Description
Foreign direct investment(FDI) in all over the world in general and in India in particular after the opening up of our market with the adoption of the policies namely globalization, privatization and liberalization has no doubt emerged as one of the most significant source and contributor of external inflow of resources and is one of the most crucial contributors to the capital formation despite their share in the world arena still catching up.
FOREIGN DIRECT INVESTMENT AND ITS GROWTH IN INDIA
ABSTRACT
Foreign direct investment(FDI) in all over the world in general and in India in particular after the
opening up of our market with the adoption of the policies namely globalization, privatization and
liberalization has no doubt emerged as one of the most significant source and contributor of external
inflow of resources and is one of the most crucial contributors to the capital formation despite their share
in the world arena still catching up !hen we talk about the term FDI we are talking about a bundle of
resources that usually flow into a country including besides capital, production technology, global
managerial skills, innovative marketing strategies and access to new markets
In this pro"ect it has been tried to provide a comprehensive picture about the foreign direct
investment ranging from its conception as a potent source of investment the world over, its various
types, the methodology adopted top FDI countries and agencies engaged and other important aspects
# cumulative and an exhaustive study of the over all scenario of FDI in India starting from the
introduction of FDI in the country, share of top investing countries, sectors attracting highest FDI flows,
sector wise technology transfer and approvals
!e will also look at the determinants for attracting FDI in the country and also the causes for
low flow of FDI and the mechanisms that can be undertaken to make our country attractive enough for
investors $his study entirely relies on secondary data collected after a thorough and exhaustive study of
various websites, text books, "ournals, newspapers, magazines and great inputs form various professors
and professionals specializing In this area
$hough the policy is reviewed fre%uently we lack when compared with countries like china, so
it&s high time the government takes steps to further liberalize the economy and streamline and liberalize
the policies to make India the most preferred FDI destination in the world
ACKNOWLEDGEMENT
I take this opportunity to thank all those who have been of help to me in the completion of this pro"ect
I would like to appreciate the guidance and co'operation provided to me by our pro"ect guide (r )
***** (faculty of +usiness (anagement) in the completion of this pro"ect
I am also grateful to ****, Director *** and all the faculty members who have directly or indirectly
helped me in preparing this pro"ect report
TABLE OF CONTENTS:
1. LIST OF TABLES
2. LIST OF FIGURES
3. INTRODUCTION
4. REVIEW OF LITERATURE
5. DATA ANALYSIS AND PRESENTATION
6. SUMMARY AND CONCLUSION
7. BIBLOGRAPY
OB!ECTIVES
, T" #$%&' $() $*)+&# ,+ $() ,+-."/ "- -"*),0+ &,*)1$ ,+2)#$3)+$
- T" #$%&' $() #(4*) "- $"5 ,+2)#$,+0 1"%+$*,)# "- FDI &%*,+0 $() 5)*,"& 266372666.
. T() #)1$"* 4$$*41$,+0 (,0()#$ FDI )8%,$' ,+-."/
/ F"*),0+ $)1(+"."0' $*4+#-)*
0 C"%+$*' /,#) $)1(+"."0' $*4+#-)*
1 C"%+$*' /,#) $)1(+"."0' $*4+#-)* 455*"24.#
2 S)1$"* /,#) $)1(+"."0' $*4+#-)* 455*"24.#
3 T" #$%&' $() 14%#)# 4+& *)4#"+# -"* ."/ FDI ,+-."/ ,+ $() 1"%+$*'
4 T" #$%&' $() &)$)*3,+4+$# -"* 4$$*41$,+0 $() FDI
,5 T" #$%&' 4+& %+&)*#$4+& 3)1(4+,#3 "- 455*"24.# "- FDI 9' RBI 4+& FIPB
,, T" #$%&' $() FDI 5".,1' ,+ 9*,)-.
METODOLOGY:
$his pro"ect is entirely based on freelance work done by the student and therefore no
organisation has been taken as a base for doing the pro"ect #6 exhaustive amount of data
available on the internet, from the text books, news papers, and various magazines and
suggestions from a few experts in the field has been taken in doing this pro"ect
#s this is a free lance pro"ect, the data has been entirely collected from secondary sources and
therefore its authenticity can be vouched for only by going through the same literature which has
been used
SCOPE OF TE STUDY
as this study is aimed to analyze the trends in the FDI inflows, the main focus is given on the
recent trends in the inward FDI inflows, sectors attracting highest FDI, and the share of top
investing countries, it covers only e%uity capital components $he scope is limited to the
availability of the secondary data
LIMITATIONS OF TE STUDY
the study is conducted in a short period, which was not detailed in all aspects
6on'availability of accurate data to FDI
Data in one secondary source do not match with that of another source
FOREIGN DIRECT INVESTMENT
INTRODUCTION:
Foreign direct investment (FDI) is defined as 7investment made to ac%uire lasting interest in enterprises
operating outside of the economy of the investor7 $he FDI relationship consists of a parent enterprise
and a foreign affiliate which together form a (ultinational corporation ((68) In order to %ualify as
FDI the investment must afford the parent enterprise control over its foreign affiliate $he 96 defines
control in this case as owning ,5: or more of the ordinary shares or voting power of an incorporated
firm or its e%uivalent for an unincorporated firm; lower ownership shares are known as portfolio
investment
ISTORY:
In the years after the asily compared to that of
the oil producers, whom may not need the oil at present, but look to prevent their competitors
from having it
OPPOSITION:
$he late ,415s and early ,425s foreign direct investment became increasingly politicized
=rganized labor, convinced that foreign investment exported "obs, undertook a ma"or campaign
to reform the tax provisions which affected foreign direct investment $he Foreign $rade and
Investment #ct of ,42. (or the +urke'Fartke +ill) would have eliminated both the tax credit
and tax deferral $he 6ixon #dministration, influential members of 8ongress of both parties,
and well'financed lobbying organizations came to the defense of the multinational $he
massive counterattack of the multinational corporations and their allies defeated this first ma"or
challenge to their interests
L,#$ "- 1"%+$*,)# 9' *)1),2)& FDI:
$his is a .,#$ "- 1"%+$*,)# 9' FDI in -551 mostly based on 8I# fact book accessed in Ganuary
-553
, 9nited states
- 9nited kingdom
. Fong kong
/ ?ermany
0 8hina
1 France
2 +elgium
3 6etherlands
4 ven when the foreign firms enter the host country&s market
they could face certain restrictions on their operations such as restrictions on employing
key foreign personnel and performance re%uirements such as sourcing or local content
re%uirements, training re%uirements and export targets
$he best example is the erstwhile Indian economy which followed the license
permit ra" before embarking upon economic reforms +ut the whole scenario of controlling
the economy in most of the developing nations has been done away with, in most of the
countries and they have seriously embarked upon many liberal measures like %uick
licensing, many tax incentives and so on which have changed the economic scenario of
many a nations
FACTORS TAT DISCOURAGE FDI:
8ountry experiences indicate that while favorable economic environment and regulatory or
policy framework help induce foreign direct investment flows, there are a number of forces
that tend to discourage such flows
(any developing countries have, during the past decade or so, begun liberalizing their
national policies to establish a hospitable regulatory framework for foreign direct
investment by relaxing rules regarding market entry and foreign ownership, improving the
standards of treatment accorded to foreign firms and improving the functioning of markets
$hese core policies are important because FDI will not take place where it is forbidden or
strongly impeded Fowever, changes in policies have an asymmetric effect on the location
of foreign direct investment, changes in the direction of greater openness allows firms to
establish themselves in a particular location In contrast, changes in the direction of less
openness will ensure a reduction in foreign direct investment (968$#D, ,443)
$he regulatory restrictions including tariffs, %uotas tend to discourage cross'border
ac%uisitions by multinational enterprises 8ountries that impose restrictions on foreign
entry and ownership and foreign transactions, as well as discriminatory tax provisions, tend
to hamper foreign direct investment flows For example, in Lenya, foreign investors face
multiple licensing re%uirements and high withholding taxes on royalties, and foreign direct
investment remained less than 5- percent of ?D@ #lso, in Bemen where sizeable outflows
of FDI have been recorded since the mid ,445&s, licensing re%uirements discouraged new
investments, despite incentives like tax holidays and customs exemptions
A COMPREENSIVE STUDY.
