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A

PROJECT REPORT ON

TRENDS ON FDI FROM INDIA

\

Submitted to: Submitted by:

Prof.Abha Rishi Vikash Kumar

14IB367

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CONTENT

1. Introduction 3

2. Objective of Study 4

3. Nature and Source of Data 4

4. Analysis of Data

i. YEARS WISE FDI INFLOW 4

ii. COUNTRY -WISE FDI INFLOWS 6

iii. SECTOR -WISE FDI INFLOW 7

5. Conclusion 9

6. References 9

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ABSTRACT

Foreign direct investment had played a very important role in the development of nations in the past as it provides capital for investment in the country which is sometimes domestically not capable of generating enough capital for investment. FDI gives a platform to countries to generate enough capital investment to foster in the growth and development of the country and full fills the gap between domestic savings and investments. FDI led foreign capital investment in a large amount had been generated in the past in India and it is capable of generating much larger capital investment in the future. This report focuses on the trend in FDI in India during the period of 2000-01 to September; 2014.This report had also focused on FDI inflow by from different countries and sector wise FDI inflow in India. The study is based on the secondary data collected from Department of Industrial Policy and Development, RBI, Ministry of commerce and industry.

Keywords: Foreign Direct Investment (FDI); Sectors; Country wise FDI

1. INTRODUCTION

The perception and role played by foreign direct investment over the past half century had gone through several changes. From the time when FDI was seen as a partner in development process of the countries during 1960s to transnational corporation which was the chief vehicle of FDI was considered as a agent to national state sovereignty which led to approach towards regulating FDI. In 1980 once again FDI became once again most preferred following commercial banks debt crisis as it was a source of non-debt foreign private finance inflow. Since then FDI had started playing a significant role in the development of economy of the guest countries.FDI not only helps in the economic development but also forester’s development in technological andmanagerial skills.

India earlier during 1973 was more restrictive towards FDI as extensive curb were imposed on foreign capital investment by introduction of Foreign Exchange Regulation Act (FERA) which restricted ownership of Indian companies share by any foreign companies or individuals.

In 1991 introduction of FDI brought about radical change in FDI operation.FDI brought not only capital but along with that it brought Technology and managerial skills inflow in the country thus fostering growth in export and enabling India in making world class products.

FDI was not just in manufacturing but it even brought FDI in capital market in terms of Portfolio investment in the country.

Later on various changes were being made in policies relating to FDI. Lifting of restrictions imposed by FERA, allowing foreign firms to invest in goods produced for domestic consumption, allowing foreign brands to use their name in domestic market

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Changes were made and mechanisms were developed to allow investment in portfolio market through institutional investor to allow not only inflow of foreign capital but also to contribute to the development of Indian stock market.

2. OBJECTIVE OF THE STUDYA. To study trend in FDI inflow in India during 2000-01 to 2014-15B. To study amount of FDI inflow from different countries.C. To study FDI inflow in different sectors.

3. NATURE AND SOURCE OF DATA

The data used for this study is based on secondary data which had been taken from Reserve Bank of India, Department of Industrial Promotion and Policy and Ministry of Commerce and Industry. The time period of the study is 2000-01 to September;2014.

4. ANALYSIS OF THE STUDY

I. YEARS WISE FDI INFLOW

TABLE 1. Financial Years Wise FDI Inflow Data From 2000-01 to September, 2014.

Financial Years 2000-01 to 2013-14 (up to November, 2013)

S. No. Financial Year (April Total FDI flow inTotal FDI Flows %

To March) US$ MillionGrowth Over Previous

1. 2000-01 4,029 -2. 2001-02 6,130 (+) 52 %3. 2002-03 5,035 (-) 18 %4. 2003-04 4,322 (-) 14 %5. 2004-05 6,051 (+) 40 %6. 2005-06 8,961 (+) 48 %7. 2006-07 22,826 (+) 146 %8. 2007-08 34,843 (+) 53 %9. 2008-09 41,873 (+) 20 %10. 2009-10 (P) (+) 37,745 (-) 10 %11. 2010-11 (P) (+) 34,847 (-) 08 %12. 2011-12 (P) 46,556 (+) 34 %13. 2012-13 (P) 34,298 (-) 26%14 2013-14 (P)(Apr-Oct, 36,046 (+) 5%15. 2014-15 (Apr - Sep, 2014) 21,511

CUMULATIVE TOTAL(from April, 2000 to September,2014 345,073

Source: RBI’s Bulletin November, 2014

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TABLE 2. DIPP’S – Financial Year-wise FDI Equity Inflows 2000-01 to 2014-15

S. Nos Financial Year(April – March) Amount of FDI Inflows%age growth

overprevious year

FINANCIAL

YEARS 2000-01 to 2014-15 (up to September, 2014) In Rs crores

In US$ million

(in terms of US $)

