ABRAHAM LINCON

Foreign direct investment (FDI) occurs when an investor based in one country (the home country) acquires an asset in another country ( the host country). with the intent to manage the asset.

 Foreign

Direct Investment, or FDI, is a type of investment that involves the injection of foreign funds into an enterprise that operates in a different country of origin from the investor.
usually involves participation management, joint venture, transfer technology and expertise. in of

It

 FII - is Foreign Institutional Investors, i.e.,

foreign Investment Bankers like Goldman sachs, Merrill lynch, Lehman bros etc...investing in Indian markets......in other words buying Indian stocks.....FII's generally buy in large volumes which has an impact on the stock markets...

FDI - is Foreign Direct Investments i.e. a foreign company having a stake in a public sector undertaking in a country for a long period and that company is called Multinational Enterprise.

Purchase of existing assets.

Quick entry, local market know-how, local financing may be possible, eliminate competitor, buying problems

New investment.
No local entity exists or is available for sale, local financial incentives may encourage, no inherited problems, long lead time to generation of sales or other desired outcome

Joint venture.
Shared ownership with local and/or other non-local partner

By Target
Mergers and acquisitions Horizontal FDI

Vertical FDI
By Motive Resource seeking

Market seeking
Efficiency seeking Strategic asset seeking

 Transfers

of existing assets from local firms to foreign firms takes place.

E.g. : Maruthi Suzuki (merger) Kraft foods (acquisition)

 Investment

in the same industry abroad as a firm operates in at home.

For E.g. : company in U.S.A running a financial consultancy services and investing a particular amt in India in another new business unit providing financial services.

 Where

an industry abroad provides inputs for a firm's domestic production process.

E.g. : Hero Honda

 Where

an industry abroad sells the outputs of a firm's domestic production.

For E.g. : circuit boards are imported from china and U.S.A fixes the main circuits and other connections and sells it as a whole product.

This typifies FDI into developing countries.

For E.g. : seeking natural resources in the Middle East and Africa, or cheap labor in Southeast Asia and Eastern Europe.

Investments which aim at either penetrating new markets or maintaining existing ones.

For E.g. : Transcend in pen drive market

It is suggested that this type of FDI comes with the expectation that it further increases the profitability of the firm. Typically, this type of FDI is mostly widely practiced between developed economies; especially those within closely integrated markets.

For E.g. : Germany and France

A tactical investment to prevent the loss of resource to a competitor.

For E.g. : Easily compared to that of the oil producers, whom may not need the oil at present, but look to prevent their competitors from having it.

Haryana - Farmers will get good price and consumers will benefit. FDI in retail is welcome in Haryana, says CM Bhupinder Singh Hooda. Maharashtra - State all for the reform, says CM Prithviraj Chavan. 'It will promote transparency, accountability and remove supply chain hurdles.' Delhi - 'Great step forward. Will mean quality food, jobs galore and equitable pricing,' says Sheila Dikshit. Rajasthan - According to CM Ashok Gehlot, move will improve availability of quality goods, enhance competitiveness and unlock true potential of the agricultural value-chain. Assam - Happy with the decision; CM in favour of FDI in retail, says agriculture minister Nilamani Sen Deka.

Gujarat - 'I don't know what PM is doing. Small businessmen will be forced to down their shutters now,' says Narendra Modi. Kerala - Ruling UDF and opposition LDF united in opposing FDI in retail. Odisha - Firmly against. CM Naveen Patnaik had last year called it 'ill advised and highly regressive'. Uttar Pradesh - CM Akhilesh earlier said his party may support FDI if convinced it'll help small farmers, but papa Mulayam ruled against it. West Bengal -Ruling Trinamool has given Centre 72-hour to 'rethink' diesel price hike and FDI in retail. Madhya Pradesh - Move will hit small traders and grocers. 'We won't implement it,' says CM Shivraj Singh Chouhan. Bihar - Local retailers will be marginalized and millions of jobs will be lost, according to CM Nitish Kumar.