INTRODUCTION:
TI(> CI6> =F $F> >8=6=(B =F I6DI#E
Pre-colonial period
0 +8
• -1 billion? 122@ e&ports target, >A2 billion, to be /80 of IndiaBs
total e&ports.
Cob• creation, a million direct D 1-/ million indirect
3. HIGHLY COMPETITIVE ENTREPRENEURSHIP:
• Prealence of foreign technology licensing - Ean" - in the world.
• *ailability of scientist and engineers - Ean" 1.
• Fuality of management schools - Ean" ..
9irm• leel innoation - Ean" -1.
9irm• leel technology absorption - Ean" -A.
• 5ompany spending on ED4 - Ean" /1. 3Source, Global 5ompetitieness
Eeport, 122/6
• India amongst the leading entrepreneurial hotbeds globally. 3Red Herring
clubs India with Israel
4. GREAT MACRO-ECONOMIC SHOW:
• India among worldBs fastest growing economies.
(Graph on top left shows Indian GDP growth since 1996-97).
• *erage G4P 3gross domestic product6 growth of 8.40 during the .th 9ie-
Hear Plan 3-..I-12216.
• %&ports registered growth of oer -.0 in 1221-2/.
• 9oreign e&change reseres at an all-time high of oer >.2 billion.
• Increase in fore& during the (scal year in 1221-2/, >12 billion.
• IndiaBs economic growth is sustained.
The• nationBs G4P is e&pected to grow by oer I.2 0 this year.
5. EASY INDUSTRIAL LICENSING POLICY:
+nder the Industries 34eelopment D Eegulation6 *ct, -.8-, industrial
license is needed only for items,
• 9alling under the list of compulsory licensing. Eesered for small-scale
sector. If location attracts restriction.
*ll• industries e&empt from industrial licensing re:uired to (le an Industrial
%ntrepreneur 7emorandum.
$o• approal is re:uired? -1• billion Jighways 4eelopment Programme. 11 billion.
• 7a)or adances in telecommunications sector. 'andwidths of terabit
aailable. Sharp decline in telecommunications costs.
• 9oreign Inestment Implementation *uthority helps sole foreign inestorsB
problems. It meets periodically with inestors to sort out operational
diNculties and facilitates implementation.
*n• %mpowered Sub-5ommittee of the $ational 4eelopment 5ouncil set up
on creating an inestor friendly climate and remoing regulatory barriers to
inestments.
• 7odernization of legislations on intellectual property. *ll IPE Laws are TEIPS
compliant. Intellectual Property *ppellate Tribunal functional.
• Simpli(cation and re-engineering of wor" procedures.
7ore• information on www.ipindia.com
10. BOOMING SECTORS 1 OPPORTUNITIES GALORE:
• R,(&2: 5apacity enhancement of highways. I222 "ms of $ational
Jighways being o;ered during the current year. 7any more opportunities in
the States. xchange Oegulation #ct, ,4/2, was enacted as a temporary measure and later
placed permanently in the year ,402 #t that time the limited ob"ective of the #ct was to regulate
the inflow of foreign capital in the form of branches and concerns with the substantial non'
resident interest, and the the employment of foreigners $he country attained freedom in ,4/2,
after two centuries of foreign rule and protracted freedom struggle stretched over decades $he
prevailing mood then was one of preserving and consolidating the freedom and not to permit
once again any type of foreign domination, political or economic Initial approach on foreign
capital was negative to a not'interested attitude @rime (inister explained that 7the stress on the
need to regulate, in the national interest, the scope and manner of foreign capital and control (as
per the Industrial @olicy xports were not picking up and imports were
surging, putting the country to severe balance of trade and balance of payment crisis $his in trn
led to the need to tap the donors or Foreign #id ?ivers
$his background induced the ?overnment of India to re'focus the F>O# act with the main aim
of conservation of foreign exchange rather than regulation of entry of foreign capital $he
Foreign >xchange Oegulation #ct, ,42., (hereinafter referred to as F>O#) was drafted with the
ob"ect of introducing the changes felt necessary for the effective implementation of the
?overnment policy and removing the difficulties faced in the working of the previous enactment
F>O# is crisis'driven regulation and naturally it contained several draconian provisions #ny
offence under F>O# was a criminal offence liable for imprisonment
Fowever in the early 6ineties due to the ma"or changes in Indian economy and liberalization of
industrial and trade policies, consistent with the fast changing international economic and trade
relations the need for a more conducive climate for increased inflow of foreign investment and
capital in the country to accelerate industrial growth and promotion of trade (especially exports)
was felt In order to remove the special restrictions in respect of companies registered in India
and to simplify the regulations in regard to foreign investment to attract better flow of foreign
capital and investment was paramount $he #mending #ct -4 of ,44. was enacted in order to
remove unnecessary restrictions and simplify procedure $hereby certain provisions dealing with
emergencies of different kinds, which were no longer relevant, were removed for improving the
climate for investment in India
FOREIGN E=CANGE MANAGEMENT ACT71???
