INTRODUCTION

WHAT IS INVESTMENT?
Investment is the employment of funds on assets with the aim of earning income or
capital appreciation. Present consumption is sacrificed to get a return in future. The
sacrifice that has to be born is certain but the return in the future may be uncertain. They
may get more returns on investment or they may not get.

DEFINITION
Economists use the word “investment” as a synonym for capital formation but in every
day usage the term can be use to describe the purchase of stock exchange, securities and
other financial assets as well as purchases of land, machinery and building.

WHAT IS FOREIGN DIRECT INVESTMENT?

Foreign direct investment (FDI) is a direct investment into production or business in a
country by a company in another country, either by buying a company in the target
country or by expanding operations of an existing business in that country. Foreign direct
investment is in contrast to portfolio investment which is a passive investment in the
securities of another country such as stocks and bonds. Foreign direct investment (FDI) is
any form of investment that earns interest in enterprises which function outside of the
domestic territory of the investor.

FDI has helped the Indian economy grow and the government continues to encourage
more investments of this sort but with $5.3 billion in FDI in 2004 India gets less than
10% of the FDI of China. Foreign direct investment (FDI) in India has played an
important role in the development of the Indian economy.
FDI in India has in a lot of ways enabled India to achieve a certain degree of financial
stability growth and development. This money has allowed India to focus on the areas
that may have needed economic attention, and address the various problems that continue
to challenge the country.

1
India has continually sought to attract FDI from the world’s major investors. In 1998 and
1999, the Indian national government announced a number of reforms designed to
encourage FDI and present a favorable scenario for investors. FDI investments are
permitted through financial collaborations, through private equity or preferential
allotments, by way of capital markets through Euro issues, and in joint ventures. FDI is
not permitted in the arms, nuclear, railway, coal & lignite or mining industries.
A number of projects have been announced in areas such as electricity generation,
distribution and transmission, as well as the development of roads and highways, with
opportunities for foreign investors. The Indian national government also provided
permission to FDIs to provide up to 100% of the financing required for the construction
of bridges and tunnels, but with a limit on foreign equity of INR 1,500 crores,
approximately $352.5m.

Currently, FDI is allowed in financial services, including the growing credit card
business. These services include the non-banking financial services sector. Foreign
investors can buy up to 40% of the equity in private banks, although there is condition
that stipulates that these banks must be multilateral financial organizations. Up to 45% of
the shares of companies in the global mobile personal communication by satellite
services (GMPCSS) sector can also be purchased.

By 2004, India received $5.3 billion in FDI, big growth compared to previous years, but
less than 10% of the $60.6 billion that flowed into China. Why does India, with a stable
democracy and a smoother approval process, lag so far behind China in FDI amounts?

Although the Chinese approval process is complex, it includes both national and
regional approval in the same process. Federal democracy is perversely an impediment
for India. Local authorities are not part of the approvals process and have their own
rights, and this often leads to projects getting bogged down in red tape and bureaucracy.
India actually receives less than half the FDI that the federal government approves.

2
DEFINITIONS
Investment’ is usually understood as financial contribution to the capital of an enterprise
or purchase of shares in the enterprise. ‘Foreign investment’ is investment in an
enterprise by a Non-Resident irrespective of whether this involves new capital or re-
investment of earnings.

International Monetary Fund (IMF) and Organization for Economic Cooperation

and Development (OECD) define FDI similarly as a category of 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 an economy other than that of the direct investor.

The motivation of the direct investor is a strategic long term relationship with the direct
investment enterprise to ensure the significant degree of influence by the direct investor
in the management of the direct investment enterprise. Direct investment allows the
direct investor to gain access to the direct investment enterprise which it might otherwise
be unable to do. The objectives of direct investment are different from those of portfolio
investment whereby investors do not generally expect to influence the management of the
enterprise.

3
NEED OF THE STUDY
It is commonly known that capital flows in developing economies like India have risen sharply

and has, therefore become a self-propelling and dynamic factor in the accelerated growth of

economies. The impassioned advocacy of increased FDI flows is based on the well-worn

arguments that FDI is a rich source of technology and know how; it can stimulate the labor

oriented export industries of India, promote technological change in the industries and put India

on a higher growth path. The excitement of FDI needs to be based on analytical review of India’s

needs, requirements and potential to participate in huge investment flows.

The practical literature on the relationship between FDI and development is mixed. Despite a

number of studies and seeming contradictions, two consistent issues that repeatedly arise are:

● What are the motivations for FDI flows into India?

● What are the economic and social implications of FDI flows in India?

A detailed study of FDI in India requires an examination of the determinants and the impact of

FDI on Indian Economy. Studying FDI flows will help to assess the nature and the true extent to

which the Indian Economy has globalized.

The study takes a closer look at the structure of Foreign Direct Investments into India. It traces

the development of India’s economic policy regarding FDI and the resulting changes. The

expansion of FDI in India has been followed by a rapid economic growth and an increasing

openness to the rest of the world. It is equally important to understand why India has become one

of the important beneficiaries of FDI in the world and what drives the more recent progress of

India towards FDI.

4
The need for larger FDI exists because India is at a stage where it needs not only US

investments, but also technology, and management policies to sustain and enhance its economic

growth. . In 2006, Foreign Direct Investment (FDI) in India amounted to US$37 billion, out of

which only $5 billion was from the US.

This was not a very encouraging figure in view of the goal of increasing the GDP by 34-36%.

Therefore, there is a need for larger FDI. India still requires an FDI component equal to 4% of

the GDP. The US needs to invest more in various sectors of the Indian economy. There is a

potential to attract more FDIs in areas like infrastructure, IT hardware, automobiles, leather,

textiles, gems, jewellery, and the financial sector. As such, India is rated as the 2nd best

economy to invest in, after China. Surprisingly, the US is rated 3rd in this domain. Focus is on

the insurance and banking sector, in context with Foreign Direct Investments. Only 10% of the

insurance sector has been tapped for foreign investment. Foreign companies need to persuade the

parliament for increasing Foreign Direct Investment capital.

The banking sector is in the process of liberalization which will continue till 2009. The insurance

sector is looking forward to increase in the capital as more and more FDIs happen. So the

insurance sector is also planning on liberalization, taking a cue from the banking sector.

The need for larger FDI calls for major issues and areas to be taken into consideration, such as:

● Market potential and accessibility

● Political stability

● Market infrastructure

● Easy currency conversion

5
India is the ideal country to make Foreign Direct investments in because of its features like

● Developing economy

● Low salaried employees

● Low wage workers

● Abundant human resources

● Big private economy

India is looking forward to a high growth rate of almost 16% – double that of the current 8%.

Hence, there is a distinct need for larger FDI. Further, FDI prospects are expected to be

bright if liberalization is initiated in the telecom sector as well. Already, brands like

Hutchison, Vodafone, and Singtel are in the Indian market and thanks to these investors,

the FDI capital in this sector has been raised to 74%. There are others necessities which a

larger FDI will cater to viz., employment generation, income generation, technology transfer,

and economic stability. Hence, the need for larger FDI is a pressing situation these days in

India. Foreign countries are well aware of this, and many of them are taking extra initiative to

invest in the Indian economy.

Indian government endorsed the economic reform decision of including FDI in multi-brand

retail and has ruled out any threat to the government. The meeting also demanded for steps to

clear anxieties of people regarding the new economic reform measures at a time when

elections are approaching in some states in the next few months.

The United States has termed the Indian government’s decision to allow FDI in multi-brand

retail as “watershed” and “courageous”, stating that the new reforms will give out the “right

message” to global investors. US said the steps will convince foreign investors that India’s

economic environment is favorable. The declaration by the Indian government to open its retail,

6
broadcasting, aviation and power sectors to foreign investment presents a “new optimism” to the

country’s growth.

SCOPE OF THE STUDY

(i) Review of policy on cases requiring prior Government approval for
foreign investment: As of today, only proposals involving total foreign
equity inflows of more than Rs.1200 crores (as against the earlier limit of
the total project cost being more than Rs.600 crores), now require to be
placed for consideration of CCEA.
(ii) Further, a number of categories of cases, where prior approval of
FIPB/CCEA for making the initial foreign investment had been taken,
have been exempted from the requirement of approaching FIPB/CCEA for
fresh approval. This has resulted in saving of considerable time and efforts
for FIPB/CCEA and also in expediting foreign investment inflows;
(iii) Introduction of a specific provision for 'downstream investment through
internal accruals': This will ensure that Indian companies have full
freedom in accessing their internal resources for funding their downstream
investments;
(iii) Flexibility in fixing the pricing of convertible instruments through a
formula, rather than upfront fixation: This change, which provides
flexibility in fixing the pricing of convertible instruments through a
formula, rather than through upfront fixation, will significantly help
recipient companies in obtaining a better valuation based upon their
performance;
(iv) Inclusion of fresh items for issue of shares against non-cash
considerations, including import of capital goods/ machinery/ equipment
and pre-operative/ pre-incorporation expenses: This measure, which
liberalizes conditions for conversion of non-cash items into equity, is
expected to significantly ease the conduct of business;

7
(v) Removal of the condition of prior approval in case of existing joint
ventures/technical collaborations in the 'same field: The requirement of
Government approval for establishment of new joint ventures in the 'same

8
OBJECTIVES OF THE STUDY
Keeping in view the importance of FDI in the development of economies and the
dynamic nature of the topic, the present study focuses on the following objectives. The
primary objective of this study is to review why India has been a preferred destination for
FDI and study the impact of FDI on the Indian economy.
The sub objectives of the study are
 To review the major reasons for attracting FDI;
 To analyze the investment strategies in selecting the right investment projects;
 To study if the FDI investments have contributed to the positive growth in the
standard of living;
To study the impact of FDI investments on the culture of the country.

9
RESEARCH METHODOLOGY
PRIMARY
Methodology adopted for making this project has been on a tedious pattern, much of the
data collected was synchronized and conceptualized in order of the understanding
wherein all the possible data was arranged in PRIMARY Data.

SECONDARY
Data is collected through secondary sources like research reports and websites. The
required data have been collected from various sources i.e. World Investment Reports,
Asian Development Bank’s Reports, various Bulletins of Reserve Bank of India,
publications from Ministry of Commerce, Govt. of India, Economic and Social Survey of
Asia and the Pacific, United Nations, Asian Development Outlook, Country Reports on
Economic Policy and Trade Practice- Bureau of Economic and Business Affairs, U.S.
Department of State and from websites of World Bank, IMF, WTO, RBI, UNCTAD,
EXIM Bank etc.

10
LIMITATION
Foreign direct investment is not free from limitations. Developing countries like
India has very little choice when it comes to opening the different sectors of the economy
to foreign investment. A case in point is the opening up of the consumer non-durable
industry to foreign investment.
Eg :- The advent of Pepsi and Coke saw the exit of domestic soft drink manufactures and
the emergence of a duopoly. Similarly, the experience with regard to FDI in the power
sector has been far from desirable. The governments of developing countries must be able
to channelize FDI in the most desirable areas of investment and the government policy
towards FDI should be stable over the long run
Foreign direct investment is advantageous to the USA however there are also limitations
of FDI to a home country. Some of the most widespread limitations consist of the loss of
employment. The main reason as why production takes place in foreign countries is
because the company benefits from cheap labour and material sourcing costs. Other
problems comprise of repatriations. This means that problems occur when "returning
foreign-earned profits or financial assets back to the company's home country”. (Buzzle,
2011).

