INTERNATIONAL FINANCIAL MANAGEMENT FDI

7/21/2019 INTERNATIONAL FINANCIAL MANAGEMENT FDI

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INTERNATIONAL FINANCIALMANAGEMENT

FDI



INTRODUCTION

FDI is direct investment intoproduction in a country by acompany located in anoter country!eiter by buyin" a company in tetar"et country or by e#pandin"

operations o$ an e#istin" business intat country%



• FDI o&ers an e#clusive opportunity toenter into te international or "lobalbusiness! ne' mar(ets and

mar(etin" cannels! elusive accessto ne' tecnolo"y and e#pertise!e#pansion o$ company 'it ne' or

more products or services! andceaper production $acilities%



)*+

• FDI plays a ma,or role in developin"countries li(e India% Tey act as alon" term source o$ capital as 'ell as

a source o$ advanced and developedtecnolo"ies% Tis elps in increasin"employment% FDI also elps in

promotin" international trade%



-ECTOR-

• Top ./ sectors by number o$ pro,ects

• -o$t'are 0 IT services 1!223

• 4usiness -ervices 5!233

•

Te#tiles 5!165• Financial -ervices .!758

• Industrial Macinery ! E9uipment 0 Tools .!27:

• Communications .!25:

• Consumer ;roducts .!512• Food 0 Tobacco .!.7:

• Transportation .!/28

• Automotive Components 7/3



BENEFITS OF FDI FORHOST COUNTRIES

• 4ot ost country and ome "etbene<t $rom FDI

• *ost country means tat country'ic accept te FDI $rom otercountries and use tis $or itseconomic development

• *ome country means tat country'ic supply its abundanceresources and 'iden its mar(et%




1. Policy framework for FDI

• Economic! political! and social stability

• Rules re"ardin" entry and operations

• -tandards o$ treatment o$ $orei"n a=liates

• ;olicies on $unctionin" and structure o$ mar(ets>especially competition and policies "overnin" mer"ersand ac9uisitions?

• International a"reements on FDI

• ;rivati@ation policy• Trade policy >tari&s and nontari& barriers? and

coerence o$ FDI and trade policies

• Ta# policy




2. Economic e!erminan!" 0

B#"ine"" facili!a!ion

• Investment promotion

• Investment incentives

• *assle costs >related to corruptionand administrative e=ciency?

• -ocial amenities




$. %arke!&"eekin'

• Mar(et si@e and per capita income

• Mar(et "ro't

• Access to re"ional and "lobal mar(ets

•

CountryBspeci<c consumer pre$erences• -tructure o$ mar(ets

(. Re"o#rce)a""e!&"eekin'

• Ra' materials

• Lo'Bcost uns(illed labor

• -(illed labor• Tecnolo"ical! innovative! and oter created assets >$or

e#ample! brand names?! includin" as embodied in individuals!<rms! and clusters

• ;ysical in$rastructure >ports! roads! po'er!

telecommunications?




*. E+ciency "eekin'

• Cost o$ resources and assets listed above!ad,usted $or labor productivity

• Oter input costs! suc as transport andcommunication costs to$rom and 'itin osteconomy and oter intermediate products

• Membersip o$ a re"ional inte"ration

a"reement conducive to te establismento$ re"ional corporate net'or(s



DECI-ION

• E,c-an'e Ra!e B Te stron"er te $orei"n currency is incomparison to tat o$ te ost country! lesser 'ill be te amount o$investment re9uired% In oter 'ords! depreciation o$ currency in teost country 'ill lead to more investments%

• %arke! Sie B Tis re$ers to te GD; "ro't% Developin" and

emer"in" countries are more li(ely to attract investments%• Infra"!r#c!#re B Investors 'ill invest in a country i$ tey tin( tat

te country as suitable in$rastructure to support te business%

• Ta, re'ime B MNCs are sub,ect to ta# in bot te parent as 'ell asost country% Te ost country 'ic attempts to reduce tis doubleta#ation o$ MNCs 'ill attract more FDI%

• /a0or marke! coni!ion" B Te educational levels o$ te labor as'ell as te 'a"e rates also play a ma,or role in determinin" teo' o$ FDI%

• Financial an economic "!a0ili!y

• Poli!ical "!a0ili!y



RECENT TREND-

• RECENT ;OLIC+

• RECENT ;ROECT-



;OLIC+

• .// FDI allo'ed in medical devices

• FDI cap increased in insurance 0 subBactivities $rom 58 to27

• FDI up to 27 as been permitted in te ;ension -ector%

FDI limit o$ 58 in de$ense sector raised to 27 underGovernment approval route% Forei"n ;ort$olio Investment upto 52 permitted under automatic route%