1. 2000-01 10,733 2,463 -2. 2001-02 18,654 4,065 ( + ) 65 %3. 2002-03 12,871 2,705 ( - ) 33 %4. 2003-04 10,064 2,188 ( - ) 19 %5. 2004-05 14,653 3,219 ( + ) 47 %6. 2005-06 24,584 5,540 ( + ) 72 %7. 2006-07 56,390 12,492 (+ )125 %8. 2007-08 98,642 24,575 ( + ) 97 %9. 2008-09 142,829 31,396 ( + ) 28 %10. 2009-10 123,120 25,834 ( - ) 18 %11. 2010-11 97,320 21,383 ( - ) 17 %12. 2011-12 165,146 35,121 (+) 64 %13. 2012-13 121,907 22,423 (-) 36 %14. 2013-14 147,518 24,299 (+) 8%15. 2014-15 (Apr - Sep, 2014) 86,939 14,472 -CUMULATIVE TOTAL

1,131,370 232,175 -(from April, 2000 to September, 2014)

Source: DIPP, Federal ministry of commerce and industry, govt of India

Table no 1 shows that during the period from year 2000 to September 2015 India had recorded a total capital inflow through FDI of around 345,073 US$ million and Table no 2 shows that India through equity inflow had recorded a total inflow of around 232,175 US$ million. Going through the table 1 & 2 it shows that from year 2000-2002 India had recorded a growth of 52% total FDI inflow and had recorded a growth of 65% in Equity inflow. This may be caused by the impact of Foreign Exchange Management Act (FEMA) which was introduced in 1999. Later on in the year 2002 to 2004 it had recorded a negative trend in FDI inflow in both Equity inflow and total FDI. Then once again from 2004 to 2009 it had recorded a positive growth rate. The highest FDI inflow was recorded in the year 2006-07 as total FDI growth rate was estimated to be 146% which was 22,826 US$ million and total FDI Equity inflow growth rate was recorded to be around 125% which was 12,492 US$ million. Then again it had recorded negative FDI inflow from 2009 to 2011. And in 2011-12 there was growth of 34% which was 46,556 US$ million in total FDI and 64% in FDI Equity inflow which recorded Equity FDI inflow of 35,121 US$

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million but now from year 2013-14 it is recording a growth of 5% and 8% in total FDI and Equity FDI respectively and is expected to grow in coming years as the initiative taken by new government is positive towards FDI.

II. COUNTRY -WISE FDI INFLOWS

Table 3. Country -Wise FDI Inflows from April 2000 to November, 2013.

S.No Name of the country Amount of FDI inflow % age with total(in US$ million) FDI inflow

1 Mauritius 82,717.43 35.652 Singapore 27,859.61 12.013 United Kingdom 21,605.24 9.314 Japan 17,205.24 7.45 Netherlands 13,206.58 16 U.S.A 13,117.60 5.697 Cyprus 7,834.50 5.658 Germany 6,900.32 3.389 France 4,255.60 2.97

10 Switzerland 2,851.29 1.8311 UAE 2,820.50 1.2312 Spain 1,937.25 1.2213 South Korea 1,483.76 0.83

2.5 4.1 2.7 2.2 3.25.5

12.5

24.6

31.4

25.8

21.4

35.1

22.424.3

14.54.0

6.1 5.0 4.36.1

9.0

22.8

34.8

41.9

37.734.8

46.6

34.336.0

21.5

0

5

10

15

20

25

30

35

40

45

50

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 (Sep, 2014)

Am

oun

t in

US

$ bi

llio

n

Year

FDI: Financial Year-wise equity & total Inflows

FDI Equity inflow Total FDI

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14 Italy 1,465.32 0.6415 Hong Kong 1,266.82 0.63

Total FDI Inflows 206,527.06 89.44

Table no 3 and the above graph shows the total amount of FDI inflow from year 2000 to September 2014. Table 3 shows a total list of 15 countries which has a major contribution of FDI inflow in India of around 206,527.06 US$ million and rest of the other countries contributes to around 10% of the total FDI inflow in India. From the graph it appears that larger part of the FDI inflow in India is contributed by Mauritius which is 82,717 US$ million. The reason of Mauritius contributing largest bundle of FDI inflow in India is Double Taxation Avoidance Agreement (DTAA) which is signed with Mauritius .The same DATT agreement had been done with Singapore too that’s why Singapore is the second largest contributor of India’s FDI inflow. The other major contributors to India’s FDI inflow are U.K and Japan with the share of 21,605 US$ million and 17,205 US$ million respectively. Some of the other small contributors are UAE, Italy, and Hong Kong, South Korea etc.