Another drawback of FDI to a home country is the competition that ascends. The
developing significance of FDI has compelled host countries into competition. The
intention of this is to escalate the amount of FDI’s, but at the same time, to condense the
long-term benefits per dollar of investment. (Tearfund, 2010) The Organization for
economic cooperation and development, (OECD), states that FDI bring competition in
the domestic market as the competition laws and frameworks in the host country are
weakly executed. (OECD, 2002)
Moreover, whilst FDIs upturn and accumulate, the demand of FDI also increases and has
an impact on the environmental policy of that country. This means that the less developed
countries have restricted environmental regulations which mean that there is a lack in
enforcing the policies regarding FDI. (Tearfund, 2010).
Another limitation of FDI is that high returns are extracted. Cost may be a significant
aspect of FDI but it also one of the greatest drawbacks as direct investment is more

11
perilous than the provision of loan capital. Therefore foreign investors expect higher
returns. (Tearfund, 2010) Furthermore, Oman, contributes by adding that FDI has
become considerably vital in the balance of payments. This is due to the fact that most
developing countries have immense debt repayments and a deficit in the current account.
The deficit as a consequence must then be invested with capital inflows as an excess.
Some of the limitations of the foreign direct investment.
 Will affect 50 million merchants in India
 Profit distribution, investment ratios are not fixed
 An economically backward class person suffers from price raise
 Retailer faces loss in business
 Market places are situated too far which increases traveling expenses
 Workers safety and policies are not mentioned clearly
 Inflation may be increased
 Again India become slaves because of FDI in retail sector

12
 REVIEW OF LITERATURE
Investment is the employment of funds on assets with the aim of earning income or
capital appreciation. Present consumption is sacrificed to get a return in future. The
sacrifice that has to be born is certain but the Return in the future may be uncertain. They
may get more returns on investment or they may not get.

Economists use the word “investment” as a synonym for capital formation but in every
day usage the term can be use to describe the purchase of stock exchange, securities and
other financial assets as well as purchases of land, machinery and building.

Foreign direct investment (FDI) is a direct investment into production or business in a

country by a company in another country, either by buying a company in the target
country or by expanding operations of an existing business in that country. Foreign direct
investment is in contrast to portfolio investment which is a passive investment in the
securities of another country such as stocks and bonds. Foreign direct investment (FDI) is
any form of investment that earns interest in enterprises which function outside of the
domestic territory of the investor.

FDI has helped the Indian economy grow, and the government continues to encourage
more investments of this sort – but with $5.3 billion in FDI in 2004 India gets less than
10% of the FDI of China. Foreign direct investment (FDI) in India has played an
important role in the development of the Indian economy. FDI in India has – in a lot of
ways enabled India to achieve a certain degree of financial stability, growth and
development. This money has allowed India to focus on the areas that may have needed
economic attention, and address the various problems that continue to challenge the
country.

India has continually sought to attract FDI from the world’s major investors. In 1998 and
1999, the Indian national government announced a number of reforms designed to
encourage FDI and present a favorable scenario for investors. FDI investments are

13
permitted through financial collaborations, through private equity or preferential
allotments, by way of capital markets through Euro issues, and in joint ventures. FDI is
not permitted in the arms, nuclear, railway, coal & lignite or mining industries.

A number of projects have been announced in areas such as electricity generation,

distribution and transmission, as well as the development of roads and highways, with
opportunities for foreign investors. The Indian national government also provided
permission to FDIs to provide up to 100% of the financing required for the construction
of bridges and tunnels, but with a limit on foreign equity of INR 1,500 crores,
approximately $352.5m.

Currently, FDI is allowed in financial services, including the growing credit card
business. These services include the non-banking financial services sector. Foreign
investors can buy up to 40% of the equity in private banks, although there is condition
that stipulates that these banks must be multilateral financial organizations. Up to 45% of
the shares of companies in the global mobile personal communication by satellite
services (GMPCSS) sector can also be purchased.

By 2004, India received $5.3 billion in FDI, big growth compared to previous years, but
less than 10% of the $60.6 billion that flowed into China. Why does India, with a stable
democracy and a smoother approval process, lag so far behind China in FDI amounts?
Although the Chinese approval process is complex, it includes both national and regional
approval in the same process. Federal democracy is perversely an impediment for India.
Local authorities are not part of the approvals process and have their own rights, and this
often leads to projects getting bogged down in red tape and bureaucracy. India actually
receives less than half the FDI that the federal government approves.

DEFINITIONS
Investment’ is usually understood as financial contribution to the capital of an enterprise
or purchase of shares in the enterprise. ‘Foreign investment’ is investment in an

14
enterprise by a Non-Resident irrespective of whether this involves new capital or re-
investment of earnings. International Monetary Fund (IMF) and Organization for
Economic Cooperation and Development(OECD) define FDI similarly as a category of
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 an economy other than that of the direct investor.
The motivation of the direct investor is a strategic long term relationship with the direct
investment enterprise to ensure the significant degree of influence by the direct investor
in the management of the direct investment enterprise. Direct investment allows the
direct investor to gain access to the direct investment enterprise which it might otherwise
be unable to do. The objectives of direct investment are different from those of portfolio
investment whereby investors do not generally expect to influence the management of the
enterprise.

CHARACTERISTICS OF INVESTMENT
All investment has following characteristics as.
1. Liquidity
An investment which is easily saleable or marketable without loss of
money and without loss of time is said to possess liquidity. Some investment like
company deposits, banks deposits, post office deposits, NSC, NSS etc. Are not
marketable.
Some investment instrument like preference shares and debentures are
marketable, but there are no buyers in many cases and hence their liquidity is
negligible. Equity shares of companies listed on stock exchange are easily
marketable through stock exchanges. A investors generally prefers liquidity for
his investment along with safety of his funds, a good return with minimum risk
2. Return
All investment is characterized by the expectation of a return. In fact,
investments are made with the primary objective of deriving a return. The return
may be received in the form of yield plus capital appreciations. The difference

15
between the sale price and the purchase price is capital appreciation. The dividend
or interest received from the investment is the yield.

3. Risk
Risk is inherent in any investment. This risk related to loss of capital delay in
repayment of capital, non-payment of interest of returns. While some investment
like govt security and banks deposits are almost riskless, other are more risky.
The risk of an investment depends on the following factors as
 The longer the maturity period the larger is the risk
 The lower and the credit worthiness of the borrower, the higher is the risk

4. Maturity
Maturity is the essence of security. It means the means the last payment
date of a lone or any other financial instrument, of which the interest and the
principal is left as due to be paid maturity is time span in which the borrower
should fulfill the obligation of repays back the amount as it will be the end of
the of a security.
5. Safety
The safety of an investment implies the certainty of returns of capital
without loss of money or time. Safety is another feature which an investors
desires for his investments. Every investor expects to get back his capital on
maturity without to get back his capital on maturity without loss and without
delay. if the return is higher than the degree of safety is less.

6. Tax
A tax play a crucial role in investment and has an impaction the returns of
investment know in tax beforehand helps the investors to ascertain the
security required after tax return and risk.
For investment decisions the key taxes used are:
a) Personal income taxes.
b) Corporate income taxes.
16
7. Inflation
The inflation rate helps the investors in taking wise decisions .as inflation
directly linked with the economy which helps in determining the economic
conditions of a country and which in turn provides the information to investor to
take the appropriate decision.

17
 INVESTMENT DECISION PROCESS
The investment process can be divided into five stages as shown below
Investment
Investment policy
analysis
- Investment funds
- Objective - Market
- Knowledge - Indutry
-Company
Port folio
construction

- Diverssification

Investment Portfolio
valuation evaluation

- Intrinsic value - Appraisal

- Future - Revision

1. Investment policy

The government or the investors before proceeding into investment formulation the
policy for the systematic functioning. The essential ingredients of the policy are the
investable funds, objective and the knowledge about the investment alternatives and
market.

18
 A. Investable funds
The entire investment procedure revolves around the availability of investable
funds; the funds may be generated through savings or form borrowings. If the
fund borrowed the investor has to be extra careful in the selection of investment
alternative. The return should be higher than the interest paid.
B. Objective
The objectives are framed on the basis of the required rate of return, need for
regularity of income, risk perception and the need for liquidity. The risk takers
objectives are to earn high rate of return in the form of capital appreciation,
whereas the primary objective of the risk averse is the safety of the principal.
C. Knowledge
The knowledge about the investment alternatives and market plays a key role in
the policy formulation. The investment alternative range from security to real
estate. The risk and return associated with investment alternative differ from each
other. Investment in equity is highly yielding but has more risk than the fixed
income securities. The tax sheltered schemes offer tax benefits to the investors.
The investors should aware of the stock market structure and the functions of
the brokers. The mode of operation varies among BSE, NSE and other
exchanges. Brokerage charges are also different. The knowledge about the
exchange enables him to trade the stock intelligently.

2. Investment analysis
After formatting the investment policy, the securities to be bought have to be
scrutinized through the market, industry and company analysis.
A. market analysis
The stock market mirrors the general economic scenario. The growth in gross
domestic product and inflation are reflected in stock prices. The recession in the
economy results in a bear market. The stock prices may be fluctuating in the short
run in the long run they move in trends i.e. either upwards or downwards.
B. Industry analysis

19
 The industries that contribute to the output of the major segments of the economy
vary if their growth rates and their overall contribute to economic activity
changes.
Some industries grow very faster than the GDP and are expected to continue in
their growth. The economy significance and the growth potential of the industry
have to be analyzed

C. Company analysis
The purpose of company analysis is to help the investor to make better decisions.
The company earnings, profitability, operating efficiency, capital structure and
management have to be screened. These factors have direct bearing on the stock
prices and the return of the investors. Appreciation of the stock value is a function
of the performance of the company. Company with high product market share is
able to create wealth to the investors in the form of capital appreciation.

3. Construction of portfolio
A portfolio is a combination of securities. The portfolio is constructed in such
manner to meet the investor goals and objective. The investors should decide how best
to reach the goals from the securities available. The investors try to attain maximum
return with minimum risk. Toward the end he diversified his portfolio and allocates
funds among the securities

A. Diversification
The main objective of diversification is the reduction of risk in the loss of capital
and income. A diversified portfolio is comparatively less risky than holding a
single security.

4. Investment valuation
20
 The valuation helps the investors to determine the return and risk axcepted from
an investment in the common stock. Thus it is based on the following.
a. Intrinsic value
The intrinsic value to the shares is measured through the book value of the share
and price earnings rates. Simple discounting model also can be adapted to value.
The real worth of the share is compared with the market price and then the
investment decisions are made.
b. Future value
Future value of the securities could be estimated by using a simple statistical
technique like trend analysis. The analyses of the historic behavior of the price
enable the investor to predict the future value.