• Construction! operation and maintenance o$ speci<edactivities o$ Rail'ay sector opened to .// $orei"n direct

investment under automatic route%• Investment by NRIs under -cedule 2 o$ FEMA >Trans$er or

Issue o$ -ecurity by ;ersons Resident Outside India?Re"ulations 'ill be deemed to be domestic investment atpar 'it te investment made by residents%

•

Composite caps on $orei"n investments introduced to brin"uni$ormity and simplicity is brou"t across te sectors in



;ROECT-

• Five industrial corridor pro,ects ave been identi<ed! planned andlaunced by te Government o$ India in te nion 4ud"et o$ 5/.2B5/.:! to provide an impetus to industriali@ation and plannedurbani@ation% In eac o$ tese corridors! manu$acturin" 'ill be a(ey economic driver and tese pro,ects are seen as critical in

raisin" te sare o$ manu$acturin" in IndiaHs Gross Domestic;roduct $rom te current levels o$ .: to .8 to 5: by 5/55%

• Alon" tese corridors! te development o$ .// -mart Cities asalso been envisa"ed in te nion 4ud"et o$ 5/.2B5/.:% Tesecities are bein" developed to inte"rate te ne' 'or($orce tat 'illpo'er manu$acturin" alon" te industrial corridors and to

decon"est IndiaHs urban ousin" scenario%

• A National Industrial Corridor Development Autority >NICDA? isbein" establised to conver"e and inte"rate te development o$all industrial corridors%

Sl N FDI i 3 P ! R f P i 4R



Sl No. ear" FDI in3ow" Po"! Reform Perio 4R".

in Crore" 51 1661&62 (762 1662&6$ 176($ 166$&6( 2718( 166(&6* ($12

* 166*&69 96199 1669&6: 69*(: 166:&68 1$*(88 1668&66 12$($6 1666&77 17$1117 2777&71 17:$$11 2771&72 189*(

12 2772&7$ 128:11$ 277$&7( 1779(1( 277(&7* 1(9*$1* 277*&79 2(*8(19 2779&7: *9$671: 277:&78 689(2

18 2778&76 ;<= 1(282616 2776&17 > 12$127

27 2717&11 > 6:$2721 2711&12 >

?19*1(9

22 2712&1$ > 12167:

2$ 271$&1( 1(:*182( 271(&1* 9(16$



ToA Ten Co#n!ry&wi"e FDI E#i!y In3ow" !o Inia from@Aril 2777 !o #ly 271(

S.No Name of the

Country

Amount of FDI

Inflows (Rs. in

crore)

%age with total

FDI Inflows (+)

!auritius "#$#.& "'.&&

Singaore "'*&.' .&&" ,nite- ing-om $'*#'.&" #.

/aan &'"#.$ *.#

' Netherlan-s ''.# '.'*

,.S.A '*&"'.#$ '."&* Cyrus "*"#."" "."&

& 0ermany ""&.& .##

# France #"#&.* .*'

$ Swit1erlan- "&$. ."



FINDING-

• India is one o$ te most important countries in te 'orld

to attract FDI%

• Te FDI ino' to India 'as not ne' one! because it 'asprevailed 'ay bac( durin" te colonial period%

• -ince introduction o$ Ne' Economic ;olicy .77.! FDIino' "ot "reater scope% Tis is because o$ open mar(etconditions%

• -ervice sector! construction! telecommunication etctertiary sector attractin" more FDI ten a"ricultural andsmall scale industries% 4ecause 'e need more $und teprimary sector but tey are deprived $rom te investment%

• -ectors 'ic are deprived $rom te FDI are tose 'erelar"e mar(et potential is present but tese are i"nored byte policy ma(ers 0 poor in$rastructure as 'ell as due toi" concentration on priority sectors also contributed tote cause%



FINDING-

• -tateB 'ise FDI ino's so' tat Maarastra!Ne' Deli! arnata(a! Gu,arat and Tamil Nadureceived ma,or investment $rom investors becauseo$ te in$rastructural $acilities and $avorable

business environment provided by tese states%• It is observed tat ma,or investment in te above

sectors came $rom Mauritius and investments intese sectors in India are primarily concentrated

in Mumbai and Ne' Deli%• It is also observed tat te reali@ation o$ approved

FDI into actual disbursement is 9uite lo'%



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INTERNATIONAL FINANCIAL MANAGEMENT FDI

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