International Business Unit 5 BBM Notes

1. INTERNATIONAL BUSINESS
BBM – 6th Semester
University of Mysore
SYLLABUS – UNIT 5:
Foreign Direct Investments in India, Trends
and Government Policy towards FDI

2. International Business – Unit 5
Foreign Direct Investments in India,
Foreign Direct Investments in India is a attractive
destination for foreign investors. FDI means foreign direct
investments cross border investments. India opened FDI in
retail sector for the Multi Brand Retail Segment for the
Global Retail Leaders like the Wal-Mart, Carrefour and so
on. India is a attractive destination for these Multi Brand
Retail Segment as the present Indian Retail Market is about
28 Billion Dollars and is expected to reach about 260
Billion Dollars by 2020. Hence India is an very attractive
destination for FDIs.

3. Policies towards Foreign Capital in India: In the economic policy of
1991, a list of industries in which Foreign Direct Investment would
be automatically allowed up to 51 percent (Foreign Equity).
• These industries ranged from the capital goods and metallurgical
sector to the entertainment, electronic, food processing and service
sectors with significant export potential. Hotels and tourist-related
areas were also allowed foreign equity holdings by international
trading companies of up to 51 percent.
• In order to accelerate the progress of the power sector, 100 per cent
foreign equity participation was allowed for setting up power plants.
Such equity participation allowed free repatriation of profits and
other incentives.

4. International Business – Unit 5
Foreign Direct Investments in India (FDI in India)
is the major monetary source for economic
development in India. Foreign companies invest
in India to take benefits of cheaper wages and
changing business environment of India.
Economic liberalization started in India in wake
of the 1991 economic crisis and since then FDI has
steadily increased in India. According to
the Financial Times, in 2015 India
overtook China and the US as the top destination for
the Foreign Direct Investment.

5. International Business – Unit 5
Foreign Direct Investments in India, Trends and
Government Policy towards FDI
• 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 enters by two ways:
• Government of India Route: Here the Foreign Investors,
obtains prior approval from the Government of India Board –
FOREIGN INVESTMENT PROMOTION BOARD (FIPB).
• Automatic Route: Here the Foreign Investors are permitted to
enter the territory without the approval from the Government
of India or Reserve Bank of India.

6. International Business – Unit 5
• Present FDI Policy in India: The Government of
India amended the FDI policy to increase the FDI
inflow.
• INSURANCE SECTOR: In 2014, the limit was revised from
26% to 49% in the INSURANCE SECTOR.
• MAKE IN INDIA: In September 2014, the Government of
India Launched the MAKE IN INDIA, FDI policies were
liberalized for 25 sectors, giving a increase of 48%, which
made India a top destination for Foreign Direct Investment.
Earlier in 2013, India ranked in the 15th position.

7. International Business – Unit 5
Foreign Direct Investments in India, Trends and
Government Policy towards FDI
The impact of Make in India in Foreign Direct Investment:
• In 2013, India ranked in 15th Position in the world.
• In 2014, India ranked to 9th Position in the world, and
• In 2015, India became the top destination for Foreign
Direct Investments.

8. International Business – Unit 5
Foreign Direct Investments in India, Trends and
Government Policy towards FDI
FDI Investors in India and their sectors:
• Most of the FDI were from Mauritius, Singapore,
Netherlands, Japan and the US. And the sectors
included as follows:
Infrastructure, Automotive, Pharmaceuticals,
Service Sector, Railways, Chemicals, Textile, and
so on

9. International Business – Unit 5
Foreign Direct Investments in India, Trends and
Government Policy towards FDI
• FDI Investors in India and their sectors: Most of
the FDI were from Mauritius, Singapore,
Netherlands, Japan and the US. And the sectors
included as follows:
 Infrastructure, (100% FDI by Automatic Route, for
constructions of Cities and Towns)

10. International Business – Unit 5
Foreign Direct Investments in India, Trends and
Government Policy towards FDI
• FDI Investors in India and their sectors: Most of
the FDI were from Mauritius, Singapore,
Netherlands, Japan and the US. And the sectors
included as follows:
• Automotive, (India is the 7th largest producers of
vehicles, and Automobiles shares 7% of India’s GDP
– 100% FDI in Automobile sector increased by 89%)