III. SECTOR -WISE FDI INFLOW

Table 4. Sector -Wise FDI Inflow from April, 2000 to November, 2013

S. No Sectors Amount of FDI Inflows %age with total(In US$ million) FDI Inflows

1 Services Sector 38,713 18.552 Construction Development 22,969 11.003 Telecommunications 12,888 6.17

82.72

27.8621.61

17.2113.21 13.12

7.83 6.90 4.26 2.85 2.82 1.94 1.48 1.47 1.270

10

20

30

40

50

60

70

80

90

Am

oun

t in

US

$ B

illio

n

COUNTRIES-WISE FDI INFLOW

FDI inflow

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4 Computer Software & Hardwar5 Drugs &Pharmaceuticals6 Chemicals(OTHER THAN

FERTILIZERS)7 Automobile Industry8 Power9 Metallurgical Industries10 Hotel & Tourism11 Petroleum& Natural Gas12 Food Processing Industries13 Trading14 Information & Broadcasting15 Electrical Equipments

Table no 4 and the graph shows that from the year 2000amount of FDI inflow in the service sector amounting to around 19% of the total after that construction and development sector attracts secondinflow which is 11% of the total inflow. This shows that foreign firms and companies are eagerly interested in investing in the service and constructithe reason for largest attraction of FDI in these sector can also be large amount of educated youth in the country. Looking at the service sector it appears from the graph that telecommunication sector attracts the highest FDI inflow which is 6.17%. Other sectors like Information and Broadcasting, Electrical Equipments, food, petroleum Hotel attracts less amount of total FDI inflow.

5.855.54

4.49

4.38

4

3.73

3.272.63

2.512.031.741.57

SECTOR -WISE FDI INFLOW

Computer Software & Hardwar 12,22011,570

Chemicals(OTHER THAN 9,362

9,1338,3577,7806,8255,483

Food Processing Industries 5,2304,236

Information & Broadcasting 3,6393,276

Table no 4 and the graph shows that from the year 2000-2014 there is a significantly large amount of FDI inflow in the service sector amounting to around 19% of the total after that construction and development sector attracts second largest amount of the total FDIinflow which is 11% of the total inflow. This shows that foreign firms and companies are eagerly interested in investing in the service and construction sector and finds more profit in this sector the reason for largest attraction of FDI in these sector can also be large amount of educated youth in the country. Looking at the service sector it appears from the graph that telecommunication

s the highest FDI inflow which is 6.17%. Other sectors like Information and Broadcasting, Electrical Equipments, food, petroleum Hotel attracts less amount of total FDI

18.55

11

6.17

WISE FDI INFLOW Services Sector

Construction Development

Telecommunications

Computer Software & Hardwar

Drugs &Pharmaceuticals

Chemicals(OTHER THAN FERTILISER)

Automobile Industry

Power

Metallurgical Industries

Hotel & Tourism

Petroleum& Natural Gas

Food Processing Industries

Trading

Information & Broadcasting

Electrical Equipments

5.855.544.49

4.384.003.733.272.632.512.031.741.57

2014 there is a significantly large amount of FDI inflow in the service sector amounting to around 19% of the total FDI inflow

largest amount of the total FDIinflow which is 11% of the total inflow. This shows that foreign firms and companies are eagerly

on sector and finds more profit in this sector the reason for largest attraction of FDI in these sector can also be large amount of educated youth in the country. Looking at the service sector it appears from the graph that telecommunication

s the highest FDI inflow which is 6.17%. Other sectors like Information and Broadcasting, Electrical Equipments, food, petroleum Hotel attracts less amount of total FDI

Construction Development

Telecommunications

Computer Software & Hardwar

Drugs &Pharmaceuticals

Chemicals(OTHER THAN FERTILISER)

Automobile Industry

Metallurgical Industries

Hotel & Tourism

Petroleum& Natural Gas

Food Processing Industries

Information & Broadcasting

Electrical Equipments

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5. CONCLUSION

India over the year had emerged as the fifth largest country attracting FDI in the world. India being considers fastest growing country after China in terms of GDP and second largest in terms of PPP is considered fourth largest country. In the study it was found that India had a total amount of, 073 US$ million inflow of foreign capital in terms of FDI. In study Mauritius emerged as the biggest contributor of FDI in India among the top 15 countries which have largest contribution of around 90% in Indian FDI. In study it was also found that service sector accounted for the largest share of FDI which was followed by Construction and Telecommunication sector.

6. REFERENCES

1. Rajdeep Kaur, Nikita, Reena “ Trends and Flow of Foreign Direct Investment in India”, Abhinav National Monthly Refereed Journal of Research in Commerce & Management, Volume 3, Issue 4, pp 42-46

2. K.S. Chalapati Rao Biswajit Dhar “India’s FDI Inflows Trends and Concepts”, Research and Information System for Developing Countries, Institute for Studies in Industrial Development, New Delhi.

3. Madem Srinu, Gudla Sandeep, Rao K Bhaskara,(2012)," Fdi Trends during the Last Decade and its Effect on Various Sector in India", International Journal of Scientific and Research Publications, vol. (12), no. 2