#s the crisis of foreign exchange melted once for all and the country came to be endowed with
sizeable reserves of foreign exchange, the basic aim of foreign exchange policy shifted from one
of control and conservation to that of effective management, to facilitate external tradeQpayment
and promote the orderly development and maintenance of the forex market in India $he #ct was
thoroughly revised and replaced by the by the Foreign >xchange (anagement #ct, ,444 $he
latter has dropped many of the stringent provisions of the older #ct, in the area of transactions
involving foreign exchange $he F>(# ,444 took effect from Gune ,, -555
$o investigate due adherence to the provisions of the #ct by the market participants, the 8entral
?ovt have established the Directorate of >nforcement with a Director and other officers as
officers of the >nforcement $his #ct extends to the whole of India and will also apply to all
branches, offices and agencies outside India owned or controlled by a person resident in India It
will also be applicable to any contravention committed outside India by any person to whom this
#ct is applicable
INVESTMENT PROMOTION AND FACILITATION:
$he ministry of Finance, ministry of corporate affairs and the ministry of commerce and
industries are the most important ministries which with the help of Oeserve bank of India look
after the foreign direct investment operations in the country $hese ministries have an elaborate
set of institutions and agencies to facilitate the flow of foreign direct investment into the country
and remove the procedural bottlenecks if any that would take place in the promotion of foreign
direct investment
SECRETARIAT FOR INDUSTRIAL ASSISTANCE:
ntrepreneurial assistance, investor facilitation, receiving and processing all applications which
re%uire ?overnment approval, conveying ?overnment decisions on applications filed, assisting
entrepreneurs and investors in setting up pro"ects, (including liaison with other organizations and
=9s, >F$@, uro'e%uityQforeign currency convertible bonds policy
(b) Foreign Institutional Investors @ortfolio Investment @olicy
(c) Investment policy for 6on'Oesident Indian
(d) @olicy governing opening up of branchQliaisonQpro"ect office by the foreign companies
and coordination in respect of individual proposals referred to ?overnment by O+I
(atters related to Indian Investment 8entre, an autonomous body under the (inistry of
Finance
FOREIGN DIRECT INVESTMENT POLICY:
$he government of India has recently undertaken a comprehensive review of the FDI policy
and associated procedures #s a result, a number of rationalization measures like dispensing
with the need of multiple approvals from ?overnment andQor regulatory agencies that exist in
certain sectors, extending the automatic route to more sectors, and allowing FDI in new
sectors
#s per the extant policy, FDI up to ,55: is allowed, under the automatic route in most
sectorsQ activities FDI under the automatic route does not re%uires prior approval either by
the government or the reserve bank of India Investors are only re%uired to notify the
concerned Oegional office of O+I within .5 days of issue of shares to foreign investors
9nder the ?overnment approval route, applications for FDI proposals, other than by 6on'
Oesident Indians, and proposals for FDI in Jconomic #ffairs, (inistry of Finance @roposals for FDI in Jconomic affairs for further processing
/ Foreign investment proposals received in the D># are placed before the Foreign
Investment @romotion +oard (FI@+) within ,0 days of receipt
$he decision of the government in all the cases is usually conveyed by the D># within .5
days
R)#)*2) B4+A O- I+&,4B# 0)+)*4. 5)*3,##,"+ %+&)* FEMA< RBI looks after granting of
general permission under the Foreign >xchange (anagement #ct in respect of proposals
approved by the government, Indian companies getting foreign investment approval through
FI@+ route do not re%uire any further clearance from O+I for the purpose of receiving inward
remittances and issue of shares to the foreign investors $he companies are, however re%uired to
notify the Oegional office concerned of the O+I of receipt of inward remittances within .5 days
of such receipt and to file the re%uired documents with the concerned Oegional offices of the O+I
within .5 days after issue to the foreign investors or 6OIs
+esides new companies, automatic route for FDIQ6OI investment if also available to the
existing companies proposing to induct foreign e%uity For existing companies with an expansion
programme, the additional re%uirements are as underE
, $he increase in e%uity level resulting from the expansion of the e%uity base of the
existing company without the ac%uisition of existing shares by 6OIQforign investors
- $he money to be remitted should be in foreign currency and
. @roposed expansion programme should be in the sectors under the automatic route
=therwise, the proposal would need ?overnment approval through the FI@+ For this a
board Oesolution of the existing Indian company must suppost the proposal
For companies already existing without an expansion programme, the additional re%uirements
for eligibility for automatic approval areE
$hat they are engaged in the industries under automatic route
$he increase in e%uity level must be from expansion of the e%uity base and the foreign e%uity
must be in foreign currency
$he earlier +I regulation that was applicable to public limited companies, that shares allotted
on preferential basis shall not be transferable in any manner for a period of 0 years from the date
of their allotment has now been modified to the extent that not more than -5 percent of the entire
contribution brought in by the promoter cumulatively in public or preferential issues shall be
locked in e%uity participation by international financial institutions such as #D+, IF8, 8D8,
D>? etc in the domestic companies is permitted through automatic route sub"ect to +IQO+I
regulations and sector specific cap on FDI
AMERICAN DEPOSITORY RECEIPTS OR GLOBAL DEPOSITORY RECEIPTS
:ADRCGDR;:
#n Indian corporate can raise foreign currency resources abroad through the issue of #merican
Depository Oeceipts (#DOs) or ?lobal Depository Oeceipts (?DOs) by issuing its Oupee
denominated shares to a person resident outside India being a depository for the purpose of
issuing ?lobal Depository Oeceipts (?DOs) andQ or #merican Depository Oeceipts (#DOs),
sub"ect to the conditions thatE
#) $he #DOsQ?DOs are issued in accordance with the (, an acknowledgement containing the ( is sent by post, the acknowledgement is sent by post P no
further approval is re%uired
#n I>( would stand cancelled if the proposal re%uires compulsory license
9pon commencement of commercial production, Industrial undertakings need to file information
in @art R+& of the I>( to @OP8 nvironment P Forests under $he >nvironment (@rotection) #ct, ,431 $his
list includes petrochemical complexes, petroleum refineries, cement, thermal power plants, bulk
drugs, fertilizers, dyes, paper, etc
Fowever, if investment in the pro"ect is less than Os , billion, such >nvironmental clearance is
not necessary, except in cases of pesticides, bulk drugs and pharmaceuticals, asbestos and
asbestos products, integrated paint complexes, mining pro"ects, tourism pro"ects of certain
parameters, tarred roads in Fimalayan areas, distilleries, dyes, foundries and electroplating
industries
nvironment and Forests
Details can be obtained at the website of (inistry of >nvironment and Forests
(httpEQQenvfornicin )
FOREIGN TECNOLOGY AGREEMENTS
G)+)*4. P".,1':
For promoting technological capability and competitiveness of the Indian industry, ac%uisition of
foreign technology is encouraged through foreign technology collaboration agreements
Induction of know'how through such collaborations is permitted either through automatic route
or with prior ?overnment approval
S1"5) "- T)1(+"."0' C"..49"*4$,"+:
$he terms of payment under foreign technology collaboration, which are eligible for approval
through the automatic route and by the ?overnment approval route, includes technical know how
fees, payment for design and drawing, payment for engineering service and royalty
@ayments for hiring of foreign technicians, deputation of Indian technicians abroad, and testing
of indigenous raw material, products, and indigenously developed technology in foreign
countries are governed by separate O+I procedures and rules pertaining to current account
transactions and are not covered by the foreign technology collaboration approval For details
please refer to the website of the O+I
A%$"34$,1 R"%$):
@ayments for foreign technology collaboration by Indian companies are allowed under the
automatic route sub"ect to the following limitsE
(i) $he lump sum payments not exceeding 9stablishment in India of +ranch =ffice of other place of business) Oegulations, -555
I+1"*5"*4$,"+ "- C"354+':
For registration and incorporation, an application has to be filed with Oegistrar of 8ompanies
(O=8) =nce a company has been duly registered and incorporatedas an Indian company, it is
sub"ect to Indian laws and regulations as applicable toother domestic Indian companies
For details please visit the website of (inistry of 8ompany #ffairs athttpEQQdcanicin
L,4,#"+ O--,1)CR)5*)#)+$4$,2) O--,1):
$he role of liaison office is limited to collecting information about possible market
opportunities and providing information about the company and its products to prospective
Indian customers It can promote exportQimport fromQto India and also facilitate
technicalQfinancial collaboration between parent company andcompanies in India Ciaison office
can not undertake any commercial activitydirectly or indirectly and can not, therefore, earn any
income in India #ll expenses of Ciasion offices have to be met by inward remittances #pproval
for establishing a liaison office in India is granted by Oeserve +ank of India (O+I)
P*"E)1$ O--,1):
Foreign 8ompanies planning to execute specific pro"ects in India can set up temporary
pro"ectQsite offices in India O+I has now granted general permission to foreign entities to
establish @ro"ect =ffices sub"ect to specified conditions xchange 8ontrol Department(ForeignInvestment Division), O+I
8entral =ffice, (umbai'/5555,, in form F68 , (available at O+I website at wwwrbiorgin )
E=CANGE CONTROL
F"*),0+ ED1(4+0) M4+40)3)+$ A1$:
$he Oeserve +ank of India&s >xchange 8ontrol Department, administers Foreign >xchange
(anagement #ct, ,444, (F>(#)
R)54$*,4$,"+ "- I+2)#$3)+$ C45,$4. 4+& P*"-,$# E4*+)& ,+ I+&,4:
(i) #ll foreign investments are freely repatriable, sub"ect to sectoral policies and except for cases
where 6OIs choose to invest specifically under non'repatriable schemes Dividends declared on
foreign investments can be remitted freely through an #uthorized Dealer
(ii) 6on'residents can sell shares on stock exchange without prior approval of O+I and repatriate
through a bank the sale proceeds if they hold the shares on repatriation basis and if they have
necessary 6=8Qtax clearance certificate issued by Income $ax authorities
(iii) For sale of shares through private arrangements, Oegional offices of O+I grant permission
for recognized units of foreign e%uity in Indian company in terms of guidelines indicated in
Oegulation ,5+ of 6otification 6o F>(#-5Q-555 O+ dated (ay R-555 $he sale price of
shares on recognized units is to be determined in accordance with the guidelines prescribed
under Oegulation ,5+ (-) of the above 6otification
(iv) @rofits, dividends, etc,(which are remittances classified as current account transactions) can
be freely repatriated
C%**)+$ A11"%+$ T*4+#41$,"+#
8urrent account transactions are regulated under the Foreign >xchange (anagement (8urrent
#ccount $ransactions) Oules -555 X 6o ?),dated .0-555U @rior approval of the
O+I is re%uired for ac%uiring foreign currency above specified limits for the following purposesE
a Foliday travel over 9ndowment Foundations, 8haritable $rusts and 8haritable =9 scheme
If the 9nit is amenable to bonding by customs authorities; conversion of existing Domestic
$ariff #rea (D$#) units into >=9 is also permitted under automatic route, if the D$# unit
satisfies the parameters in @ara 3, In case there is an outstanding export commitment under
the >@8? scheme, it will be subsumed in the export performance of the unit If the unit is
having outstanding export commitment under the #dvance Cicensing 0urrent 'ffairs TB 0hannel
issue# $.