5. Portfolio evaluation
Based on the diversification level industry and company analysis the security have
to be selected. Funds are allocated for the selected securities. Selection of securities
and the allocation of funds and seals the construction of portfolio. The portfolio has to
be managed efficiently the efficient management calls for evaluation of the portfolio
this process consist of portfolio appraisal and revision.
a. Appraisal
The return and risk performance of the security may vary from time to time. The
variability in returns of the securities is measured and compared. The development
in the economy, industry and relevant companies from which the stock are bought
have to be appraised, the approval warns the loss and steps can be taken to avoid
such losses.
b. Revision
Revision depends on the result of the approval. The low yielding securities with
high risk are replaced with high yielding securities with low factor. To keep the
return at a particular level necessitates the investment to revise the components of
the portfolio periodically.

21
HISTORY OF FDI IN INDIA
At the time of independence, the attitude towards foreign capital was one of fear and
suspicion. This was natural on account of the previous exploitative role played by it in
‘draining away’ resources from this country.
The suspicion and hostility found expression in the Industrial Policy of 1948 which, though
recognizing the role of private foreign investment in the country, emphasized that its
regulation was necessary in the national interest. Because of this attitude expressed in the
1948 resolution, foreign capitalists got dissatisfied and as a result, the flow of imports of
ca[ital goods got obstructed. As a result, the prime minister had to give following assurances
to the foreign capitalists in 1949:
1. No discrimination between foreign and Indian capital. The government o India will
not differentiate between the foreign and Indian capital. The implication was that the
government would not place any restrictions or impose any conditions on foreign
enterprise which were not applicable to similar Indian enterprises.
2. Full opportunities to earn profits. The foreign interests operating in India would be
permitted to earn profits without subjecting them to undue controls. Only such
restrictions would be imposed which also apply to the Indian enterprises.
3. Grantee of compensation. If and when foreign enterprises are compulsorily acquired,
Compensation will be paid on a fair and equitable basis as already announced in
government’s statement of policy.
Though the Prime Minister stated that the major interest in ownership and effective control
of an undertaking should be in Indian hands, he gave assurance that there would be “no hard
and fast rule in this matter.”
By a declaration issued on June 2, 1950, the government assured the foreign capitalists that
they can remit the he foreign investments made by them in the country after January 1, 1950.
in addition, they were also allowed to remit whatever investment of profit and taken place.
Despite the above assurances, foreign capital in the requisite quantity did now flow into India
during the period of the First plan. The atmosphere of suspicion had not changed
substantially. However, the policy statement of the Prime Minister issued in 1949 and
continued practically unchanged in the 1956 Industrial Policy Resolution, had opened up
immense fields to foreign participation. In addition, the trends towards liberalization grew

22
slowly and gradually more strong and the role of foreign investment grew more and more
important.
The government relaxed its policy concerning majority ownership in several cases and
granted several tax concessions for foreign personnel. Substantial liberalization was
announced in the New Industrial Policy declared by the government on 24th July 1991 and
doors of several industries have been opened up for foreign investment.
Prior to this policy, foreign capital was generally permitted only in the those industries where
Indian capital was scarce and was not normally permitted in those industries which had
received government protection or which are of basic and/or strategic importance to the
country. The declared policy of the government was to discourage foreign capital in certain
inessential‘ consumer goods and service industries.
However, this provision was frequently violated as a number of foreign collaborations even
in respect of cosmetics, toothpaste, lipstick etc. were allowed by the government. It was also
stated that foreign capital should help in promoting experts or substituting imports. The
government also laid down that in al those industries where foreign capital investment is
allowed, the major interest in ownership and effective control should always be in Indian
hands (this condition was also often relaxed).
The foreign capital investments and technical collaborations were required to be so regulated
as to fit into the overall framework of the plans. In those industries where foreign technicians
and managers were allowed to operate as Indians with requisite skills and experience were
not available, vital importance was to be accorded to the training and employment of Indians
in the quickest possible manner.

POLICY AND REGULATORY FRAMEWORK TOWARD FDI

The Government has put in place a policy framework on Foreign Direct Investment. which is
embodied in the Circular on Consolidated FDI Policy, issued which is updated every six
months, to capture and keep pace with the regulatory changes. The Department of Industrial
Policy and Promotion (DIPP), Ministry of Commerce & Industry, Government of India
makes policy pronouncements on FDI through Press Notes/ Press Releases which are
notified by the Reserve Bank of India as amendments to the Foreign Exchange Management

23
(Transfer or Issue of Security by Persons Resident Outside India) Regulations, 2000
(notification No.FEMA 20/2000-RB dated May 3, 2000).
The procedural instructions are issued by the Reserve Bank of India vide A.P. DIR. (series)
Circulars. Thus, regulatory framework for FDI consists of Acts, Regulations, Press Notes,
Press Releases, Clarifications, etc. FDI policy is reviewed on an ongoing basis and measures
for its further liberalization are taken. Change in sectoral policy/sectoral equity cap is
notified from time to time through Press Notes by the Department of Industrial Policy &
Promotion. Policy announcement by DIPP are subsequently notified by RBI under FEMA.
AUTOMATIC ROUTE
FDI Policy permits FDI up to 100 % from foreign/NRI investor without prior approval in
most of the sectors including the services sector under automatic route. FDI in
sectors/activities under automatic route does not require any prior approval either by
the Government or the RBI. The investors are required to notify the concerned Regional
office of RBI of receipt of inward remittances within 30 days of such receipt and will have to
file the required documents with that office within 30 days after issue of shares to foreign
investors. The present Automatic Route allows Indian companies engaged in all industries
except for certain select industries/sectors to issue shares to foreign investors up to 100% of
their paid up capital in Indian companies. There are also some areas where though Automatic
Route is available, foreign investors cannot invest beyond a certain percentage of the paid up
capital of the Indian companies or where investment is subject to some other conditions.
Foreign investors have to, however, keep in mind that they may invest freely
under the Automatic Route described above but where such investment does not conform to
policies of Government of India, a specific approval from Government must be sought. For
example, there are Government guidelines on location of industrial units, or there are certain
items like explosives or liquor that need an industrial license. If the Indian company does not
conform to the locational guidelines or needs an Industrial license then it cannot issue shares
under the Automatic Route.

GOVERNMENT APPROVAL ROUTE

24
All activities which are not covered under the automatic route, prior Government approval
for FDI/NRI shall be necessary. Areas/sectors/activities hitherto not open to FDI/NRI
investment shall continue to be so unless otherwise decided and notified by Government.
An investor can make an application for prior Government approval even when the proposed
activity is under the automatic route.
Proposals requiring Government Approval FDI up to 100% is allowed under the
automatic route in all activities/sectors except the following which will require approval of
the Government
 Activities/items that require an Industrial License.
 All proposals falling outside notified sectoral policy/caps or under sectors in which
FDI is not permitted.
 Proposals in which the foreign collaborator has a previous/existing venture/tie up in
India in the same.
Prior Government approval for new proposals would be required only in cases where the
foreign investor has an existing joint venture, technology transfer, trade mark agreement in
the same field. With the amendment of the Press Note 18, joint ventures formed with foreign
investment before December 12, 2004 would be considered as “existing JVs” which will fall
under the ambit of Press Note 18. The foreign partner in such JV has to obtain a No
Objection Certificate (NOC) from the Indian partner for starting new venture in India in the
“same” field of activity.
However, Government via Press Note No. 1 (2005 Series) made an exception that even in
cases where the foreign investor has a joint venture or technology transfer/ trademark
agreement in the 'same' field prior approval of the Government will not be required in the
following cases:
A. Investments to be made by Venture Capital Funds registered with the
Security and Exchange Board of India (SEBI); or
B. where in the existing joint-venture investment by either of the parties is less
than 3%
C. where the existing venture/ collaboration is defunct or sick.
Application for proposals requiring prior Govt’s approval should be submitted to FIPB in
fresh Application . The application shall be filed online through FIPB portal. Plain paper

25
applications carrying all relevant details are also accepted. No fee is payable. The following
information should form part of the proposals submitted to FIPB
a. Whether the applicant has had or has any previous/existing financial/technical
collaboration or trade mark agreement in India in the same or allied field for which
approval has been sought; and
b. If so, details thereof and the justification for proposing the new venture/technical
collaboration (including trade marks).
c. Applications can also be submitted with Indian Missions abroad who will forward
them to the Department of Economic Affairs for further processing.
d. Generally foreign investment proposals received in the DEA (Department of
Economic Affairs) are placed before the Foreign Investment Promotion Board (FIPB)
within 15 days of receipt. The decision of the Government in all cases is usually
conveyed by the DEA within 30 days.

PROHIBITED SECTORS FOR FDI IN INDIA

FDI is not permissible in the following cases
1) Gambling and Betting, or
2) Lottery Business, or
3) Business of chit fund
4) Nidhi Company
5) Housing and Real Estate business (to a certain extent has been opened. For details
please see note on Construction
6) Trading in Transferable Development Rights (TDRs)
7) Retail Trading (discussions are being held to open this area-B2B and Cash & Carry
are permitted)
8) Atomic Energy
9) Agricultural or plantation activities or 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)
GENERAL PERMISSION OF RBI UNDER FEMA

26
RBI has granted general permission under Foreign Exchange Management Act (FEMA)
in respect of proposals approved by the Government. Indian companies getting foreign
investment approval through FIPB route do not require any further clearance from RBI
for the purpose of receiving inward remittance and issue of shares to the foreign
investors.
The companies are however required to notify the concerned Regional office of the RBI
about receipt of inward remittances within 30 days of such receipt and to file the required
documents with the concerned Regional offices of the RBI within 30 days after issue of
shares to the foreign investors or NRIs.

FDI IN LIMITED LIABILITY PARTNERSHIPS (LLP’S)

Government of India recently allowed FDI in LLP’s however LLPs with FDI will not be
allowed to operate in agricultural/plantation activity, print media or real estate business.
FDI in LLP is allowed with the previous approval of the Government. Further it is
allowed with the Government’s approval only in those sectors in which 100% FDI is
allowed under automatic route under the FDI policy. Thus those sectors which are not
available under automatic route is not available for FDI in LLP. The followings are some
conditions with respect to FDI in LLP’s.
 LLPs with FDI will not be eligible to make any downstream investments
 Foreign Capital participation in LLPs will be allowed only by way of cash
consideration.
 Investment in LLPs by Foreign Institutional Investors (FIls) and Foreign Venture
Capital Investors (FVCIs) will not be permitted.
 LLP’s are not allowed to raise ECB (external commercial borrowings)

FDI IN EOUS/ SEZS/ INDUSTRIAL PARK/ EHTP/ STP

Special Economic Zones (SEZs)

27
100% FDI is permitted under automatic route for setting up of special Economic
Zone. Units in SEZ qualify for approval through automatic route subject to sectoral
norms. Details about the type of activities permitted are available in the Foreign Trade
Policy issued by Department of Commerce. Proposals not covered under the automatic
route require approval by FIPB.
100% Export Oriented Units (EOUs)
100% FDI is permitted under automatic route for setting up 100% EOU, subject to
sectoral norms. proposals not covered under the automatic route would be considered
and approved by FIPB.
Capitalization of Import Payables
FDI inflows are required to be under the following modes;
 By inward remittances through normal banking channels or
 By debit to the specified account of person concerned maintained in an
authorized dealer/authorized bank.
Issue of equity to non-residents against other modes of FDI inflows or in kind is not
permissible under automatic route. Issue of shares for consideration other than cash
requires prior Government Approval. However, Issue of equity shares against lump sum
fee, royalty payable and external commercial borrowings (ECBs) in convertible foreign
currency are permitted, subject to meeting all applicable tax liabilities and sector specific
guidelines.

