FOREIGN DIRECT INVESTMENT IN INDIA

INTRODUCTION
Foreign direct investment (FDI) refers to

Cross-border investment made by a resident in one economy (the direct investor) With the objective of Establishing a lasting interest in an enterprise (the direct investment

enterprise) that is
Resident in a country other than that of the direct investor.

GOVERNMENT POLICY
Foreign investment is allowed in all areas except following sectors where foreign investment is prohibited :

Atomic energy Agriculture (except floriculture , horticulture , seed development etc.) Lottery business / Gambling and betting Plantations (except tea plantations)

BENEFITS OF FDI

Play a complementary role in overall capital formation Employment generation and productivity enhancement

Encourages the transfer of management skills, intellectual property, and technology

Improves Forex position of the country

Promotion of the competition within the local input market

Development of the human capital resources Increase in exports Increases tax revenues

PROBLEMS WITH FDI

A company may lose out on its ownership to an overseas company Government has less control over the functioning of the company that is functioning as the wholly owned subsidiary of an overseas company FDI entering and taking the control of already established market, where local companies are meeting the requirements of the market Invest in machinery and intellectual property, not in wages Large giants can set up monopolies in highly profitable sector

THANK YOU