/inistr. of
Information >
7roa#casting
***.mi$.nic.in
8 cigars >cigarettes
manufacture.
##2 6I17 (u$-ect to in#ustrial
license un#er the
In#ustries
(
Regulation) 'ct, 1?!1
1N 2 3 "004
Coal 5 &ignite mining
for capti%e consumption
$. po*er pro-ects, an#
iron > steel, cement
pro#uction an# other
eligi$le acti%ities
permitte# un#er the
0oal /ines
(Nationalisation) 'ct,
1?8&.
##2 'utomatic (u$-ect to pro%isions of
0oal /ines
(Nationali)ation) 'ct,
1?8&
***.coal.nic.in
1N 2 3 "004
Coffee 5 Ru%%er processing
5 *arehousing
##2 'utomatic 1N 2 3 "004
Construction /evelopment
projects= inclu#ing housing,
commercial premises, resorts,
e#ucational institutions,
recreational facilities, cit. an#
regional le%el infrastructure,
to*nships.
##2 'utomatic (u$-ect to con#itions
notifie# %i#e 1ress Note "
("00! (eries) inclu#ing:
1 '. minimum
capitali)ation of A(C 10
million for *holl. o*ne#
su$si#iaries an# A(C !
million for -oint %enture.
The fun#s *oul# ha%e to
$e $rought *ithin six
months of commencement
of $usiness of the
0ompan..
" $. /inimum area to
$e #e%elope# un#er each
pro-ect- in 10 hectares in
case of #e%elopment of
ser%ice# housing plots an#
$uilt up area of !0,000 s:
mts. in case of construction
#e%elopment pro-ect an#
an. of the a$o%e in case of
a com$ination pro-ect.
1N " 3
"00! >
1N " 3
"004
+. Courier services for carr.ing
pac;ages, parcels an# other
items *hich #o not come
*ithin the am$it of the In#ian
1ost Dffice 'ct, 1+?+.
##2 6I17 (u$-ect to existing
la*s an#
exclusion of
acti%it. relating to
#istri$ution of
letters, *hich is
exclusi%el.
reser%e# for the
(tate.
***.in#iapost.go
%.in
1N 2 3
"001
?. /efence production ; precious stonesE
gol#, sil%er an#
minerals.
##2 'utomatic (u$-ect to /ines >
/inerals (
Regulation) 'ct, 1?!8
***.mines.nic.in
1ress Note 1+ (1??+) an#
1ress Note 1 ("00!) are not
applica$le for setting up
100% o*ne# su$si#iaries
in so far as the mining
sector is concerne# su$-ect
to a #eclaration from the
applicant that he has no
existing -oint %enture for the
same area an#3 or the
particular mineral.
1N " 3
"000,
1N & 3
"00!,>
1N 2 3
"004
14. Petroleum 5 Natural @as sector
a. Dther than
Refining an#
inclu#ing mar;et
stu#. an#
formulationE
in%estment3
financingE setting
up infrastructure
for mar;eting in
1etroleum >
Natural ,as
sector.
##2 'utomatic (u$-ect to sectoral
regulations issue# $.
/inistr. of 1etroleum >
Natural ,asE an#
in the case of actual
tra#ing an# mar;eting of
petroleum pro#ucts,
#i%estment of "4%
e:uit. in fa%our of In#ian
partner3pu$lic *ithin !
.ears.
***.petroleum.nic.in
1N 1 3
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1N 2 3
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+. Atock Awapped /)0-4-5)) 304+-5. #
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GRAND TOTA=
(From April 2000 to September 2007)
42/0/145+* )-0/1.5-. $
III. FOREIGN TECNOLOGY TRANSFER:
(From &u!ust *++* to Septem,er -../)
A. NUMBER OF CUMULATIVE FTC APPROVALS:
N5 Of C#m#lative FTC A66rvals
(from august -- to Aeptember %&&,,
9=""<
N5 Of FTC A66rvals D#rin& 422*$21
(from April %&&' to march %&&,$
"
N5 Of FTC A66rvals D#rin& 4221$2.
(from April %&&, to Aeptember %&&,,
3#
B. COUNTRY7WISE TECNOLOGY TRANSFER APPROVALS:
Ran%s C#ntr' N5 f te":ni"al "lla8ratins
a66rved
C wit: Ttal Te":5
A66rvals5
/ >5 S5 A /01-2 445/+
4 German' /0/23 /35++
3 Aa6an .*/ /25+4
) >5 @ .-* /25.-
- Ital' ).) *5/)
* Ot:er C#ntries 40.34 3-5+/
TOTA= OF A==
CO>NTRIES.
10..* /22522
C. SECTORS7WISE TECNOLOGY TRANSFER APPROVALS:
Ran%s Se"tr N5 f Te":ni"al
Clla8ratins A66rved
C Wit: Ttal Te":
A66rvals
/ Ele"tri"al
E
Foreign direct investment(FDI) in all over the world in general and in India in particular after the opening up of our market with the adoption of the policies namely globalization, privatization and liberalization has no doubt emerged as one of the most significant source and contributor of external inflow of resources and is one of the most crucial contributors to the capital formation despite their share in the world arena still catching up.
