestic Scheduled Passenger

Airline and regional Air Transport Service

raised to 100%, with FDI upto 49%

permitted under automatic route and FDI

beyond 49% through Government approval.

SECTORS REQUIRING CENTRAL

GOVERNMENT APPROVAL

i. Mining and mineral separation of

titanium bearing minerals and ores –

Upto 100%

ii. Defence – Beyond 49% & upto

100%

iii. Satellites – establishment and

operation – Upto 100%

iv. Telecom Services – Beyond 49% &

Upto 100%

v. Pharma – Brownfield – Beyond 74%

& Upto 100%

vi. Banking – Private Sector – Beyond

49% & Upto 74%

vii. Banking – Public Sector – Upto 20%

viii. Mining and mineral

separation of titanium bearing

minerals and ores – Upto 100%

PROBLEMS FOR LOW FDI FLOW TO

INDIA:-

• Stringent labor laws

• Lack of adequate infrastructure

• High corporate tax rates

• Lack of decision making authority

with the state governments

• Limited scale of export processing

zones

• Corruption

• political instability

CONCLUSION

FDI in India has a significant role in the

economic growth and development of India.

FDI in India to various sectors can attain

sustained economic growth and

development through creation of jobs,

expansion of existing manufacturing

industries. The inflow of FDI in service

sectors and construction and development

sector,attained substantial sustained

economic growth and development through

creation of jobs in India. India is a

developing country, capital has been one of

the scare resources that are usually required

for economic development. Capital is

limited and there are many issues such as

Health, poverty, employment, education,

research and development, technology

obsolesce, global competition,because of

these reasons India need FDI.

REFERENCES

Reserve Bank of India,Monthly Bulletin,

Department of Industrial Policy and

Promotion,Annual Report.

www.ijsrp.org

https://www.studydhaba.com