PM’s Make In India Project and its impact on FDI in India

Rency Raj J – ERBE11026Gowtham – ERBH16006

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AGENDA

• What is FDI?• Evolution of FDI in India• Types• Forms of Business Presence in India• Make in India• Impacts and Achievements

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What is FDI?• FDI is a key component in global economic integration.• Foreign direct investment (FDI) is an investment made by a company

or individual in one country in business interests in another country, in the form of either establishing business operations or acquiring business assets in the other country, such as ownership or controlling interest in a foreign company.

• FDI is an important vehicle of technology transfer from developed countries to developing countries.

• FDI is an important source of non-debt financial resources for country for economic development .

• It is a means of achieving technical knowhow and employment generation.

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Evolution of FDI in India

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Progressive Liberalisation

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Types

Investment Strategy• Greenfield Investment

Strategy • Brownfield investment

Strategy

Investors• Individual: 

– FVCI (Foreign Venture Capital Investors)

– Pension/Provident Fund– Financial Institutions

• Company:– Foreign Trust– Sovereign Wealth Funds– NRIs (Non Resident Indians)/ PIOs

(Persons of Indian Origin)• Foreign Institutional Investors: 

– Private Equity Funds– Partnership / Proprietorship Firm– Others

FDI• Horizontal FDI• Vertical FDI

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Forms of Business Presence in India

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The Entry Process

Automatic Route Government Route

Investing in India

No Central Government Permission is required.

Applications are considered by the Foreign Investment Promotion Board (FIPB). Approval from Cabinet Committee on Security is required for more than 49% FDI in defence. The proposals involving investments of more than USD 769.23 million are considered by Cabinet committee on economic affairs.

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STEPS INVOLVED IN INVESTMENT

• Identification of structure• Central Government approval if

required• Setting up or incorporating the

structure• Inflow of funds via eligible

instruments and following pricing guidelines

• Meeting reporting requirements of RBI and respective Act

• Registrations/obtaining key documents like PAN etc.

• Project approval at State/UT level

• Finding ideal space for business activity based on various parameters like incentives, cost, availability of man power etc.

• Manufacturing projects are required to file Industrial Entrepreneur’s Memorandum (IEM), some of the industries may also require industrial license.

• Construction/renovation of unit.• Hiring of manpower.• Obtaining licenses if any.• Other state & central level registrations.• Meeting annual requirements of a

structure, paying taxes etc.

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MAKE IN INDIA

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MAKE IN INDIA• Make in India was launched on September 25, 2014, by Prime Minister Narendra Modi

to encourage multinational as well as domestic companies to manufacture their products in India.

• Vision: The initiative hopes to attract both capital and technological investment in India and that the country will become the top destination globally for foreign direct investment (FDI), surpassing even China and the United States.

• Logo –inspired by the Ashoka Chakra – is a striding lion made of cogs, symbolising manufacturing, strength and national pride.

• Objective: To focus on job creation and skill enhancement in 25 key sectors of the economy, including automobiles, aviation, biotechnology, defence manufacturing, electrical machinery, food processing, oil & gas, and pharmaceuticals, among others.

• Key policies -- ease of doing business, getting away with archaic laws, 100 Smart Cities, disinvestment of public sector undertakings, skills and jobs for the youth, making India a manufacturer

• Major challenges include creating a healthy business environment, removal of unfavourable factors, more focus on Indian’s micro, small and medium enterprises (MSME), lack of world class research and development (R&D), and comparisons with China's ‘Made in China’ campaign

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MAKE IN INDIA PROJECTS AND POLICY CHANGES

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KEY IMPACTS - GROWTH IN FDI

Top 5 destinations — H1 2015Country Capex ($bn)*India 31China 28US 27UK 16Mexico 14 Source: fDi Markets.

As per the FDI Markets, a Financial Times, London data service -India has surpassed China and the US to take the pole position in attracting largest FDI in the first half of 2015

India is in pole position to pass both China and the US in the FDI league tables this year

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FDI into Asia Pacific in 2015

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India Overtakes China

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MAKE IN INDIA - ACHIEVEMENTS

48%India's Position in the Rating of The World's Fastest Growing Economies – IMF report, April 20151India's Rank Amongst The World's Topmost Investment Destinations, From 110 Countries polled – Baseline profitability Index, 20151India's Position Amongst 100 Countries On The Growth, Innovation And Leadership Index – Frost & Sullivan, 2015

India's Position Amongst World’s Best Prospective Investment Destinations – UNCTAD report, 2015

The Increase In Year-on-year Growth In Foreign Direct Investment Inflows Recorded For The Period October 2014 To April 2015 – PIB, India, 2015

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The Number Of Government Services That Can Be Availed Of By An Investor At A Single Window Online Portal20

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