FOREIGN DIRECT INVESTMENT AND ITS GROWTH IN INDIA
ABSTRACT
Foreign direct investment(FDI) in all over the world in general and in India in particular after the
opening up of our market with the adoption of the policies namely globalization, privatization and
liberalization has no doubt emerged as one of the most significant source and contributor of external
inflow of resources and is one of the most crucial contributors to the capital formation despite their share
in the world arena still catching up !hen we talk about the term FDI we are talking about a bundle of
resources that usually flow into a country including besides capital, production technology, global
managerial skills, innovative marketing strategies and access to new markets
In this pro"ect it has been tried to provide a comprehensive picture about the foreign direct
investment ranging from its conception as a potent source of investment the world over, its various
types, the methodology adopted top FDI countries and agencies engaged and other important aspects
# cumulative and an exhaustive study of the over all scenario of FDI in India starting from the
introduction of FDI in the country, share of top investing countries, sectors attracting highest FDI flows,
sector wise technology transfer and approvals
!e will also look at the determinants for attracting FDI in the country and also the causes for
low flow of FDI and the mechanisms that can be undertaken to make our country attractive enough for
investors $his study entirely relies on secondary data collected after a thorough and exhaustive study of
various websites, text books, "ournals, newspapers, magazines and great inputs form various professors
and professionals specializing In this area
$hough the policy is reviewed fre%uently we lack when compared with countries like china, so
it&s high time the government takes steps to further liberalize the economy and streamline and liberalize
the policies to make India the most preferred FDI destination in the world
ACKNOWLEDGEMENT
I take this opportunity to thank all those who have been of help to me in the completion of this pro"ect
I would like to appreciate the guidance and co'operation provided to me by our pro"ect guide (r )
***** (faculty of +usiness (anagement) in the completion of this pro"ect
I am also grateful to ****, Director *** and all the faculty members who have directly or indirectly
helped me in preparing this pro"ect report
TABLE OF CONTENTS:
1. LIST OF TABLES
2. LIST OF FIGURES
3. INTRODUCTION
4. REVIEW OF LITERATURE
5. DATA ANALYSIS AND PRESENTATION
6. SUMMARY AND CONCLUSION
7. BIBLOGRAPY
OB!ECTIVES
, T" #$%&' $() $*)+&# ,+ $() ,+-."/ "- -"*),0+ &,*)1$ ,+2)#$3)+$
- T" #$%&' $() #(4*) "- $"5 ,+2)#$,+0 1"%+$*,)# "- FDI &%*,+0 $() 5)*,"& 266372666.
. T() #)1$"* 4$$*41$,+0 (,0()#$ FDI )8%,$' ,+-."/
/ F"*),0+ $)1(+"."0' $*4+#-)*
0 C"%+$*' /,#) $)1(+"."0' $*4+#-)*
1 C"%+$*' /,#) $)1(+"."0' $*4+#-)* 455*"24.#
2 S)1$"* /,#) $)1(+"."0' $*4+#-)* 455*"24.#
3 T" #$%&' $() 14%#)# 4+& *)4#"+# -"* ."/ FDI ,+-."/ ,+ $() 1"%+$*'
4 T" #$%&' $() &)$)*3,+4+$# -"* 4$$*41$,+0 $() FDI
,5 T" #$%&' 4+& %+&)*#$4+& 3)1(4+,#3 "- 455*"24.# "- FDI 9' RBI 4+& FIPB
,, T" #$%&' $() FDI 5".,1' ,+ 9*,)-.
METODOLOGY:
$his pro"ect is entirely based on freelance work done by the student and therefore no
organisation has been taken as a base for doing the pro"ect #6 exhaustive amount of data
available on the internet, from the text books, news papers, and various magazines and
suggestions from a few experts in the field has been taken in doing this pro"ect
#s this is a free lance pro"ect, the data has been entirely collected from secondary sources and
therefore its authenticity can be vouched for only by going through the same literature which has
been used
SCOPE OF TE STUDY
as this study is aimed to analyze the trends in the FDI inflows, the main focus is given on the
recent trends in the inward FDI inflows, sectors attracting highest FDI, and the share of top
investing countries, it covers only e%uity capital components $he scope is limited to the
availability of the secondary data
LIMITATIONS OF TE STUDY
the study is conducted in a short period, which was not detailed in all aspects
6on'availability of accurate data to FDI
Data in one secondary source do not match with that of another source
FOREIGN DIRECT INVESTMENT
INTRODUCTION:
Foreign direct investment (FDI) is defined as 7investment made to ac%uire lasting interest in enterprises
operating outside of the economy of the investor7 $he FDI relationship consists of a parent enterprise
and a foreign affiliate which together form a (ultinational corporation ((68) In order to %ualify as
FDI the investment must afford the parent enterprise control over its foreign affiliate $he 96 defines
control in this case as owning ,5: or more of the ordinary shares or voting power of an incorporated
firm or its e%uivalent for an unincorporated firm; lower ownership shares are known as portfolio
investment
ISTORY:
In the years after the asily compared to that of
the oil producers, whom may not need the oil at present, but look to prevent their competitors
from having it
OPPOSITION:
$he late ,415s and early ,425s foreign direct investment became increasingly politicized
=rganized labor, convinced that foreign investment exported "obs, undertook a ma"or campaign
to reform the tax provisions which affected foreign direct investment $he Foreign $rade and
Investment #ct of ,42. (or the +urke'Fartke +ill) would have eliminated both the tax credit
and tax deferral $he 6ixon #dministration, influential members of 8ongress of both parties,
and well'financed lobbying organizations came to the defense of the multinational $he
massive counterattack of the multinational corporations and their allies defeated this first ma"or
challenge to their interests
L,#$ "- 1"%+$*,)# 9' *)1),2)& FDI:
$his is a .,#$ "- 1"%+$*,)# 9' FDI in -551 mostly based on 8I# fact book accessed in Ganuary
-553
, 9nited states
- 9nited kingdom
. Fong kong
/ ?ermany
0 8hina
1 France
2 +elgium
3 6etherlands
4 ven when the foreign firms enter the host country&s market
they could face certain restrictions on their operations such as restrictions on employing
key foreign personnel and performance re%uirements such as sourcing or local content
re%uirements, training re%uirements and export targets
$he best example is the erstwhile Indian economy which followed the license
permit ra" before embarking upon economic reforms +ut the whole scenario of controlling
the economy in most of the developing nations has been done away with, in most of the
countries and they have seriously embarked upon many liberal measures like %uick
licensing, many tax incentives and so on which have changed the economic scenario of
many a nations
FACTORS TAT DISCOURAGE FDI:
8ountry experiences indicate that while favorable economic environment and regulatory or
policy framework help induce foreign direct investment flows, there are a number of forces
that tend to discourage such flows
(any developing countries have, during the past decade or so, begun liberalizing their
national policies to establish a hospitable regulatory framework for foreign direct
investment by relaxing rules regarding market entry and foreign ownership, improving the
standards of treatment accorded to foreign firms and improving the functioning of markets
$hese core policies are important because FDI will not take place where it is forbidden or
strongly impeded Fowever, changes in policies have an asymmetric effect on the location
of foreign direct investment, changes in the direction of greater openness allows firms to
establish themselves in a particular location In contrast, changes in the direction of less
openness will ensure a reduction in foreign direct investment (968$#D, ,443)
$he regulatory restrictions including tariffs, %uotas tend to discourage cross'border
ac%uisitions by multinational enterprises 8ountries that impose restrictions on foreign
entry and ownership and foreign transactions, as well as discriminatory tax provisions, tend
to hamper foreign direct investment flows For example, in Lenya, foreign investors face
multiple licensing re%uirements and high withholding taxes on royalties, and foreign direct
investment remained less than 5- percent of ?D@ #lso, in Bemen where sizeable outflows
of FDI have been recorded since the mid ,445&s, licensing re%uirements discouraged new
investments, despite incentives like tax holidays and customs exemptions
A COMPREENSIVE STUDY.
