FDI in India

Free Trade Between US and EU

• February 12, 2013, State of the Union address, President Barack
Obama committed the United States to negotiating a free trade
deal with the European Union (EU).
• The United States and the 27 countries that are members of the
EU already make up the world’s largest and richest trading
partnership.
• Existing Conventional Tariff is below 3%.
• Non Tariff Barrier on Automobile and Pharmaceutical- major -
amounting to 10% -20% conventional tariff.
• Shall lead to GDP growth by 0.5% and Trade value of $200bn.

• Free trade is a positive sum game; it is equivalent to the rising

tide that lifts all boats.
 DP World, Dubai and US
• In February 2006, DP World, a ports operator with global reach owned by
the government of Dubai, a member of the United Arab Emirates and a
staunch U.S. ally, paid $6.8 billion to acquire P&O, a British firm that runs a
global network of marine terminals.
• .PO management operations of six U.S. ports: Miami, Philadelphia,
Baltimore, New Orleans, New Jersey, and New York.
• The acquisition had already been approved by U.S. regulators.
• Raised objections of US Senate were twofold. First, they raised questions
about the security risks associated with management operations in key
U.S. ports being owned by a foreign enterprise
• was a state-owned enterprise and argued that foreign governments
should not be in a position of owning key “U.S. strategic assets.”
 DP World, Dubai and US
• The Bush administration was quick to defend the takeover,
• DP World was a respected global firm with an American chief operating
officer and an American-educated chairman; the head of the global ports
management operation would also be an American. DP World would not
own the U.S. ports in question, just manage them.
• Most of the DP World employees at American ports would be U.S.
citizens, and any UAE citizen transferred to DP World would be subject to
American visa

• These arguments fell on deaf ears. With several U.S. senators threatening
to pass legislation to prohibit foreign ownership of U.S. port operations,
DP World bowed to the inevitable

• In the words of the firm’s CEO, “This is the world’s largest economy. How
can you just ignore it?”
• In 2015 India overtook China and
the US as the top destination for the
Foreign Direct Investment. In first half of
the 2015, India attracted investment of $31
billion compared to $28 billion and $27
billion of China and the US respectively
 FDI in India
• FDI inflows were at $55.6 billion for the year ending March 2016, which was
a record.
• In 2016-17, the FDI inflows were even higher at $60.08 billion.
• the total FDI investments India received during April-June 2017 stood at
US$ 14.55 billion,
• Data for April-June 2017 indicates that the services sector attracted the
highest FDI equity inflow of US$ 1.88 billion, followed by computer software
and hardware – US$ 1.32 billion and trading – US$ 769 million. Most
recently, the total FDI equity inflows for the month of June 2017 touched
US$ 3.12 billion
• During April-June 2017, India received the maximum FDI equity inflows from
Mauritius (US$ 3.29 billion), followed by Singapore (US$ 3.01 billion),
Germany (US$ 798 million), USA (US$ 660 million), and Netherlands (US$
584 million).
 Some of the recent significant FDI
announcements
• Japanese low-cost retail chain, Miniso, is set to open its first store in India
on July 18, 2017 and is targeting revenue of Rs 10,000 crore (US$ 1.56
billion) over two years by reaching a count of 210 stores by the end of 2018
and 800 by 2019.
• Kathmandu based conglomerate, CG Group is looking to invest Rs 1,000
crore (US$ 155.97 million) in India by 2020 in its food and beverage
business, stated Mr Varun Choudhary, Executive Director, CG Corp Global.
• International Finance Corporation (IFC), the investment arm of the World
Bank Group, is planning to invest about US$ 6 billion through 2022 in
several sustainable and renewable energy programmes in India.
• Warburg Pincus, a Private Equity firm based in New York, has invested US$
100 million in CleanMax Solar, a rooftop solar development firm, which will
be utilised to fund growth opportunities outside India and to improve product
offerings.
• Morganfield Group, a Malaysian restaurant and bar chain, is planning to
enter India by launching three of its brands, Morganfield’s, Mocktail Bar and
Snackz It, by the end of 2017. The company expects to open 250 outlets in
India over the next five years.
• SAIC Motor Corporation is planning to enter India’s automobile market and
begin operations in 2019 by setting up a fully-owned car manufacturing
facility in India
• Toronto-based Canada Pension Plan Investment Board (CPPIB) made investments worth Rs 9,120 crore
(US$ 1.41 billion) in India during FY 2016-17, taking their total investment in India to Rs 22,560 crore (US$
3.50 billion).
• SoftBank is planning to invest its new US$ 100 billion technology fund in market leaders in each market
segment in India as it is seeks to begin its third round of investments.
• UAE-based firm, DP World, having previously invested US$ 1 billion in India, is planning to invest another
US$ 1 billion in India's infrastructure sector along with logistics and container terminals.
• Xander Group Inc. and APG Asset Management NV have purchased an Information Technology (IT) Special
Economic Zone (SEZ) in South Chennai from Shriram Properties and Infrastructure Pvt. Ltd and SUN-AREA
Property Partners for a consideration of approximately US$ 350 million.
• The infrastructure sector in India witnessed 33 deals in FY 2016-17 involving US$ 3.49 billion as against US$
2.98 billion raised across 31 deals in FY 2015-16, with the majority of deals led by the power, roads and
renewable sectors, as per investment bank Equirus Capital.
• Developers from China and Japan will invest US$ 3-4 billion in India’s real estate sector over the next three
years owing to positive regulatory reforms taken by the Government of India such as implementation of the
Real Estate Investment Regulatory Act, as per Mr Christian Ulbrich, Chief Executive Officer (CEO), JLL Inc.
• Walmart, global retail giant, plans to open 50 new cash-and-carry stores in India over the next three to four
years and locate half of the stores in Uttar Pradesh and Uttarakhand while creating over 40,000 jobs in the
two states.
• Global e-commerce giant, Amazon is planning to enter the Indian food retailing sector by investing US$ 515
million in the next five years, as per Mr Harsimrat Kaur Badal, Minister of Food Processing Industries,
Government of India.
• The Government's Make in India campaign has attracted investment across sectors from various Chinese
companies, as is evident from cumulative Foreign Direct Investment (FDI) inflows of Rs 9,933.87 crore (US$
1.54 billion) between 2014 and December 2016.
• The capital inflows to India from Canadian institutional investors was estimated to reach over US$ 6.5 billion
in March 2016, making Canada the fifth largest foreign direct investment (FDI) partner of the country, with
major investments in infrastructure projects by Brookfield, Canada Pension Plan Investment Board (CPPIB),
Ontario Teachers and Fairfax, among other institutions.
 Government Initiatives
• The Department of Industrial Policy and Promotion (DIPP)
approved nine Foreign Direct Investments (FDIs) worth Rs
5,000 crore (US$ 779.83 million), that includes Amazon
India's Rs 3,500 crore (US$ 545.88 million) proposed
investment.
• India and Japan have joined hands for infrastructure
development in India's north-eastern states and are also
setting up an India-Japan Coordination Forum for
Development of North East to undertake strategic
infrastructure projects in the northeast.
• The Government of India is in talks with stakeholders to
further ease foreign direct investment (FDI) in defence under
the automatic route to 51 per cent from the current 49 per
cent, in order to give a boost to the Make in India initiative and
to generate employment.
 Contd.
• ADB will increase its investment to upto US$ 5 billion for development along
the East Coast Economic Corridor (ECEC) over the next five years.
• The Central Board of Direct Taxes (CBDT) has exempted employee stock
options (ESOPs), foreign direct investment (FDI) and court-approved
transactions from the long term capital gains (LTCG) tax, under the Finance
Act 2017.
• The Union Cabinet has approved raising of bonds worth Rs 2,360 crore
(US$ 365.63 million) by the Indian Renewable Energy Development Agency
(IREDA), which will be used in various renewable energy projects in FY
2017-18.
• The Government of India is likely to allow 100 per cent foreign direct
investment (FDI) in cash and ATM management companies, since they are
not required to comply with the Private Securities Agencies Regulations Act
(PSARA).
• The World Bank has stated that private investments in India is expected to
grow by 8.8 per cent in FY 2018-19 to overtake private consumption growth
of 7.4 per cent, and thereby drive the growth in India's gross domestic
product (GDP) in FY 2018-19.
FDI
 Findings of S P Kothari on FDI in India(2014)