INDUSTRIAL LICENSING
Industrial Licensing Policy
Industrial Licenses are regulated under the Industries (Development & Regulation) Act,
1951. The requirements of Industrial licence has been progressively reduced. At present
industrial licence for manufacturing is required only for the following:
 Industries retained under compulsory licensing,
 Items reserved for small scale sector; and

28
  When the proposed location attracts locational restriction industries requiring
Compulsory Licensing The following industries require compulsory industrial
license:
I. Distillation and brewing of alcoholic drinks;
II. Cigars and cigarettes of tobacco and manufactured tobacco substitutes;
III. Electronic Aerospace and defence equipment: all types;
IV. Industrial explosives including detonating fuses, safety fuses, gun powder,
nitrocellulose and matches;
V. Hazardous chemicals;
a) Hydrocyanic acid and its derivatives
b) Phosgene and its derivatives
c) Isocyanates and di-isocyanates of hydrocarbon, not elsewhere specified
example: Methyl Isocyanate); and
VI. Drugs and Pharmaceuticals (according to modified Drug Policy issued in
September, 1994 and subsequently amended from time to time)
Prior Government approval required in all cases where Industrial License is required to
start the business. i.e. all sectors requiring industrial license comes under approval route
and requires Government approval.

INDUSTRIES UNDER SMALL-SCALE SECTOR

An industrial undertaking is defined as a small-scale unit if the capital investment in plant
and machinery does not exceed Rs 10 million. Small-scale units can get registered with
the Directorate of Industries/District Industries Centre of the State Government. Such
units can manufacture any item, and are also free from locational restrictions.
Manufacture of items reserved for small-scale sector
Non-small scale units can manufacture items reserved for the small scale sector only
after obtaining an industrial license. In such cases, the non-small scale unit is required to
undertake an obligation to export 50 per cent of the production of SSI reserved items.

29
FDI IN SSI UNITS
A small scale unit can not have more than 24 per cent equity in its paid up capital
from any industrial undertaking, either foreign or domestic. If the equity from another
company (including foreign equity) exceeds 24 per cent, even if the investment in plant
and machinery in the unit does not exceed Rs 10 million, the unit loses its small-scale
status.
Locational Restrictions
Industrial undertakings are free to select the location of a project. Industrial Licence is
required if the proposed location is within 25 KM of the Standard Urban Area limits of
23 city having population of 1 million as per 1991 census.
Locational restriction does not apply:
i) If the unit were to be located in an area designated as an ‘’industrial area’’
before the25th July, 1991.
ii) Electronics, Computer software and Printing and any other industry, which
may be notified in future as “non polluting industry”, are exempt from such
locational restriction.
The location of industrial units is subject to applicable local zoning and land use
regulations and environmental regulations.

FOREIGN TECHNOLOGY AGREEMENTS

GENERAL POLICY
For promoting technological capability in Indian industry, acquisition of foreign
technology is encouraged through foreign technology collaboration agreements.
Inductions of know-how through such agreements are permitted either through automatic
route or with prior approval from the Government.
SCOPE OF TECHNOLOGY COLLABORATION
The terms of payment under foreign technology collaboration, which are eligible for
approval through the automatic route and by the Government approval route are technical
knowhow fees, payment for design and drawing, payment for engineering service and

30
royalty. Payments for hiring of foreign technicians, deputation of Indian technicians
abroad, and testing of indigenous raw material, products, and indigenously developed
technology in foreign countries are governed by separate RBI procedures and rules and
are not covered by the foreign technology collaboration approval. Similarly, payments for
imports of plant and machinery and raw material are also not covered by the foreign
technology collaboration approval.
AUTOMATIC ROUTE
Government has delegated powers to Reserve Bank of India to allow payments for
foreign technology collaboration by Indian companies under automatic route subject to
the following limits:
(I). the lump sum payments not exceeding US $ 2 Million;
(II). royalty payable being limited to 5 per cent for domestic sales and 8 per cent for
exports. The aforesaid royalty limits are net of taxes and are calculated according to
standard conditions.
Terms of payment qualifying for automatic route is irrespective of the extent of foreign
equity in the Indian company.

USE OF TRADEMARKS AND BRAND NAME

Payment of royalty up to 2% for exports and 1% for domestic sales is allowed under
automatic route for use of trademarks and brand name of the foreign collaborator without
technology transfer. Royalty on brand name/trade mark shall be paid as a percentage of net
sales, viz., gross sales less agents’/dealers’ commission, transport cost, including ocean
freight, insurance, duties, taxes and other charges, and cost of raw materials, parts and
components imported from the foreign licensor or its subsidiary/affiliated company. In case
of technology transfer, payment of royalty subsumes the payment of royalty for use of
trademark and brand name of the foreign collaborator.

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ENTRY OPTIONS FOR FOREIGN INVESTORS IN INDIA
Entry Options
A foreign company planning to set up business operations in India has the
following options:
Incorporated Entity
1. By incorporating a company under the Companies Act,1956 through
 Joint Ventures; or
 Wholly Owned Subsidiaries
Foreign equity in such Indian companies can be up to 100% depending on the
requirements of the investor, subject to equity caps in respect of the area of activities
under the Foreign Direct Investment (FDI) policy.
As an Unincorporated Entity
As a foreign Company through
 Liaison Office/Representative Office
 Project Office
 Branch Office
Such offices can undertake activities permitted under the Foreign Exchange Management
(Establishment in India of branch or office of other place of business) Regulations,2000.
INCORPORATION OF COMPANY
For registration and incorporation, an application has to be filed with Registrar of
Companies (ROC). Once a company has been duly registered and incorporated as an
Indian company, it is subject to Indian laws and regulations as applicable to other
domestic Indian companies.

LIAISON OFFICE/REPRESENTATIVE OFFICE

The role of the liaison office is limited to collecting information about possible
market opportunities and providing information about the company and its products to
prospective Indian customers. It can promote export/import from/to India and also

32
facilitate technical/financial collaboration between parent company and companies in
India. Liaison office can not undertake any commercial activity directly or indirectly and
can not, therefore, earn any income in India. Approval for establishing a liaison office in
India is granted by Reserve Bank of India (RBI).
PROJECT OFFICE
Foreign Companies planning to execute specific projects in India can set up
temporary project/site offices in India. RBI has now granted general permission to
foreign entities to establish Project Offices subject to specified conditions. Such offices
can not undertake or carry on any activity other than the activity relating and incidental to
execution of the project. Project Offices may remit outside India the surplus of the project
on its completion, general permission for which has been granted by the RBI.
BRANCH OFFICE
Foreign companies engaged in manufacturing and trading activities abroad are allowed to
set up Branch Offices in India for the following purposes:
(i) Export/Import of goods
(ii) Rendering professional or consultancy services
(iii) Carrying out research work, in which the parent company is engaged.
(iv). Promoting technical or financial collaborations between Indian companies
and parent or overseas group company.
(v) Representing the parent company in India and acting as buying/selling agents
in India.
(vi) Rendering services in Information Technology and development of software
in India.
(vii) Rendering technical support to the products supplied by the parent/ group
companies
(viii) foreign airline/shipping Company.
A branch office is not allowed to carry out manufacturing activities on its own but is
permitted to subcontract these to an Indian manufacturer. Branch Offices established with
the approval of RBI, may remit outside India profit of the branch, net of applicable Indian

33
taxes and subject to RBI guidelines Permission for setting up branch offices is granted by
the Reserve Bank of India (RBI).
Branch Office on “Stand Alone Basis” in SEZ
Such Branch Offices would be isolated and restricted to the Special Economic zone
(SEZ) alone and no business activity/transaction will be allowed outside the SEZs in
India, which include branches/subsidiaries of its parent office in India.
No approval shall be necessary from RBI for a company to establish a branch/unit in
SEZs to undertake manufacturing and service activities provided that:
(i) such units are functioning in those sectors where 100% FDI is permitted,
(ii) such units comply with part XI of the Companies Act (Section 592 to 602),
(iii) such units function on a stand-alone basis,
(iv) in the event of winding-up of business and for remittance of winding-up
proceeds, the branch shall approach an Authorised Dealer in Foreign Exchange with the
documents except (A) listed in Regulation 6 (I) (iii) of Notification No. FEMA
13/2000-RB dated 3rd May 2000.”
The afore mentioned information of FDI in India is limited and to be read with the
extant government policy and prevailing laws.
Types of Foreign Direct Investment
Foreign Direct Investment "as any flow of lending to, or purchase of ownership in a foreign
enterprise that is largely owned by the residents of the investing company". It may take the
form of Cash, securities, plant, equipment, and other factors of production, such as
managerial skills, technology, or know how. FDI usually involves some combination of the
above. The transfer of this "package" of capital assets as well as the retention of control is
what distinguishes FDI from portfolio investment. Foreign Direct Investment is generally
classified into two types which is Inward Foreign Direct Investment and Outward Foreign
Direct Investment. Inward Foreign direct investment is a typical form of what is termed as
'inward investment'. In this case investment of foreign resources is local resources. The
factors encourages the growth of Inward FDI contains relaxation of existent regulations, tax
breaks, loans on low rates of interest etc. Outward Foreign direct investment is also referred
to as “direct investment abroad”. In this case it is the local capital, which is being invested in

34
some foreign resource. Outward FDI may also find use in the import and export dealings
with a foreign country. Direct investment is much more than just a capital movement. It is
accompanied by inputs of managerial skill, trade secrets, technology, right to use brand
names and instructions about which markets to pursue and which to avoid. The classical
examples of FDI is a multinational enterprise starting a foreign subsidy with 100% equity
ownership or acquire more than 50% equity in a domestic company so that it will have
control over managerial decisions. Obviously a MNC could not come into existence without
having direct investment. These enterprises essentially own or control production facilities in
more than one country. At times, the strategy of a multinational is to enter into joint ventures
with domestic firms as well as MNC. By such arrangements, divergent resources and skill
can be merged. Domestic companies can establish themselves in new markets and gain
access to technology.
Factors of fdi
Amid all uncertain global economic climates, foreign investors anticipate India as an
attractive investment option. According to the Ernst and Young’s 2012 India
Attractiveness Survey, international investors have a keen interest in Indian market. Foreign
companies are persuaded about India’s growth and anticipate it as a good investment
destination. Yahoo has jotted some of the prime sectors which are more prone to attract FDI
for India.

“The move to increase FDI caps in these sectors will help mobilize capital into these
sectors, which the country needs and would also improve the current account deficit
situation, which was becoming alarming”, says Chandrajit Banerjee, Director-General,
Confederation of Indian Industries, as quoted by Rediff.