INTRODUCTION:
TI(> CI6> =F $F> >8=6=(B =F I6DI#E
Pre-colonial period
0 +8
• -1 billion? 122@ e&ports target, >A2 billion, to be /80 of IndiaBs
total e&ports.
Cob• creation, a million direct D 1-/ million indirect
3. HIGHLY COMPETITIVE ENTREPRENEURSHIP:
• Prealence of foreign technology licensing - Ean" - in the world.
• *ailability of scientist and engineers - Ean" 1.
• Fuality of management schools - Ean" ..
9irm• leel innoation - Ean" -1.
9irm• leel technology absorption - Ean" -A.
• 5ompany spending on ED4 - Ean" /1. 3Source, Global 5ompetitieness
Eeport, 122/6
• India amongst the leading entrepreneurial hotbeds globally. 3Red Herring
clubs India with Israel
4. GREAT MACRO-ECONOMIC SHOW:
• India among worldBs fastest growing economies.
(Graph on top left shows Indian GDP growth since 1996-97).
• *erage G4P 3gross domestic product6 growth of 8.40 during the .th 9ie-
Hear Plan 3-..I-12216.
• %&ports registered growth of oer -.0 in 1221-2/.
• 9oreign e&change reseres at an all-time high of oer >.2 billion.
• Increase in fore& during the (scal year in 1221-2/, >12 billion.
• IndiaBs economic growth is sustained.
The• nationBs G4P is e&pected to grow by oer I.2 0 this year.
5. EASY INDUSTRIAL LICENSING POLICY:
+nder the Industries 34eelopment D Eegulation6 *ct, -.8-, industrial
license is needed only for items,
• 9alling under the list of compulsory licensing. Eesered for small-scale
sector. If location attracts restriction.
*ll• industries e&empt from industrial licensing re:uired to (le an Industrial
%ntrepreneur 7emorandum.
$o• approal is re:uired? -1• billion Jighways 4eelopment Programme. 11 billion.
• 7a)or adances in telecommunications sector. 'andwidths of terabit
aailable. Sharp decline in telecommunications costs.
• 9oreign Inestment Implementation *uthority helps sole foreign inestorsB
problems. It meets periodically with inestors to sort out operational
diNculties and facilitates implementation.
*n• %mpowered Sub-5ommittee of the $ational 4eelopment 5ouncil set up
on creating an inestor friendly climate and remoing regulatory barriers to
inestments.
• 7odernization of legislations on intellectual property. *ll IPE Laws are TEIPS
compliant. Intellectual Property *ppellate Tribunal functional.
• Simpli(cation and re-engineering of wor" procedures.
7ore• information on www.ipindia.com
10. BOOMING SECTORS 1 OPPORTUNITIES GALORE:
• R,(&2: 5apacity enhancement of highways. I222 "ms of $ational
Jighways being o;ered during the current year. 7any more opportunities in
the States. xchange Oegulation #ct, ,4/2, was enacted as a temporary measure and later
placed permanently in the year ,402 #t that time the limited ob"ective of the #ct was to regulate
the inflow of foreign capital in the form of branches and concerns with the substantial non'
resident interest, and the the employment of foreigners $he country attained freedom in ,4/2,
after two centuries of foreign rule and protracted freedom struggle stretched over decades $he
prevailing mood then was one of preserving and consolidating the freedom and not to permit
once again any type of foreign domination, political or economic Initial approach on foreign
capital was negative to a not'interested attitude @rime (inister explained that 7the stress on the
need to regulate, in the national interest, the scope and manner of foreign capital and control (as
per the Industrial @olicy xports were not picking up and imports were
surging, putting the country to severe balance of trade and balance of payment crisis $his in trn
led to the need to tap the donors or Foreign #id ?ivers
$his background induced the ?overnment of India to re'focus the F>O# act with the main aim
of conservation of foreign exchange rather than regulation of entry of foreign capital $he
Foreign >xchange Oegulation #ct, ,42., (hereinafter referred to as F>O#) was drafted with the
ob"ect of introducing the changes felt necessary for the effective implementation of the
?overnment policy and removing the difficulties faced in the working of the previous enactment
F>O# is crisis'driven regulation and naturally it contained several draconian provisions #ny
offence under F>O# was a criminal offence liable for imprisonment
Fowever in the early 6ineties due to the ma"or changes in Indian economy and liberalization of
industrial and trade policies, consistent with the fast changing international economic and trade
relations the need for a more conducive climate for increased inflow of foreign investment and
capital in the country to accelerate industrial growth and promotion of trade (especially exports)
was felt In order to remove the special restrictions in respect of companies registered in India
and to simplify the regulations in regard to foreign investment to attract better flow of foreign
capital and investment was paramount $he #mending #ct -4 of ,44. was enacted in order to
remove unnecessary restrictions and simplify procedure $hereby certain provisions dealing with
emergencies of different kinds, which were no longer relevant, were removed for improving the
climate for investment in India
FOREIGN E=CANGE MANAGEMENT ACT71???
#s the crisis of foreign exchange melted once for all and the country came to be endowed with
sizeable reserves of foreign exchange, the basic aim of foreign exchange policy shifted from one
of control and conservation to that of effective management, to facilitate external tradeQpayment
and promote the orderly development and maintenance of the forex market in India $he #ct was
thoroughly revised and replaced by the by the Foreign >xchange (anagement #ct, ,444 $he
latter has dropped many of the stringent provisions of the older #ct, in the area of transactions
involving foreign exchange $he F>(# ,444 took effect from Gune ,, -555
$o investigate due adherence to the provisions of the #ct by the market participants, the 8entral
?ovt have established the Directorate of >nforcement with a Director and other officers as
officers of the >nforcement $his #ct extends to the whole of India and will also apply to all
branches, offices and agencies outside India owned or controlled by a person resident in India It
will also be applicable to any contravention committed outside India by any person to whom this
#ct is applicable
INVESTMENT PROMOTION AND FACILITATION:
$he ministry of Finance, ministry of corporate affairs and the ministry of commerce and
industries are the most important ministries which with the help of Oeserve bank of India look
after the foreign direct investment operations in the country $hese ministries have an elaborate
set of institutions and agencies to facilitate the flow of foreign direct investment into the country
and remove the procedural bottlenecks if any that would take place in the promotion of foreign
direct investment
SECRETARIAT FOR INDUSTRIAL ASSISTANCE:
ntrepreneurial assistance, investor facilitation, receiving and processing all applications which
re%uire ?overnment approval, conveying ?overnment decisions on applications filed, assisting
entrepreneurs and investors in setting up pro"ects, (including liaison with other organizations and
=9s, >F$@, uro'e%uityQforeign currency convertible bonds policy
(b) Foreign Institutional Investors @ortfolio Investment @olicy
(c) Investment policy for 6on'Oesident Indian
(d) @olicy governing opening up of branchQliaisonQpro"ect office by the foreign companies
and coordination in respect of individual proposals referred to ?overnment by O+I
(atters related to Indian Investment 8entre, an autonomous body under the (inistry of
Finance
FOREIGN DIRECT INVESTMENT POLICY:
$he government of India has recently undertaken a comprehensive review of the FDI policy
and associated procedures #s a result, a number of rationalization measures like dispensing
with the need of multiple approvals from ?overnment andQor regulatory agencies that exist in
certain sectors, extending the automatic route to more sectors, and allowing FDI in new
sectors
#s per the extant policy, FDI up to ,55: is allowed, under the automatic route in most
sectorsQ activities FDI under the automatic route does not re%uires prior approval either by
the government or the reserve bank of India Investors are only re%uired to notify the
concerned Oegional office of O+I within .5 days of issue of shares to foreign investors
9nder the ?overnment approval route, applications for FDI proposals, other than by 6on'
Oesident Indians, and proposals for FDI in Jconomic #ffairs, (inistry of Finance @roposals for FDI in Jconomic affairs for further processing
/ Foreign investment proposals received in the D># are placed before the Foreign
Investment @romotion +oard (FI@+) within ,0 days of receipt
$he decision of the government in all the cases is usually conveyed by the D># within .5
days