• In the last 10 years, Mexico has attracted $247 billion of FDI net inflows and
China $2 trillion, compared to India's $229 billion
• On a per-capita basis, FDI net inflows for Mexico, China and India are $2,017,
$1,531 and $183, respectively. No wonder the per-capita GDP of Mexico is
$10,300, China $6,800 and India $1,500.
• Each 1% increase in FDI adds about 0.4% to a country's GDP growth. So, to
boost GDP growth by about 2%, India will need FDI of about 5% of GDP. Put
another way, at the current level of GDP of almost $2 trillion in India, about $100
billion of FDI is required to boost GDP growth by 2%.
• Mexico and China. For the last 10 years, global FDI net inflows have totalled
nearly $15 trillion, and even countries with populations that are fractions of
India's are making noticeable contributions to that figure. Brazil, with a
population less than a fifth of India's, has seen $461 billion in FDI net inflows in
the last decade, while Turkey, nearly one-20th India's size, has seen $135 billion
in FDI.
 Contd
• On a per-capita basis, FDI net inflows for
Mexico, China and India are $2,017,
$1,531 and $183, respectively. When the
per-capita GDP of Mexico is $10,300,
China $6,800 and India $1,500.
 Last Previous Highest Lowest
Australia 64825.00 Dec/16 29636 64825 -37050 AUD Million Yearly
Brazil 5138.00 Aug/17 4132 20427 -24.1 USD Million Monthly
Canada 223.00 Jun/17 11576 50326 -8640 CAD Million Quarterly
China 940.13 Sep/17 815 1263 18.32 USD HML Monthly
France 2936.00 Aug/17 3608 20881 -8809 EUR Million Monthly
Germany 2938.46 Jul/17 8531 141352 -32190 EUR Million Monthly
India 8579.00 Aug/17 3409 8579 -60 USD Million Monthly
Indonesia 109.90 Jun/17 97 110 35.4 IDR Trillion Quarterly
Italy 504.00 Jul/17 3189 14203 -10787 EUR Million Monthly
Japan 5927.00 Aug/17 11811 45202 -3825 JPY Hundreds Monthly
Million
Mexico 5621.30 Jun/17 10024 20840 -63.9 USD Million Quarterly
Netherlands 84137.00 Mar/17 -23238 189388 -100540 EUR Million Quarterly
Russia 4646.00 Mar/17 20723 40140 -3922 USD Million Quarterly
South Korea 3991000.0 Sep/17 5745000 7638784 0 USD Thousand Quarterly
Spain 1197.00 Jul/17 1732 23250 -9566 EUR Million Monthly
Switzerland 833192.60 Dec/15 770570 833193 20959 CHF Million Yearly
Turkey 12300.00 Dec/16 16800 22046 1800 USD Million Yearly
United Kingdom 7430.00 Jun/17 13118 89855 -44536 GBP Million Quarterly
United States 46199.00 Jun/17 38357 47465 -9988 USD Million Quarterly