1. Infrastructure

In 2011, the number of FDI projects in infrastructure sector in India grew by 90 percent,
which contributes 4 percent to the entire FDI projects and 9 percent of the total jobs created
due to FDI. Government of India plans to increase its infrastructure by spending U.S. $1

35
trillion by 2017, which is only U.S. $500 billion now. “The government now needs to follow
up these reforms by resolving actual implementation bottlenecks on the ground - especially
as they relate to the infrastructure sector”, adds Banerjee.
2. Automotive

The automotive industry in India is one of the largest in the world and one of the fastest
growing globally. Indian automotive industry is the sixth largest vehicle manufacturing
industry in the world. Since 1991 almost all global majors have set up their facilities in
Indian taking the level of production from 2 million in 1991 to over 10 million in recent
years. The exports in automotive sector have grown on an average compound annual growth
rate of 30 percent per year for the last seven years.
Since 2011, this sector has attracted 78 FDI deals which is a rise by 28 percent as of 2010.
Automotive contributes 8 percent to the entire FDI projects and 16 percent of the total jobs
created by FDI deals.

3. Retail and Consumer Products

The number FDI deals in the consumer products sector grew by 31 percent in 2011. This
particular sector contributes 10 percent to the entire FDI projects and has created nearly
28,400 jobs. The government's decision to attract FDI into various sectors - especially in
multi-brand retail - is a very positive move. While it will be several quarters before things on
the ground change, the series of moves announced last week are very important to boost
investor confidence, create the notion that the country is open for business again and possibly
avert a ratings downgrade," says Sajjid Chinoy, India Economist, JP Morgan, as quoted by
Rediff.

4. Technology

In the recent years, technology sector in India has implied a major impact on the Indian
economy and has grown hugely. It has jumped from U.S. $4 billion in 1998 to U.S. $80 in

36
2011. During this period this sector has employed more than 10 million people, directly or
indirectly. The major cities that account for about nearly 90 percent of IT–ITES and IT–BPO
sectors exports are Bangalore, Chennai, Delhi, Mumbai, Hyderabad, Pune, Kolkata and
Coimbatore. The industry’s share of total Indian exports increased from less than 4 percent in
FY1998 to about 25 percent in FY2012. According to Gartner, the “Top Five Indian IT
Services Providers” are Tata Consultancy Services, Infosys, Cognizant, Wipro and HCL
Technologies.

5. Financial Services
The number of FDI projects in the financial services sector increased by 21 percent in
2011, whereas the value of the projects increased by 75 percent. In spite of the fact that it has
a high growth potential, FDI in this industry remains low compared with other quickly
developing economies. This primarily happened due to capital account convertibility, capital
lock-ins and numerous regulations. Though, the demand for an extensive collection of
financial services products, ranging from credit to insurance, is increasing.

6. Life Sciences
In the aspiration of making India a global economic powerhouse, the sector of life
sciences is an arena which is focused more to improve the health of the nation. India has
higher disease burden then Brazil and chain, i.e. around 37 percent higher than Brazil and 86
percent than China. “Apart from the role FDI will play in agriculture and agricultural
marketing, is that it signals that the government is doing something because there are
limitations on fiscal and monetary policies in the current slowdown, so there has to be other
types of actions that can boost investment and restart the economy,” says Ashima Goyal,
Professor of Economics at Indira Gandhi Institute for Development Research in Mumbai, as
quoted by Rediff.

37
7. Cleantech

India is one of the most preferred destinations for cleantech investments. As per the
Ernst & Young’s Renewable Energy Country Attractiveness Indices November 2011 report,
India is the fourth most attractive country out of 40 countries, with China, U.S. and Germany
being ahead of India. Foreign investors believe this sector as a potential one. Government of
India has taken many initiatives to encourage the sector.

Methods of Foreign Direct Investments

The foreign direct investor may acquire 10% or more of the voting power of an enterprise in
an economy through any of the following methods:
 by incorporating a wholly owned subsidiary or company
 by acquiring shares in an associated enterprise
 through a merger or an acquisition of an unrelated enterprise
 participating in an equity joint venture with another investor or enterprise
Foreign direct investment incentives may take the following forms:
 low corporate tax and income tax rates
 tax holidays
 preferential tariffs & other types of tax concessions
 special economic zones
 investment financial subsidies
 soft loan or loan guarantees
 free land or land subsidies
 relocation & expatriation subsidies
 job training & employment subsidies
 infrastructure subsidies
 R&D support
 derogation from regulations (usually for very large projects)
The manner in which a firm chooses to enter a foreign market through FDI:

38
 o International franchising
o Branches
o Contractual alliances
o Equity joint ventures
o Wholly foreign-owned subsidiaries
• Investment approaches:
o Greenfield investment (building a new facility)
o Cross-border mergers
o Cross-border acquisitions
o Sharing existing facilities

39
 COMPANY PROFILE

Wipro Ltd., the flagship company of the Azim H Premji group was incorporated in the year
1945. The company started off originally as a manufacturer of vegetable ghee/vanaspati, refined
edible oils etc. Gradually the company has diversified into various other businesses.

Today Wipro Limited is the first PCMM Level 5 and SEI CMM Level 5 certified IT Services
Company globally. Wipro provides comprehensive IT solutions and services, including systems
integration, Information Systems outsourcing, package implementation, software application
development and maintenance, and research and development services to corporations globally.

In the Indian market, Wipro is a leader in providing IT solutions and services for the corporate
segment in India offering system integration, network integration, software solutions and IT
services. Wipro also has profitable presence in niche market segments of consumer products and
lighting. In the Asia Pacific and Middle East markets, Wipro provides IT solutions and services
for global corporations.

Wipro's ADSs are listed on the New York Stock Exchange, and its equity shares are listed in
India on the Stock Exchange – Mumbai, and the National Stock Exchange, among others.

Wipro is the leading strategic IT partner for companies across India, the Middle East and Asia–
Pacific – offering integrated IT solutions. They plan, deploy, sustain and maintain your IT
lifecycle through their total outsourcing, consulting services, business solutions and professional
services. Wipro InfoTech helps you drive momentum in your organisation – no matter what
domain you are in.

Backed by their strong quality processes and rich experience managing global clients across
various business verticals, they align IT strategies to your business goals. Along with their best

40
of breed technology partners, Wipro InfoTech also helps you with your hardware and IT
infrastructure needs.

The various accreditations that they have achieved for every service they offer reflect their
commitment towards quality assurance. Wipro InfoTech was the first global software company
to achieve Level 5 SEI–CMM, the world's first IT Company to achieve Six Sigma, as well as the
world's first company to attain Level 5 PCMM.

Their continuing success in executing projects is a result of their stringent implementation of

quality processes. Deploying quality frameworks to align with your business will give you the
benefit of a smooth and transparent transition while providing complete IT lifecycle
management. Reliability and perfection are a result of their adherence to these quality
benchmarks and this has been their key differentiator, while helping drive the business
momentum.

The company’s experience and expertise are measured against globally recognized standards to
ensure their commitment in delivering competitive solutions to their customers. Wipro InfoTech
epitomises quality by maintaining high standards in service offerings and products, as well as
internal processes and people management. They believe in constantly scaling quality standards
by expanding our efficiency in all areas beyond their basic IT offerings.

Different people perceive innovation in various ways. At Wipro InfoTech, their innovative
thinking helps them adopt newer business lines and offerings based on your business
expectations. They have adapted to the changes brought about by technology and business and
this has helped us improve customer experience through service delivery and process
optimisation.

In 2013, the company decided to shut down its hardware manufacturing business because it
offers no competitive advantage. It would no longer build Wipro–branded desktops, laptops, and
servers, including the SuperGenuis line of PCs and NetPower servers. It would now look to beef
up its footprint as a systems integrator and increase its focus on IT services.

41
The Wipro Brand

Early Evolution

“During the early stages of the brand evolution, the Wipro brand meant different things to
different customers. Customers had vastly different perspectives of the brand” - Vineet Agarwal,
President, Consumer Care and Lighting, Wipro During the early stages of its evolution, the
Wipro brand was extremely diversified and had multiple identities. Wipro was initially a Fast
Moving Consumer Goods (FMCG) company which made sunflower cooking oil, soaps,
detergent, talcum powder, light bulbs and other consumer products. It subsequently diversified
into an IT services company under the leadership of Mr. Azim Premji who was the Chairman
and Managing Director of Wipro. As a result, to a housewife, Wipro was a soap manufacturing
company while to an engineering professional, Wipro was a software engineering firm [28]. In
those days, the Wipro name was more a convenient name to use rather than a vehicle to convey a
coherent brand identity. The “W” Wipro logo was not consistently used and it was treated more
as a convenience more than anything else. In order to communicate better with the customers and
have a uniform brand identity, Wipro created and tested two brand themes, “We Care” and
“Applying Thought”. This exercise was done during the period of 1996-1998 and was headed by
Mr. Vineet Agarwal who was considered to be the father of the Wipro Brand and now the
president of Wipro Consumer Care and Lighting. The theme “We Care” with the profile of a
mother and a child was rejected by customers on the pretext that although the theme had a lot of
warmth and human feelings, it lacked innovation. The theme “Applying Thought” gave a lot of
feel on innovation and customers quickly accepted it and it gave them an impression of a
company which was on a high-growth path. The company then spent considerable time, money
and effort in order to build their new brand logo, a bright multi-colored sunflower along with the
impact line, “Applying Thought”. The multi-colored sunflower exhibited a sense of innovation
and diversity.

The "Applying Thought" theme could be divided into thinking for the customer, application of
the thinking and a continuous application of the thinking. Thinking for the customer was about

42
human values, application of thinking was about proposing an innovative solution and
continuous application of thinking was to produce better products, optimize cost and integrate
the concept of Six Sigma into the overall process. Since Wipro had so many diverse divisions
which would have been open to various interpretations, a management decision was made to
implement the new brand positioning regimentally rather than provide options. They performed a
rigid implementation on issues such as size of business cards, position of logo

on the card etc.

Moving Up the Value Chain

“Over the next four to five years, Wipro will start to serve the middle tier providers as well and
when that happens, I am sure there will be room for innovation and for us to do things on a more
proactive basis” - Girish Paranjpe, President, Finance Solutions, Wipro In the 1980s outsourcers
in India did low-rung jobs such as data entry and some software development. In the 1990s they
expanded by doing larger software projects and by taking over whole IT systems and back-office
functions such as accounting for U.S. and European corporations. Now they draw a bead on
more sophisticated services--engineering, research and development, and designing auto parts,
sections of aircraft wings and chips for wireless services [7] [See Exhibit 5 for the Four
Generations of Offshore Outsourcing].

As Wipro had been attempting to move up the value ladder, there was greater need for bright
innovative ideas to flow more frequently. What had been embedded in the Wipro culture was
brought to surface in the form of a slogan “Innovation is Wipro: Wipro is Innovation” [39]. At
Wipro, the process of moving up the value chain was done in multiple ways, one of them was by
trying to lead the customer with respect to new technology and new processes. The other was by
trying to do so in a more efficient and effective manner. Wipro's product engineering and design
services were especially pushing hard to deliver on innovation to create and sustain revenue
streams for the future. The evidence towards a more IP and marketing driven model lied in the
number of patent applications that had been made by TCS and Wipro over the past three to four

43
years. The Factory Model as described in detail later was an apt example of Wipro moving up
the value chain with respect to process optimization and efficiency. Wipro Technologies, which
started off by providing back-office operations support to major US firms was now gradually
charging upstream into consulting and other high-value services.