R)#)*2) B4+A O- I+&,4B# 0)+)*4. 5)*3,##,"+ %+&)* FEMA< RBI looks after granting of
general permission under the Foreign >xchange (anagement #ct in respect of proposals
approved by the government, Indian companies getting foreign investment approval through
FI@+ route do not re%uire any further clearance from O+I for the purpose of receiving inward
remittances and issue of shares to the foreign investors $he companies are, however re%uired to
notify the Oegional office concerned of the O+I of receipt of inward remittances within .5 days
of such receipt and to file the re%uired documents with the concerned Oegional offices of the O+I
within .5 days after issue to the foreign investors or 6OIs
+esides new companies, automatic route for FDIQ6OI investment if also available to the
existing companies proposing to induct foreign e%uity For existing companies with an expansion
programme, the additional re%uirements are as underE
, $he increase in e%uity level resulting from the expansion of the e%uity base of the
existing company without the ac%uisition of existing shares by 6OIQforign investors
- $he money to be remitted should be in foreign currency and
. @roposed expansion programme should be in the sectors under the automatic route
=therwise, the proposal would need ?overnment approval through the FI@+ For this a
board Oesolution of the existing Indian company must suppost the proposal
For companies already existing without an expansion programme, the additional re%uirements
for eligibility for automatic approval areE
$hat they are engaged in the industries under automatic route
$he increase in e%uity level must be from expansion of the e%uity base and the foreign e%uity
must be in foreign currency
$he earlier +I regulation that was applicable to public limited companies, that shares allotted
on preferential basis shall not be transferable in any manner for a period of 0 years from the date
of their allotment has now been modified to the extent that not more than -5 percent of the entire
contribution brought in by the promoter cumulatively in public or preferential issues shall be
locked in e%uity participation by international financial institutions such as #D+, IF8, 8D8,
D>? etc in the domestic companies is permitted through automatic route sub"ect to +IQO+I
regulations and sector specific cap on FDI
AMERICAN DEPOSITORY RECEIPTS OR GLOBAL DEPOSITORY RECEIPTS
:ADRCGDR;:
#n Indian corporate can raise foreign currency resources abroad through the issue of #merican
Depository Oeceipts (#DOs) or ?lobal Depository Oeceipts (?DOs) by issuing its Oupee
denominated shares to a person resident outside India being a depository for the purpose of
issuing ?lobal Depository Oeceipts (?DOs) andQ or #merican Depository Oeceipts (#DOs),
sub"ect to the conditions thatE
#) $he #DOsQ?DOs are issued in accordance with the (, an acknowledgement containing the ( is sent by post, the acknowledgement is sent by post P no
further approval is re%uired
#n I>( would stand cancelled if the proposal re%uires compulsory license
9pon commencement of commercial production, Industrial undertakings need to file information
in @art R+& of the I>( to @OP8 nvironment P Forests under $he >nvironment (@rotection) #ct, ,431 $his
list includes petrochemical complexes, petroleum refineries, cement, thermal power plants, bulk
drugs, fertilizers, dyes, paper, etc
Fowever, if investment in the pro"ect is less than Os , billion, such >nvironmental clearance is
not necessary, except in cases of pesticides, bulk drugs and pharmaceuticals, asbestos and
asbestos products, integrated paint complexes, mining pro"ects, tourism pro"ects of certain
parameters, tarred roads in Fimalayan areas, distilleries, dyes, foundries and electroplating
industries
nvironment and Forests
Details can be obtained at the website of (inistry of >nvironment and Forests
(httpEQQenvfornicin )
FOREIGN TECNOLOGY AGREEMENTS
G)+)*4. P".,1':
For promoting technological capability and competitiveness of the Indian industry, ac%uisition of
foreign technology is encouraged through foreign technology collaboration agreements
Induction of know'how through such collaborations is permitted either through automatic route
or with prior ?overnment approval
S1"5) "- T)1(+"."0' C"..49"*4$,"+:
$he terms of payment under foreign technology collaboration, which are eligible for approval
through the automatic route and by the ?overnment approval route, includes technical know how
fees, payment for design and drawing, payment for engineering service and royalty
@ayments for hiring of foreign technicians, deputation of Indian technicians abroad, and testing
of indigenous raw material, products, and indigenously developed technology in foreign
countries are governed by separate O+I procedures and rules pertaining to current account
transactions and are not covered by the foreign technology collaboration approval For details
please refer to the website of the O+I
A%$"34$,1 R"%$):
@ayments for foreign technology collaboration by Indian companies are allowed under the
automatic route sub"ect to the following limitsE
(i) $he lump sum payments not exceeding 9stablishment in India of +ranch =ffice of other place of business) Oegulations, -555
I+1"*5"*4$,"+ "- C"354+':
For registration and incorporation, an application has to be filed with Oegistrar of 8ompanies
(O=8) =nce a company has been duly registered and incorporatedas an Indian company, it is
sub"ect to Indian laws and regulations as applicable toother domestic Indian companies
For details please visit the website of (inistry of 8ompany #ffairs athttpEQQdcanicin
L,4,#"+ O--,1)CR)5*)#)+$4$,2) O--,1):
$he role of liaison office is limited to collecting information about possible market
opportunities and providing information about the company and its products to prospective
Indian customers It can promote exportQimport fromQto India and also facilitate
technicalQfinancial collaboration between parent company andcompanies in India Ciaison office
can not undertake any commercial activitydirectly or indirectly and can not, therefore, earn any
income in India #ll expenses of Ciasion offices have to be met by inward remittances #pproval
for establishing a liaison office in India is granted by Oeserve +ank of India (O+I)
P*"E)1$ O--,1):
Foreign 8ompanies planning to execute specific pro"ects in India can set up temporary
pro"ectQsite offices in India O+I has now granted general permission to foreign entities to
establish @ro"ect =ffices sub"ect to specified conditions xchange 8ontrol Department(ForeignInvestment Division), O+I
8entral =ffice, (umbai'/5555,, in form F68 , (available at O+I website at wwwrbiorgin )
E=CANGE CONTROL
F"*),0+ ED1(4+0) M4+40)3)+$ A1$:
$he Oeserve +ank of India&s >xchange 8ontrol Department, administers Foreign >xchange
(anagement #ct, ,444, (F>(#)
R)54$*,4$,"+ "- I+2)#$3)+$ C45,$4. 4+& P*"-,$# E4*+)& ,+ I+&,4:
(i) #ll foreign investments are freely repatriable, sub"ect to sectoral policies and except for cases
where 6OIs choose to invest specifically under non'repatriable schemes Dividends declared on
foreign investments can be remitted freely through an #uthorized Dealer
(ii) 6on'residents can sell shares on stock exchange without prior approval of O+I and repatriate
through a bank the sale proceeds if they hold the shares on repatriation basis and if they have
necessary 6=8Qtax clearance certificate issued by Income $ax authorities
(iii) For sale of shares through private arrangements, Oegional offices of O+I grant permission
for recognized units of foreign e%uity in Indian company in terms of guidelines indicated in
Oegulation ,5+ of 6otification 6o F>(#-5Q-555 O+ dated (ay R-555 $he sale price of
shares on recognized units is to be determined in accordance with the guidelines prescribed
under Oegulation ,5+ (-) of the above 6otification
(iv) @rofits, dividends, etc,(which are remittances classified as current account transactions) can
be freely repatriated
C%**)+$ A11"%+$ T*4+#41$,"+#
8urrent account transactions are regulated under the Foreign >xchange (anagement (8urrent
#ccount $ransactions) Oules -555 X 6o ?),dated .0-555U @rior approval of the
O+I is re%uired for ac%uiring foreign currency above specified limits for the following purposesE
a Foliday travel over 9ndowment Foundations, 8haritable $rusts and 8haritable =9 scheme
If the 9nit is amenable to bonding by customs authorities; conversion of existing Domestic
$ariff #rea (D$#) units into >=9 is also permitted under automatic route, if the D$# unit
satisfies the parameters in @ara 3, In case there is an outstanding export commitment under
the >@8? scheme, it will be subsumed in the export performance of the unit If the unit is
having outstanding export commitment under the #dvance Cicensing 0urrent 'ffairs TB 0hannel
issue# $.