Karnataka - Jagadish Shettar govt will go through contents of policy before deciding, says state industries minister Murugesh Nirani. Punjab - Will study the fine print and then react, says CM Parkash Singh Badal. Jharkhand - Will decide after consulting people of state and local businessmen, says CM Arjun Munda.

FDI Approval Procedure

Automatic Route in most Sectors

Government Route for few sectors

RBI

FIPB

No permission required, only to notify RBI within 30 days of issue of shares to foreign investors

Approval is granted generally in 30 days

Gambling and betting Lottery Business Atomic Energy Retail Trading Agricultural or plantation activities of Agriculture (excluding floriculture, Horticulture, Development of Seeds, Animal Husbandry, Pisiculture and Cultivation of Vegetables, Mushrooms etc., under controlled conditions and services related to agro and allied sectors) and Plantations (other than Tea Plantations) Business of Chit Fund Defense.

Country 1 MAURITIUS 2 SINGAPORE 3 UNITED KINGDOM 4 JAPAN 5 U.S.A 6 NETHERLANDS 7 CYPRUS 8 GERMANY 9 FRANCE 10 UAE

(Rs crore) 289,470.99 77,587.82 74,661.24 57,851.03 47,889.21 32,324.68 29,670.32 20,827.86 13,377.53 10,320.41

(US$ million) 64,168.95 17,152.51 15,896.06 12,313.08 10,563.87 7,109.32 6,399.73 4,620.68 2,926.81 2,242.62

% 37.68 10.07 9.33 7.23 6.20 4.17 3.76 2.71 1.72 1.32

Services Sector 6% 4% 4%

3%

6%

Computer Software & hardware Telecommunications

Housing & real Estate Construction Activities 31% Power

10%

11%

Automobile Industry
Metallurgical Industries

12%
13%

Petroleum & Natural Gas Chemicals

 Generates
Increased The The

huge employment
investment in technology

huge tax revenue generated.

consumer gains from the wide variety of

choices and a more diversified basket.

Availability

of products at less cost.

 High

Real Estate Prices Land Acquisition : Displacement of people. Limited jobs in manufacturing. Cannot provide employment to semi-literate people Cultural difference problems Pushing families below the poverty line. Creation of Monopolies. The main purpose defeated if focus is on frontline instead of back end.

Huge investments in the retail sector will see gainful employment opportunities in agro-processing, sorting, marketing, logistics management and front-end retail.

Move will lead to large-scale job losses. International experience shows supermarkets invariably displace small retailers. Small retail has virtually been wiped out in developed countries like the US and in Europe. India has the highest shopping density in the world with 11 shops per 1,000 people. It has 1.2 crore shops employing over 4 crore people; 95% of these are small shops run by self-employed people.

 There

has been impressive growth in retail and wholesale trade after China approved 100% FDI in retail.

There has been impressive growth in retail and wholesale trade after China approved 100% FDI in retail.

Comparison between India and China is misplaced. China is predominantly a manufacturing economy. It's the largest supplier to Wal-Mart and other international majors. It obviously cannot say no to these chains opening stores in China when it is a global supplier to them. India in contrast will lose both manufacturing and services jobs.

A strong legal framework in the form of the Competition , Commission is available to deal with any anti-competitive practices, including predatory pricing.

Global retail giants will resort to predatory pricing to create monopoly/oligopoly. This can result in essentials, including food supplies, being controlled by foreign organizations.

 Disagree

with FDI in retail sector. Reason

being : 1. Working mechanism of these companies. 2. Unemployment condition. 3. Farmers initially gain profit but later have to face problems. 4. No actual need of development in retail sector. 5. Variety of products already available.

 Fdi

should not be allowed in health sector. Reason being : 1. India has a rich culture in the field of medicine. 2. Foreign pharmaceuticals aim only at profit making and not at service. Although FDI can be allowed more in hygiene improvement field. In real estate sector FDI can be allowed only in land development purposes, construction, township etc and not for acquiring of assets.