Compared to large U.S. ESPs, Wipro had limited name recognition among U.S. and European
enterprise buyers. However, among its peer group in India, Wipro was clearly considered one of
the most recognized vendors and often citied as an enterprise to emulate. Wipro had recognized
the need for marketing and branding efforts in the United States and had focused a great deal of
effort and resources on several channels. There had been organization wide efforts to become the
premium company across parameters such as best employer, customer favorability and corporate
governance. Wipro’s strategy was to capitalize on its momentum of rapid growth with an
entrepreneurial approach, as it seeked to be the pioneer in many new areas.

The Factory Model

One of the prime examples of Wipro’s success in thought leadership was the rollout of the
Factory Model. The ‘Factory Model’ had evolved from Wipro’s Innovation council and was
called so because of its resemblance to the manufacturing assembly line where efficiencies and
quality improvements are driven through standardization of processes. It was based on the
principles of the Toyota production system and "lean" manufacturing. Wipro’s Factory Model
brought together the governance, architectural expertise, and delivery capability and aimed to
accelerate development and management within a large corporate application development
environment by using principles of componentization, much like assembly in a factory. The
Factory Model was most suitable when Wipro undertook program management and large-scale
outsourced management of application development, especially where Wipro serviced multiple
geographical or business divisions of the same client. It was founded on a common demand
management process, centralized architecture and engineering services, core processes of
software development driven through enterprise-wide standards, and a framework of a shared
development, testing and deployment environment.

44
Different divisions of the company:

Wipro Technologies – Wipro Technologies is the global IT services business division of Wipro
Limited. With over 20 offices around the world, Wipro Technologies is the No.1 provider of
integrated business, technology and process solutions on a global delivery platform.

Wipro Infotech– Wipro Infotech is the leading strategic IT partner for companies across India,
the Middle East and Asia–Pacific – offering integrated IT solutions. We plan, deploy, sustain and
maintain your IT lifecycle through our total outsourcing, consulting services, business solutions
and professional services.

Wipro Consumer Care and Lighting– Wipro Consumer Care and Lighting, a business unit of
Wipro Limited, has a profitable presence in the branded retail market of toilet soaps, hair care
soaps, baby care products and lighting products. It is also a leader in institutional lighting in
specified segments like software, pharma and retail.

Wipro Infrastructure Engineering – Wipro Infrastructure Engineering was Wipro Limited’s

first diversification in 1975, which addressed the hydraulic equipment requirements of mobile
original equipment manufacturers in India. Over the past 25 years, the Wipro Infrastructure
Engineering business unit has become a leader in the Hydraulic Cylinders and Truck Tipping
Systems markets in India, and intends growing its business to serve the global manufacturing
requirements of Hydraulic Cylinders and Truck Tippers.

Wipro GE Medical Systems – Wipro GE Medical Systems is a joint venture between Wipro
and General Electric Company. As a part of GE Medical Systems South Asia, it caters to
customer and patient needs with a commitment to uncompromising quality. Wipro GE is India’s
largest exporter of medical systems, with unmatched distribution and service reach in South
Asia. Wipro GE pioneered the manufacture of Ultrasound and Computed Tomography systems
in India and is a supplier for all GE Medical Systems products and services in South Asia.

45
Products and services offered by the company:

Wipro was having its presence across various verticals viz;(it decided to shut its hardware
business in 2013)

 Wipro Personal Computing Products

 Enterprise Products
 Software Products and Licences
Wipro Personal Computing Products:–

DesktopsEntry Level:

 Wipro Desktop WSG37205

 Wipro Desktop WSG37555
 Wipro Desktop WSG15C55
 Wipro Desktop WSG15D55
 Wipro Desktop WSG41155.
Mainstream:

 Wipro Desktop WSG53255

 Wipro Desktop WSG37555
 Wipro Desktop WSG15C55
 Wipro Desktop WSG15D55
 Wipro Desktop WSG41155.
Performance:

 Wipro Desktop WSG38105

 Wipro Desktop WSG41155
Gaming PC :

 Intel® Processor based

 AMD Processor based

46
Palm–Sized PC: Protos Desktop

Wipro Green Computing:

 Wipro Desktop WSG 15D55V

 Wipro Desktop WSG 37555V.
Note Book:

 Wipro 7B1610
 Wipro EM4700
 Wipro 7B1630
 Wipro 7E1100
 Wipro 7B1100
 Wipro 7B3800
 Wipro 7710P
 Wipro 7B1650.
Server:

 Entry level and dual servers

 Performance Segment
 Blade server
 Enterprise class server.
AMD– performance & Enterprise classWiproLooKeys.Supercomputing

Services offered by the company:

 System Integration
 Managed Services
 Total Outsourcing
 Application Development and Portals
 Business Transformation Services
 Security Governance
 Data Warehousing and Biz Intelligence
 Availability Services

47
Milestones

2012:

Wipro– Australia–based MMG Selects Wipro as Strategic Partner

Wipro – Wipro Acquires L.D.Waxson with Skincare brands Bio–essence &Ginvera
Wipro Tech joins Car Connectivity Consortium (CCC) to develop smartphone–based connected–
car solutions

Wipro Technologies, Oracle joined hands to offer next gen Oracle Fusion HCM solution
Wipro Infotech, the India and Middle East, IT Business unit of Wipro launched the e.go aero
range of ultraportable notebooks

Wipro Wins NASSCOM Corporate Award for Excellence in Diversity and Inclusion 2012

 2011: Inaugurated its first rural BPO at Manjakkudi village in Tamil Nadu to capitalize
on literate talent pool available in the region.
 2011: Wipro has signed an agreement to acquire majority stake of Brazil based hydraulic
cylinder manufacturer R.K.M. EQUIPAMENTOS HIDRAULICOS.
 2010: Wipro Infotech –– the India, Middle East and Africa, IT Business of Wipro––has
been awarded a 5–year IT outsourcing contract by Vasan Eye Care – one of India's
largest network of eye care centers and a unit of Vasan Healthcare Group.
 2010: Wipro Technologies, the global IT services business division of Wipro, has jointly
with Citrix Systems entered into an agreement with Microsoft.
 2008: Launch of Wipro Egypt Development Center
 2008: Launch of Wipro GSMC in Kuala Laumpur
 2007: Wipro Arabia Joint Venture found
 2006: Acquisition of 3D networks
 2006: Launch of GSMC– Global Service Management Centre for remote service delivery
 2004: Start of Total Outsourcing business
 2002: Start of Consulting business unit
 2001: Launch of Wipro Infotech Middle East & Asia–Pacific operations

48
  1998: Mission Quality journey started with focus on Six Sigma
 2000: Wipro Listed on NYSE
 1998: Re–launch of Wipro branded PC
 1995: Wipro–BT joint venture started
 1995: Joint Venture with Acer started
 1995: Partnership with Cisco announced
 1995: Off shoring services started
 1992: Launch of global R&D services
 1990: Launch of global software services business
 1988: Partnership with Sun Microsystems announced
 1986: Manufacturing tie–up with Epson for printers
 1986: Start of Wipro PC manufacturing (with India's first surface mounted technology)
 1984: Start of Wipro Systems – focus on software products (Wipro branded as well as
distribution business)
 1981: Manufacture of mini computers started at the Mysore factory
 1980: Birth of IT business under banner of Wipro Information Technology Ltd. focused
on hardware manufacturing and R&D
 1945: Manufacturing of edible oils

Achievements/ recognition:

 In 2014 Wipro Rated as a 'High Performer' in HfS Blueprint Report on Insurance BPO
 Wipro Recognized as a Best in Class Outsourcing and Consulting Service Provider for
2014 by Consumer Goods Technology Readers
 Best Websphere Partner Award.
 Authorized EMC Signature Partner in South Asia.
 Best TSG Partner of HP.
 Best System Integrator award 2007–08.
 Best Technology Partner for the Year.
 Network Integrator of the Year 2008.
 SAP Pinnacle Award 2008.

49
  Golden Peacock Innovation Management Award 2007.
 Riverbed Partner of the year 2007 award.
 National Partner of the Year 2007 Award from Microsoft.
 Wipro wins FIVE awards from CISCO.
 India's first ever Microsoft Platinum Partner Award.
 Wipro 3D Networks once again emerged as the most formidable partner for Nortel in FY
2006 bagging all the highest awards in significant categories – Sales, pre sales & post
sales
 Partner of the Year award:––Over Drive Excellence of the Year award –Sales
Champion of the Year award –Pre–Sales Champion of the Year award –Customer
Champion of the Year award

Wipro Limited (Western India Products Limited[1]) is an Global multinational IT and System
Integration services company headquartered in Bangalore, India.[5][6] As of December 2014, the
company has 154,297 employees servicing over 900 large enterprise & Fortune 1000
corporations with a presence in 61 countries.[7] On 31 January 2015, its market capitalization was
approximately 1.63 trillion ($26.3 billion), making it one of India's largest publicly traded
companies and seventh largest IT services firm in the World.[8]

To focus on core IT Business, it demerged its non-IT businesses into a separate company named
Wipro Enterprises Limited with effect from 31 March 2013. [9] The demerged companies are
consumer care, lighting, healthcare and infrastructure engineering which contributed
approximately 10% of the revenues of Wipro Limited in previous financial year. [10][11] Recently
Wipro has also identified Canada, Brazil, Australia & South Africa as rapidly growing markets
globally and has committed to strengthen the presence in the respective countries over the next 5
years.

History

Early formative years

The company was incorporated on 29 December 1945, in Mumbai by Mohamed Premji as

'Western India Vegetable Products Limited', later abbreviated to 'Wipro'. It was initially set up as

50
a manufacturer of vegetable and refined oils in Mumbai, Maharashtra, India under the trade
names of Kisan, Sunflower and Camel. The company logo still contains a sunflower to reflect
products of the original business.

In 1966, after Mohamed Premji’s death, his son Azim Premji returned home from Stanford
University and took over Wipro as its chairman at the age of 21. During the 1970s and 1980s, the
company shifted its focus to new business opportunities in the IT and computing industry, which
was at a nascent stage in India at the time. On 7 June 1977, the name of the company changed
from Western India Vegetable Products Limited, to Wipro Products Limited.

The year 1980 marked the arrival of Wipro in the IT domain. In 1982, the name was changed
from Wipro Products Limited to Wipro Limited. [16] Meanwhile Wipro continued to expand in the
consumer products domain with the launch of "Ralak" a tulsi-based family soap and "Wipro
Jasmine", a toilet soap.

1966–1992

In 1988, Wipro diversified its product line into heavy-duty industrial cylinders and mobile
hydraulic cylinders. A joint venture company with the United States' General Electric in the
name of Wipro GE Medical Systems Pvt. Ltd. was set up in 1989 for the manufacture, sales, and
service of diagnostic and imaging products. Later, in 1991, tipping systems and Eaton hydraulic
products were launched. The Wipro Fluid Power division, in 1992, developed expertise to offer
standard hydraulic cylinders for construction equipment and truck tipping systems. The market
saw the launch of the "Santoor" talcum powder and "Wipro Baby Soft" range of baby toiletries
in 1990.