/inistr. of
Information >
7roa#casting
***.mi$.nic.in
8 cigars >cigarettes
manufacture.
##2 6I17 (u$-ect to in#ustrial
license un#er the
In#ustries
(
Regulation) 'ct, 1?!1
1N 2 3 "004
Coal 5 &ignite mining
for capti%e consumption
$. po*er pro-ects, an#
iron > steel, cement
pro#uction an# other
eligi$le acti%ities
permitte# un#er the
0oal /ines
(Nationalisation) 'ct,
1?8&.
##2 'utomatic (u$-ect to pro%isions of
0oal /ines
(Nationali)ation) 'ct,
1?8&
***.coal.nic.in
1N 2 3 "004
Coffee 5 Ru%%er processing
5 *arehousing
##2 'utomatic 1N 2 3 "004
Construction /evelopment
projects= inclu#ing housing,
commercial premises, resorts,
e#ucational institutions,
recreational facilities, cit. an#
regional le%el infrastructure,
to*nships.
##2 'utomatic (u$-ect to con#itions
notifie# %i#e 1ress Note "
("00! (eries) inclu#ing:
1 '. minimum
capitali)ation of A(C 10
million for *holl. o*ne#
su$si#iaries an# A(C !
million for -oint %enture.
The fun#s *oul# ha%e to
$e $rought *ithin six
months of commencement
of $usiness of the
0ompan..
" $. /inimum area to
$e #e%elope# un#er each
pro-ect- in 10 hectares in
case of #e%elopment of
ser%ice# housing plots an#
$uilt up area of !0,000 s:
mts. in case of construction
#e%elopment pro-ect an#
an. of the a$o%e in case of
a com$ination pro-ect.
1N " 3
"00! >
1N " 3
"004
+. Courier services for carr.ing
pac;ages, parcels an# other
items *hich #o not come
*ithin the am$it of the In#ian
1ost Dffice 'ct, 1+?+.
##2 6I17 (u$-ect to existing
la*s an#
exclusion of
acti%it. relating to
#istri$ution of
letters, *hich is
exclusi%el.
reser%e# for the
(tate.
***.in#iapost.go
%.in
1N 2 3
"001
?. /efence production ; precious stonesE
gol#, sil%er an#
minerals.
##2 'utomatic (u$-ect to /ines >
/inerals (
Regulation) 'ct, 1?!8
***.mines.nic.in
1ress Note 1+ (1??+) an#
1ress Note 1 ("00!) are not
applica$le for setting up
100% o*ne# su$si#iaries
in so far as the mining
sector is concerne# su$-ect
to a #eclaration from the
applicant that he has no
existing -oint %enture for the
same area an#3 or the
particular mineral.
1N " 3
"000,
1N & 3
"00!,>
1N 2 3
"004
14. Petroleum 5 Natural @as sector
a. Dther than
Refining an#
inclu#ing mar;et
stu#. an#
formulationE
in%estment3
financingE setting
up infrastructure
for mar;eting in
1etroleum >
Natural ,as
sector.
##2 'utomatic (u$-ect to sectoral
regulations issue# $.
/inistr. of 1etroleum >
Natural ,asE an#
in the case of actual
tra#ing an# mar;eting of
petroleum pro#ucts,
#i%estment of "4%
e:uit. in fa%our of In#ian
partner3pu$lic *ithin !
.ears.
***.petroleum.nic.in
1N 1 3
"002
>
1N 2 3
"004
$. Refining ;NAAB0
HAR?ANA0
HIMACHA=
9RADESH
,,()., 3.)544 &.--
+. =86=A>A WEST BENGA=0
SI@@IM0
ANDAMAN 7
NICOBAR
IS=ANDS
,'**.% 3*/5)* &.-%
-. ?A2A@I GOA +%'.*) /1+54+ &.),
&. 1H8?A6 MADH?A
9RADESH0
CHATTISGARH
))%.+' /2/5*1 &.%(
. =8:HI @ERA=A0
=A@SHADWEE9
)%).(* +25)+ &.%*
%. 1H01A23AH4A9 ORISSA *-(.(% ..5*. &.%%
*. @AI?09 RAAASTHAN %-*.'- *-5// &.,
). =A2?09 >TTAR 9RADESH0
>TTRANCHA=
(,., /45.3 &.&*
(. 704AHA>I ASSAM0
AR>NACHA=
9RADESH0
MANI9>R0
MEGHA=A?A0
MIBORAM0
NAGA=AND0
TRI9>RA
(%.*) //5*. &.&*
'. ?A>2A BIHAR0
AHAR@HAND
.,- 253+ &.&&
,. 28> I25I:A>35* )-,&,.*& /20++354. %,.,)
S>B TOTA= /110/-454) 3+01+.5*. /22522
+. Atock Awapped /)0-4-5)) 304+-5. #
-. Advance of Inflows
!from %&&& to %&&)$
.0+*4544 /0+*45.
%&. 91I’s#29I Achemes -3352* /4/53 #
GRAND TOTA=
(From April 2000 to September 2007)
42/0/145+* )-0/1.5-. $
III. FOREIGN TECNOLOGY TRANSFER:
(From &u!ust *++* to Septem,er -../)
A. NUMBER OF CUMULATIVE FTC APPROVALS:
N5 Of C#m#lative FTC A66rvals
(from august -- to Aeptember %&&,,
9=""<
N5 Of FTC A66rvals D#rin& 422*$21
(from April %&&' to march %&&,$
"
N5 Of FTC A66rvals D#rin& 4221$2.
(from April %&&, to Aeptember %&&,,
3#
B. COUNTRY7WISE TECNOLOGY TRANSFER APPROVALS:
Ran%s C#ntr' N5 f te":ni"al "lla8ratins
a66rved
C wit: Ttal Te":5
A66rvals5
/ >5 S5 A /01-2 445/+
4 German' /0/23 /35++
3 Aa6an .*/ /25+4
) >5 @ .-* /25.-
- Ital' ).) *5/)
* Ot:er C#ntries 40.34 3-5+/
TOTA= OF A==
CO>NTRIES.
10..* /22522
C. SECTORS7WISE TECNOLOGY TRANSFER APPROVALS:
Ran%s Se"tr N5 f Te":ni"al
Clla8ratins A66rved
C Wit: Ttal Te":
A66rvals
/ Ele"tri"al
E