Impact of Foreign Direct Investment on Indian Economy

1. FOREIGN DIRECT INVESTMENT Its Impact on Indian Economy By Dr. HarapriyaPatnaik Reader in Economics KHEMINDI COLLEGE; DIGAPAHANDI

2. PLAN OF PRESENTATION • The presentation would be as follows • What is F D I • Types of FDI • Types of retailing of India • Types of retail market • FDI in retail • FDI-Advantages V.s Disadvantages • FDI-in modi government • Impact of FDI in retail in India • Immense growth opportunities for retailers • Huge surge in FDI inflows under modi government • Regional flow of FDI in India • Revised FDI (foreign direct investment ) policy • FDI proposal approved till may 2013 • Recent trends in FDI • conclusion

3. What is foreign direct investment? The foreign direct investment means “cross border investment made by a resident in one economy in a enterprise in another economy, with objective of establish a lasting interest in the investee economy.in other ward A foreign direct investment (FDI) is an investment in the form of a controlling ownership in a business in one country by an entity based in another country. It is thus distinguished from a foreign portfolio investment  by a notion of direct control.

4. Types of FDI • BY DIRECTION:- Inward, out ward. • BY TARGET:-Greenfield investment, horizontal FDI, vertical FDI. • BY MOTIVE. :- Resources seeking, market seeking, efficiency seeking. • (b)BY TARGET:- • Horizontal FDI arises when a firm duplicates its home country-based activities at the same value chain stage in a host country through FDI. • Platform FDI Foreign direct investment from a source country into a destination country for the purpose of exporting to a third country. • Vertical FDI takes place when a firm through FDI moves upstream or downstream in different value chains i.e., when firms perform value-adding activities stage by stage in a vertical fashion in a host country.

5. Types of retailing in India • Single brand :- • single brand implies that foreign companies would be allowed to sell goods sold a retail store with foreign investment can only sell one brand . e.g.:-adidas,lee,nike etc. • Multi brand:- • FDI in multi brand retail implies that a retail store with a foreign investment can sell multiple brand under one roof. e.g.:-lifestyle, metro shoes. Etc.

6. Types of retail market • Organized:- • trading activities undertaken by license retailer, that is, those who are registered for sales tax, income tax, etc. .e.g.:-corporate backed hypermarket. • un Organized:- • traditional m format of low-cost retiling, fore e.g.:- the local kirani shop ,owner managed general stores , paan / beedi shop, convenience stores, hand cart and pavement vendors, etc.

7. FDI in Retail • Current position :- • FDI is permitted only in single brand product retiling -100%(form January 2012) • In multi brand-50%(form September 2012 ) • FDI cap in broadcasting was raised to 74% form 49%

8. Pros and Cons of FDI for National Economy As Stimulus As Barrier • Inflow of equipment &technology. • Competitive advantages & innovation. • Financial resources for expansion. • Employment generation . • Contribution to export growth. • Access to global market place for domestic player. • Access to low cost resources for investor. • Access to new market/distribution channel for product. • Improved consumer welfare through reduce costs, wider choice and improved quality. • Crowding of local industry. • Loss of control. • Repatriation of profit/dividends by investor. • Conflict of codes/laws. • Possible exploitation of resources –material/wage. • Effect on local culture /sentiments-socio cultural effect. • Effect on natural environment .

9. Impact of FDI in retailing in India • Consumers:- • access to some of the major global brand. • Improved quality and variety of product. • Increase competition and expend manufacturing. • It gives consumer competitive advantage • Influences the consumer standard of living.

10. Immense growth opportunities for Retailers • India is Asia’s third largest retail market after china and japan . organized retailing is very virgin space in India. • Currently Indian retail sector have seals of around $500 billion. • Retail sector is excepted to have sale of $900 billion by 2014.it still far behind china, whose retail sales by 2014 is excepted to across $4500 billion mark. • Lifestyle product that are widely accepted by urban Indian consumer.eg:-(watches , shoes, food and jewellery.)

11. Flow of FDI to Indian Economy :

13. Foreign Direct Investment Policy • The government has notified change in the FDI policy, paving the way for larger overseas investment in sector such as multi-brand retail. • As per the revised FDI guidelines, the government relaxed norms for multi-brand retail treading and eased the mandatory 30 percent local sourcing norm for companies .As much as 100 percent FDI in single brand retail was allowed ,of which 49 percept is through the automatic route. • The investment cap in defence production was retained at 26 precent. • In currier service FDI of up to 100 percent was allowed under the automatic rout.

14. FDI proposal approved till may 2013 • The government approved a total of 18 foreign direct investment proposals worth USD 173 million in May 2013. • During April 2010 and May 2013,india also attracted FDI worth USD256.7 million in agriculture service. • As per extent FDI policy,FDI is not permitted in real estate business. There is no proposal under consideration to mend the said policy. • In April ,Swedish clothing gientHennes & Mauritzreceived approval to open 50 stores across the country with a planned investment of Rs700 corer. • Foreign retailer will now be allowed to open stores in cities that have a population of less then one million.

15. Recent trends in FDI • FDI in speciality stores:-multi-brand organized retail in speciality stores such as consumer Electronics, Footer, furniture, and furnishing etc. Are accepted to expand and mature in the next few year (e-zone, reliance footprint) • Dominance of unorganized retail:- Flexible credit option and convenient shopping locations may help traditional retail to continue its dominance in retail sector. • Growth in small cities and town:-stiff competition and saturation of urban market is excepted to drive domestic retail player to trap the potential in small cities .

16. Conclusion:- At last it can be asserted that any thesis has it’s own antithesis but in course of time it can be synthesised paving the way for a better blending. Much in the same line FDI is producing mixed results being at the infant stage of it’s commencement, However in the world of LPG it is expected to confer well to any economically scarce nation of the Globe.

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