1994–2000

In 1994, Wipro set up an overseas design centre, Odyssey 21, for undertaking projects and
product developments in advanced technologies for overseas clients. Wipro Infotech and Wipro
Systems were amalgamated with Wipro in April that year. Five of Wipro's manufacturing and

51
development facilities secured the ISO 9001 certification during 1994–95. In 1999, Wipro
acquired Wipro Acer. Wipro became a more profitable, diversified corporation with new
products such as the Wipro SuperGenius personal computers (PCs). In 1999, the product was the
one Indian PC range to obtain US-based National Software Testing Laboratory (NSTL)
certification for the Year 2000 (Y2K) compliance in hardware for all models.

Wipro Limited joined hands with a global telecom major KPN (Royal Dutch telecom) to form a
joint venture company “Wipro Net Limited” to provide internet services in India. [15] The year
2000 was the year Wipro launched solutions for convergent networks targeted at Internet and
telecom solution providers in the names of Wipro OSS Smart and Wipro WAP Smart. [20] In the
same year, Wipro got listed on New York Stock Exchange.[21] In early 2000 Wipro Vice
Chairman Vivek Paul and Azim Premji approached KPMG Consulting Vice Chairman Keyur
Patel and CEO Rand Blazer to form an mega-outsourcing joint venture between the two
organizations.

2001–present

In February 2002, Wipro became the first software technology and services company in India to
be certified for ISO 14001 certification. Wipro also achieved ISO 9000 certification to become
the first software company to get SEI CMM Level 5 in 2002. Wipro Consumer Care and
Lighting Group entered the market of compact fluorescent lamps, with the launch of a range of
CFL, under the brand name of Wipro Smartlite. As the company grew, a study revealed that
Wipro was the fastest wealth creator for 5 years (1997–2002). The same year witnessed the
launch of Wipro’s own laptops with Intel's Centrino mobile processor. Wipro also entered into
an exclusive agreement with the owners of Chandrika for marketing of their soap in select states
in India.[29][30] It set up a wholly owned subsidiary company viz. Wipro Consumer Care Limited
to manufacture consumer care and lighting products. [31] In 2004 Wipro joined the billion dollar
club.[32] It also partnered with Intel for i-shiksha.[33][34] The year 2006 saw Wipro acquire cMango
Inc., a US-based technology infrastructure Consulting firm Enabler, and a Europe based retail
solutions provider.[37] In 2007, Wipro signed a large deal with Lockheed Martin. It also entered

52
into a definitive agreement to acquire Oki Techno Centre Singapore Pte Ltd (OTCS) [39][40] and
signed an R&D partnership contract with Nokia Siemens Networks in Germany. [41][42] The year
2008 saw Wipro’s foray into the clean energy business with Wipro Eco Energy. [43][44] In April
2011, Wipro signed an agreement with Science Applications International Corporation (SAIC)
for the acquisition of their global oil and gas information technology practice of the commercial
business services business unit. The year 2012 saw Wipro make its 17th acquisition in IT
business when it acquired Australian analytics product firm Promax Applications Group (PAG)
for $35 million. Wipro is the No. 1 employer of H-1B visa professionals in the United States in
2012.

In 2012 Wipro Ltd. announced the demerger of its Consumer Care & Lighting (incl Furniture
business), Infrastructure Engineering (Hydraulics & Water business), and Medical Diagnostic
Product & Services business into a separate company to be named Wipro Enterprises Ltd.
Wipro's scheme of arrangement for demerger turned effective from 31 March 2013.

Wipro Group of Companies

Wipro Ltd.

Wipro Limited is a global company provider of comprehensive IT solutions and services,

including Systems Integration, Consulting, Information Systems outsourcing, IT-enabled
services, and R&D services.

It is also a value added reseller of desktops, servers, notebooks, storage products, networking
solutions and packaged software for international brands.

Wipro entered into the technology business in 1981 and has over 140,000 employees and clients
across 54 countries today.[55] IT revenues stood at $6.2 billion for the year ended 31 March 2013,
with a repeat business ratio of over 95%.

53
The business model at Wipro Technologies Ltd is an industry-aligned customer-facing model
which gives greater understanding of customers’ businesses to build industry specific solutions.

Wipro Consumer Care & Lighting

Wipro Consumer Care and Lighting (WCCLG), a business unit of Wipro Limited operates in the
FMCG segment offering a wide range of consumable commodities. Established in 1945, the first
product to be introduced by WCCLG was vegetable oil, later popularised under the brand name
"Sunflower Vanaspati". It offers personal care products, such as Wipro Baby Soft and Wipro
Safewash, toilet soaps like Santoor and Chandrika as well as international brands like Yardley.[61]
Its portfolio of lighting solutions includes products like Smartlite CFL, [62] LED, emergency lights
and more.

Through its customer-centric products and acquisitions, Wipro Consumer Care and Lighting has
become a fast-growing company in the FMCG segment.

Wipro Infrastructure Engineering

Wipro Infrastructure Engineering is the hydraulics business division of Wipro Limited and has
been in the business of manufacturing hydraulic cylinders, truck cylinders, and their components
and solutions since 1976. This division delivers hydraulic cylinders to international OEMs and
represents the Kawasaki, Sun Hydraulics and Teijin Seiki range of hydraulic products in India. [68]
It has entered into partnerships with companies like Kawasaki and aerospace giant EADS. [71] The
commitment to quality has made Wipro Infrastructure Engineering the second largest
independent manufacturer of cylinders in the world. The company has recently ventured into
water treatment systems and solutions to cater to the needs of various industries.

54
Wipro GE Medical Systems Limited

Wipro GE Medical Systems Limited is Wipro’s joint venture with GE Healthcare South Asia. It
is engaged in the research and development of advanced solutions to cater to patient and
customer needs in healthcare. This partnership, which began in 1990, today includes offerings
like gadgets and equipment for diagnostics, healthcare IT solutions and services to help
healthcare professionals combat cancer, heart disease, and other ailments. There is complete
adherence to Six Sigma quality standards in all products.

Sustainability at Wipro

Wipro’s approach to sustainability is structured on enabling itself, as an organisation, and its

customers to be more ecologically sustainable. It is driven by issues considered important to
employees, India current and future generations, customers, investors, suppliers, and the
community as a whole. Wipro has been ranked 1st in the 2010 Asian Sustainability Rating
(ASRTM) of Indian companies and is a member of the NASDAQ Global Sustainability Index as
well as the Dow Jones Sustainability Index.

In November 2012 Guide to Greener Electronics, Greenpeace ranked Wipro first with a score of
7.1/10.

Listing and shareholding

Listing: Wipro's equity shares are listed on Bombay Stock Exchange where it is a constituent of
the BSE SENSEX index, and the National Stock Exchange of India where it is a constituent of
the S&P CNX Nifty. The American Depositary Shares of the company are listed at the NYSE
since October 2000.

55
Shareholding: On 30 September 2013, 73.51% of the equity shares of the company were owned
by the promoters: Azim Premji, his family members, partnership firms in which he is a partner
and Trusts formed by him/his family. The remaining 26.49% shares are owned by others.

Shareholders (as on 30-September-2016) Shareholding[86]

Promoter group led by Azim Premji 73.51%

Foreign Institutional Investors (FII) 08.82%

Indian Public 05.31%

Bodies Corporate 03.89%

Mutual Funds/UTI 01.90%

NRI 01.04%

Trusts/Others 00.84%

American Depositary Shares 01.93%

Total 100.0%

Employees

At the end of FY 2015-2016, its employee strength was 147,452. Its global workforce consists of
98 nationalities working from 61 countries, 175+ cities across 6 continents. [3] Approx. 8.5% of its
workforce is non-Indian. The average age of a Wipro employee is 29 years. The attrition rate for
2013-14 was 15.1%. During 2012-13, the company incurred 180 billion on employee benefit
expenses.

56
 DATA ANALYSIS AND INTERPRETATION

Q1. What is total FDI inflow in India

Year Wise FDI Inflows In India Through FIPB Route/ RBI’s Automatic Route/ Acquisition
Route
Table 1: FDI Inflows In India From 2000-2012

Financial Year Capital Inflow (US$ %age Growth Over

Million) Previous Year

2004 – 2005
2,463 -
2005 – 2006
4,065 67%
2006 – 2007
2,705 (34%)
2007 – 2008
2,188 (15%)
2008 – 2009
3,219 48%
2009 – 2010
5,540 70%
2010 – 2011
12,492 181%
2011 – 2012
24,575 58%
2012 - 2013
31,396 11%
2013 - 2014
25,834 (6%)
2014 - 2015
19,427 (25%)
2015 - 2016
28,403 24%
Total 162,307 -
Source: Nic.in

57
Interpretation
For the financial year (FY) 2010-2011 (April 2010 - March 2011), India's FDI inflow amounted
to US$19.4 billion, down 25% from US$25.6 billion of the FY2009-2010. The inflow for the
FY2010-2011 was mainly from Mauritius (US$6.9 billion, 36% of total), mainly because most of
the investors want to take advantage of the double taxation avoidance agreement between
Mauritius and India, and Mauritius-based investors do not have to pay capital gains tax in India.
Singapore is the second largest contributor of FDI, after Mauritius, with US$1.7 billion,
representing 9% of the total inflows. Japan came third with US$1.6 billion, representing 8%,
followed by the Netherlands and the USA with 6% each, and Cyprus with 4.5% of total FDI
inflows. During the period, the services sector attracted the highest FDI inflow (US$3.4 billion),
followed by telecommunications with US$1.7 billion and automobile with US$1.3 billion.

58
 Q2. Total fdi inflow and outflows in India.
Year wise The total foreign direct investment inflows in india and out flows by india

Interpretation
The total fdi inflows is higher in the financial year 2008-09 it reach to .028 the major part
of fdi inflows in India is from Mauritius after that fid start decline to the point 0.14 in financial year of
2010-11 then start moving upwards and reaches to 0.25 in financial year of 2011-12. In simple terms
the fdi in flows in India is moving upwards so many countries are interested investing in India
because they’re very attracted towards Indian market.When India receives the fdi from different
countries then India make some investment in sectors of India. The fdi outflows is start moving
upwards to the financial year of 2007-08 after that the fdi is continuously start declining

59
 Date : 23/08/2016
Foreign direct investment flows to India: country wise

Source/industry 2011-12 2012-13 2013-14 2014-15 2015-16

9,518 10,165 9,801 5,616 8,142

Mauritius

2,827 3,360 2,218 1,540 3,306

Singapore

950 1,236 2,212 1,071 994

U.S.A

570 1,211 1,623 571 1568

Cyprus

457 266 971 1,256 2,089

Japan

601 682 804 1,417 1,289

Netherlands

508 690 643 538 2760

United Kingdom

486 611 602 163 368

Germany

226 234 373 188 346

UAE

136 437 283 486 589

France

192 135 96 133 211

Switzerland

106 155 137 209 262

Hong Kong SAR

48 363 125 183 251

Spain

86 95 159 136 226

South Korea

15 23 40 248 89
Luxembourg

2,699 3,034 2,374 1,184 983

Others

60
Q3. Countries wise fdi inflows in India
Share Of Top Investing Countries - FDI Equity Inflows In India

Interpretation
For the FY2010-2011 (April 2010 - March 2011), India's FDI inflow was primarily from
Mauritius with US$6.9 billion, representing 36% of total inflow of US$19.4 billion. However,
the total investments decreased by 33% when compared to US$10.4 billion in FY2009-2010.
Mauritius has been the single largest source of FDI into the country in the first 10 years of the
new millennium. As much as $55 billion worth of money has been invested in India after being
routed through Mauritius. This is 42% of the total FDI in the country in the past decade.
Singapore stood second with US$1.7 billion, denoting 9%; followed by Japan with US$1.6
billion, representing 8%. Investments from U.S.A. witnessed a declining trend, as the county is
facing the credit crunch from the past couple of years. FDI from U.S.A. decreased from US$1.9
billion in FY2009-2010 to US$1.2 billion in FY2010-2011