11. International Business – Unit 5
Foreign Direct Investments in India, Trends and
Government Policy towards FDI
• FDI Investors in India and their sectors: Most of
the FDI were from Mauritius, Singapore,
Netherlands, Japan and the US. And the sectors
included as follows:
• Pharmaceuticals: (100% FDI is permitted, and is
expected to grow at 20% compound growth. Indian
Pharmaceutical Market is the 3rd largest in terms of
volume and 13th largest in terms of value)

12. International Business – Unit 5
Foreign Direct Investments in India, Trends and
Government Policy towards FDI
• FDI Investors in India and their sectors: Most of
the FDI were from Mauritius, Singapore,
Netherlands, Japan and the US. And the sectors
included as follows:
• Service Sector: The FDI slab is increased from 26%
to 49% in Banking, Insurance and Outsourcing
sectors, R & D, Courier, Logistics and Technology
Testing)

13. International Business – Unit 5
Foreign Direct Investments in India, Trends and
Government Policy towards FDI
• FDI Investors in India and their sectors: Most of
the FDI were from Mauritius, Singapore,
Netherlands, Japan and the US. And the sectors
included as follows:
• Railways: (100% FDI is permitted through the automatic
route for development of Railways like Speed Trains
(BULLET Trains), Mass Rapid Transport Systems, Railway
Electrification) – The MUMBAI-HYDERABAD HIGH
SPEED CORRIDOR is the single largest railway project in
India.

14. International Business – Unit 5
Foreign Direct Investments in India, Trends and
Government Policy towards FDI
• FDI Investors in India and their sectors: Most of
the FDI were from Mauritius, Singapore,
Netherlands, Japan and the US. And the sectors
included as follows:
• Chemicals: (FDI is allowed by Automatic Route in
Chemical Industry and from the present 2.8% in 2013
is expected to go to 6% to 7% in 2023)

15. International Business – Unit 5
Foreign Direct Investments in India, Trends and
Government Policy towards FDI
• FDI Investors in India and their sectors: Most of
the FDI were from Mauritius, Singapore,
Netherlands, Japan and the US. And the sectors
included as follows:
• Textile: (100% FDI is allowed under the automatic
route, and FDI has increased by 91% in the textile
Industry – Textile contributes 11% of India’s total
exports).

16. International Business – Unit 5
Foreign Direct Investments in India, Trends and Government Policy
towards FDI
• RETAIL MARKET IN INDIA: - Conditions to enter
Indian Market: Indian Retail Sector is the fastest and most attractive
destinations for the FDIs to manufacture and sell the products in India.
There are several conditions for the foreign companies to enter the Indian
Market, these include:
• Amount of Investments: Any foreign company willing to enter Indian
Retail Market need to invest at least 100 Million Dollars.
• Place for opening stores: Any foreign company willing to invest in India
must open their stores in cities where the population must be at least 1
Million or More.
• Other conditions on investments: Any foreign company willing to enter
Indian Market need to invest at least 50% on ‘Back End Infrastructure like
Warehousing, and need to obtain permission from state governments where
they want to establish their chains.

17. International Business – Unit 5
Foreign Direct Investments in India, Trends and
Government Policy towards FDI
Advantages of Foreign Direct Investments:
• More Consumer Savings, (At least 5% to 10% Savings)
• Higher Quality at a lower price, (Value for Money)
• Higher Remuneration for farmers and producers, (20% to
30% increase of income)
• Increase in Employment Opportunities (New jobs in Labor,
Logistics, Transport and so on)
• Increase in Government Revenue (Direct and Indirect Taxes)
and so on..

18. International Business – Unit 5
Foreign Direct Investments in India, Trends and
Government Policy towards FDI
• Disadvantages for Foreign Direct Investments:
• Destruction of small entrepreneurs: (Small outlets may not
be able to compete with the large outlets)
• Shrinking of Jobs: (Large FDIs when they come, they will
engage labor who will start working in an organized
environment instead of un-organized environment – NO
MUCH CHANGE – More exploitation may take place)
• No real benefit for farmers: (The farmers would be
demanded more crop output and if not supplied they will be
exploited, violation of contract)

19. International Business Environment
Please revert with your valuable suggestions, and most
important is also complaints therefore the same can be
delivered even better,:
SANJEEV KUMAR SINGH
+91 91640 76660
harsubhmys@yahoo.co.in