The major investing companies which are investing in India are Mauritius, USA, Japan, UK,

Germany, Netherland and South Korea. The various states which account for Maximum FDI (as
per data of 2013-2014) are Maharashtra, Delhi, Tamil Nadu, Karnataka and Gujarat. As per the
table the FDI inflows in 2001-02 has shown the growth of 73.80%. The total FDI in India has
increased from Rs. 10,733 Crore ($ 2,463 million) in 2000-2001 to Rs. 18,654 Crore ($ 4,065
million) in 2001-02. Main reasons for this growth were:
i. Progressive liberalization of FDI policy has strengthened investor confidence-opening up
of new sectors (integrated townships, defense industry, tea plantations, etc.) removal of
FDI caps in most sectors, including advertising, airports, private sector oil refining, drugs
and pharmaceuticals, etc.; and greater degree of automaticity for investment.
ii. Liberalization of foreign exchange regulations by way of simplifying the procedures for
making inward and outward remittances.
iii. Sectorial reforms, especially in sectors such as telecom, information technology and
automobiles have made them attractive destination for FDI.
iv. Policy to allow foreign companies to set up wholly owned subsidiaries in India has
enabled foreign companies to convert their joint ventures into wholly owns subsidiaries.
The percentage of FDI through merger and acquisition route has increased to around 30
percentage (from around 10 percent in 1999), which is still much lower than the global
percentage of 70-80 percent.
v. Public sector disinvestment has finally emerged as an important means to promote FDI.
When it came to financial year 2002-03 and 2003-04 the growth rate of FDI has decreased by
31% and 21.81% from financial year 2001-02the main reason for the decline in FDI was that in
few sectors, restrictions of FDI, such as equity cap, divestment condition, and minimum
capitalization, lock-in period have been imposed in view of sectorial policies, security concerns
and other strategic considerations. As well as FDI was not permitted in few sectors like:
i. Agriculture and plantations excluding tea plantation
ii. Real estate business excluding integrated town ship development. However, NRI/OCB
investment is allowed for real estate business
iii. Retail trade in any form
iv. Lottery, betting and gambling business
v. Security services
vi. Atomic Energy.
In 2006-07 the FDI growth was on its peak in past ten years it has shown the growth of 129.38%
and has elevated from Rs. 24,584 crore ($ 5,540 million) in 2005-06 to Rs. 56,390 crore ($
12,492 million). Reason for this tremendous growth was the comprehensive review of the FDI
policy which was undertaken for the first time in the last 15 years, with a view to consolidate the
liberalization measures already effected, and further rationalization of the FDI policy governing
various activities as a result of which the following changes has taken place due to which this
hike in FDI inflow was seen.
i. Change of route - FDI was allowed up to 100% under the automatic route for distillation
and brewing of potable alcohol, manufacture of industrial explosives; manufacture of
hazardous chemicals, manufacturing activities located within 25 km of the Standard
Urban Area limits requiring Industrial license under the IDR (Act), 1951, setting up of
Greenfield airport projects, laying of Natural Gas/LPG pipelines, market study &
formulation and Investment financing in the Petroleum sector; and cash & carry
wholesale trading and export trading.
ii. FDI in new activities: FDI was allowed up to 100% on the automatic route in Power
trading and processing and warehousing of coffee and rubber and up to 51% was allowed
for single brand product retailing which requires prior Government approval. Specific
guidelines have been issued for governing FDI for single brand product retailing.
iii. Removal of restrictive conditions: Mandatory divestment condition for B2B
ecommerce has been dispensed with.
iv. Procedural simplification: The transfer of shares by residents to non-residents including
acquisition of shares in an existing company has been placed on the automatic route
subject to sectorial policy on FDI.
For financial year 2007-08 the growth of FDI inflow was positive but as per the last year it has
declined. The growth was 74.93% in 2007-08 though the growth rate of 2006-07 it was 129.38%.
Reasons for this increment of the FDI inflow were:
i. Agriculture & Plantations was removed from the list of prohibited sectors for FDI and the
activities permitted within these sectors were included in the sector specific policy.
ii. Government has extended some additional facilities to NRIs, which include investment in
the real estate and civil aviation sectors up to 100 per cent besides a liberal investment
regime on non-repatriation basis.
The growth of FDI inflows has started to decline from financial year 2009-10 to 2010-11. The
growth has decline by 13.80% in 2009-10 and 20.96% in 2010-11. This decline was the result of
the financial crises that has taken place in 2008 many companies has gone bankrupted they were
not having money to invest in the market. American and European companies were the main
source of FDI as they were bringing in truck-loads of dollars and Euros to get a piece of pie of
Indian prosperity. The initial stage of the crisis witnessed rising interest rates across global
economies. Rising interest rates tend to have a negative impact on global liquidity, and
subsequently equity prices, as funds may move into bonds or other money market instruments.
The positive Growth of foreign direct investment inflows was again seen in financial year 2011-
12. The FDI inflow has increased by 69.67% from Rs. 97,320 Crore ($ 21,383 million) in 2010-
11 to Rs. 165,146 Crore ($35,121 million) in 2011-12. This was because of the change in various
changes in the policies. The changes were done to overcome the loss of the previous year.
Following are the various changes which were made to attract the FDI in India:
i. Pricing of convertible instruments upfront, on the basis of a conversion formula,
instead of price
ii. Inclusion of fresh items for issue of shares against non-cash considerations, including
import of capital goods/ machinery/ equipment and pre-operative/pre-incorporative
expenses