61
Q4. Fdi invested by India in various sectors.
Sectors Attracting Highest FDI Equity Inflows - India
Table 2: FDI Investments By Sector In India (US$ Million) – 2014 -2016

Financial Year
Rank Sector 2013-14 2014-15 2015-16 Cumulative %age to total
(April- (April- (for April Inflows Inflows (in
March) March) 2015) (April ’13 - terms of US
April ‘16) $)

1 Services
4,353 3,403 658 27,668 21%
Computer Software
2
& Hardware 919 784 96 10,821 8%
3 Telecommunications 2,554 1,665 46 10,611 8%
Housing & Real
4
Estate 2,884 1,127 38 9,655 7%
Construction
5
Activities 2,862 1,125 311 9,941 7%
6 Automobile
1,208 1,331 266 6,199 5%
7 Power 1,437 1,252 256 6,156 5%
Metallurgical
8
Industries 407 1,105 52 4,286 3%
9 Petroleum & Natural
Gas
272 574 6 3,159 2%
10 Chemicals
362 398 34 2,927 2%
Source: Nic.in

62
63
Figure 1: FDI Investments By Sector In India (US$ Million) – 2009 -2012

FDI Inflows In India By Sector (US$ Million) - 2009-2011

5,000

4,353

3,750
3,403

2,884 2,862
2,554

2,500
US$ Million

1,665
1,331 1,437
1,125
1,127
1,208 1,252
1,250 1,105
919
784
574
407 362 398
272

0
Services Computer Software Telecommunications Housing & Real Construction Automobile Power Metallurgical Petroleum & Chemicals
& Hardware Estate Activities Industries Natural Gas

2009-10 2010-11

Source: Nic.in
Interpretation
The services sector in India, which includes financial and non-financial services, attracted
the majority of the FDIs from investors during the financial period April 2010 - March 2011. The
sector attracted US$3.4 billion in FY2010-2011, representing 18% of total inflow of US$19.4
billion. However, on a year-on-year basis, FDIs in the services sector decreased by 22% from
$4.4 billion in FY2009-2010. As India imposes substantial FDI caps in the financial services
sector particularly in the insurance sector, the sector attracted fewer investments in the FY2010-
2011. The country can add about 1.5% to the country's economic growth, if the FDI policy in the
services sector is liberalized, which in turn leads to an increase in FDIs in services sector. In
second place, telecommunications sector attracted US$1.7 billion, followed by automobile sector
with US$1.3 billion. India's economic policies are designed in such a way that it attracts
significant capital inflows into the country on a sustained basis, thereby encouraging technology
collaboration between Indian and foreign firms.

64
Q5. Fdi invested in various cities in india.
FDI Equity Inflows By City – India
Table 3: FDI Equity Inflows By City In India (US$ Million) – 2014 -2016

Financial Year
S.No City State 2013-14 2014-15 2015-16 Cumulative %age to total
(April- (April- (for April Inflows Inflows (in
March) March) 2015) (April ’13 - terms of US $)
April ‘16)
1 Mumbai Maharastra 8,249 6,097 762 45,830 35%
2 New Delhi Delhi 9,695 2,677 1,103 26,101 20%
3 Bengaluru Karnataka 1,029 1,332 130 8,358 6%
4 Chennai TamilNadu 774 1,352 494 7,341 6%
5 Ahmedabad Gujarat 807 724 130 7,282 5%
Andhra 5%
6 Hyderabad
Pradesh 1,203 1,262 130 6,090
West 1%
7 Kolkata
Bengal 115 95 124 1,611
8 Chandigarh Chandigarh 224 416 5 1,030 1%
9 Panaji Goa 169 302 0.02 725 1%
10 Bhopal Madhya 0.5%
Pradesh 54 451 0.32 654
11 Jaipur Rajasthan 31 51 0.7 521 0.4%
12 Kochi Kerala 128 37 60 428 0.3%
13 BhubaneshwarOrissa 149 15 20 281 0.2%
Uttar 0.2%
14 Kanpur
Pradesh 48 112 56 233
15 Guwahati Assam 11 8 - 72 0.1%
16 Patna Bihar - 5 - 6 0%
Source: Nic.in

65
 % of fdi inflows
mumbai
new delhi
banglore
channi
ahmedabad
hydeabad
kolkata
chandigarh
panaji
bhopal
jaipure
kochi
bhubaneshwar
kanpur
guwahati
assam

Interpretation
Mumbai attracted highest FDIs with US$6.1 billion in the FY2010-2011, followed by
New Delhi with US$2.7 billion. Chennai came third with 7.2% or $1.35 billion, closely followed
by Bengaluru with 7.1% or $1.33 billion and Hyderabad (6.5% or $1.26 billion). Ahmedabad,
which has been traditionally receiving higher FDI, got only $724 million in FY2010-2011.
Despite regulatory hurdles, India continues to be among the preferred destinations for FDI due to
the country's high economic growth, with both Mumbai and Delhi being touted as among the
major cities for investment because of low cost outsourcing. According to a survey by Ernst &
Young, India will rank fifth among the most attractive destinations and it would be the home to
the next big brand name in the IT sector. "India is undergoing a transition in terms of investor
perception of its market potential, bolstered by economic growth projected to surpass 8 per cent
annually," the report said. The Indian economy had expanded by 8.5 per cent in 2010-11, up
from 8 per cent in the previous fiscal. The Reserve Bank, in its annual monetary policy, said that
growth is likely to slow down a bit but still clock around 8 per cent this fiscal. The survey also
found that Asian countries find Europe to be a good investment destination, with India ranking
11th among the top investors globally to the continent.

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 FINDINGS

India is established as one of the top tier world destinations for FDI. In the Asia-Pacific region, the
country consolidated its second top position, besides China, after a lull in 2009 because of financial
crisis. To augment, India’s inward investment rule went through a series of changes since economic
reforms were evolved in two decades back. The cumulative amount of FDI inflows into India were
US$1,97,935 million for the period April 2000 – April 2011, including data of‘re-invested earnings’
& ‘other capital’ of equity inflows. These are the estimates on an average basis, based upon data for
the previous two years, published by RBI in Monthly Bulletin. The cumulative amount of Indian FDI
inflows, excluding, amount remitted through RBI’s-NRI Schemes, were US$1,35,958 mi for the
period April 2000 – April 2011.
As per the recent survey done by the United National Conference on Trade and Development, India
will emerge as the third largest recipient of FDI for the three-year period ending 2012. As per the
study, the sectors which attract highest FDI were services, telecommunications, construction
activities, and computer software and hardware.
There has been a continuing and sustained effort to make the FDI policy more liberal and investor-
friendly. Significant rationalization and simplification of the policy has, therefore, been carried out in
the recent past. DIPP, in its consultation paper titled ‘FDI Policy—rational and relevance of caps’
has, as a landmark initiative, accepted that up to 49% foreign investment is indirectly possible in all
sectors. This effectively means that an Indian owned and controlled company can make downstream
investments even in prohibited sectors such as multiband retail trading etc. It is important here to note
that foreign investment for this purpose includes not only strategic foreign investment but also FII
under portfolio investment schemes, NRI, GDR, ADR etc.\

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 CONCLUSION

Amidst today’s time of fierce competition and a quest to achieve and enhance a substantial level
of economic and social development; each and every nation is trying to liberalize its economic
policies in order to attract investments from not only, domestic players, but also from magnates
all across the globe. Consequently, people with generous reserves of funds, all around the globe,
are expanding their wings and seeking opportunities for investing in different spheres of this
lucrative market. India too is not oblivious to the rapid developments taking place in the global
market and has emerged as one of the prime destinations for the investment of funds from an
impressive number of foreign investors. FDI is a superb conduit for the transfer of technology
and know-how to developing countries. This message has not been lost on India's policy makers.
They have though until the decade of the nineties attempted to regulate and control its spheres of
activity and the contractual forms of foreign enterprise participation in the economy. The
framework of policies they put in place was guided by the desire to limit foreign control of
economic activity but at the same time take advantage of the technology and knowhow provided
by foreign capital. This attempt at riding two horses in tandem, a complex feat, inevitably
resulted in a complex and cumbersome bureaucratically guided FDI regime and earned India the
reputation for hostility towards FDI.
The GDP growth in India is anticipated to surpass 8% yearly and the number of people in the
Indian middle class is set to triple over the next 15 years, the domestic demand is expected to
grow exponentially. India’s young demographic profile also helps it in providing an increasingly
well-educated and cost-competitive labor force. These factors put India in a good position to
attract an increasing proportion of global FDI going forward.

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 SUGGESTIONS

 India is building up the reforms, but admits that inter-governmental politics have been
impacting government policy.
 FDI is lowering inflation and is increasing GDP growth of the economy.
 The GDP growth of the country grew 7.8% in the first quarter of 2011 (Q4 of FY11),
down from 8.4% in Q4, FY10, and 8.9% in Q3, FY10.
 India's diverse economy encompasses traditional village farming, modern agriculture,
handicrafts, a wide range of modern industries, and a multitude of services.
 Services are the major source of economic growth, accounting for more than half of
India's output with less than one third of its labor force.
 The purchasing power parity (PPP) of India is on an increasing trend because of FDI. In
terms of PPP, Indian economy valued is at US$3.92 trillion and was at the fourth place in
2010.
 The country was behind the US, China and Japan, according to the World Bank.
 The Indian economy is expected to be nearly US$85.97 trillion on PPP basis by 2050
from US$3.92 trillion in 2010.
India is expected to be the world’s largest economy by 2050, surpassing China and the US, in view
of its continuing robust growth in the recent past

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 BIBLIOGRAPHY
Books
1. Investment management
i. Prakash Guptha, IV edition, 2005
V.K.Bhalla
2. Security Analysis And Portfolio Management
i. Sulthan Chand and son’s, II edition, 2002
V.A.Avadhani
3. Investment management
i. Sulthan Chand and son’s, V edition, 2004
Preethi Singh
4. Baskaran A (2010), “The Impact of Foreign Direct Investment on Indian Economy”,
Excel Books.
5. Direct Tax Laws (2010), “Guide To Foreign Direct Investments In India With FDI Policy
Issued on 1st April 2010”, Taxmann Publications Pvt. Ltd.
6. G. Gopala Krishna Murthy (2007), “Foreign Institutional Investors – Indian and Global
Scenario”, Icfai University Press, Hyderabad

WEB SITES
o www.rbi.com
o www.fdiintelligence.com
o www.sebi.gov.in.com

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