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05/21/2009
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Impact of FDI on the industrial development in India

  1. Introduction to FDI
  2. FDI quality
  3. Impact FDI
  4. Government policy towards FDI
  5. Evolution of FDI in India
  6. Major investors
    1. European union investments
    2. EU vis-a-vis US and Japan FDI
  7. Trends and pattern of FDI
    1. FDI trends in India
    2. Pattern of FDI
  8. Interpretation of industrial development before and after introducing FDI in India
  9. Banking sector
    1. FDI in Indian banks
    2. Guidelines to be followed by private banks
    3. General guidelines on foreign investment
    4. The road map
  10. Insurance sector
    1. Competition in insurance sector
    2. Induction of new technology
    3. India's domestic savings
    4. Social responsibilities
  11. Telecom sector
  12. Role of FDI in India
  13. FDI telecom sector
  14. Pharmaceutical sector
    1. Indian pharma industry
  15. Findings
  16. Suggestions
  17. Conclusions
  18. Bibliography

Foreign direct investments (FDI) are investment of foreign assets into domestic structures, equipments and organization. FDI reflects the objectives of obtaining a lasting interest by a resident entity in one economy (Direct Investor) in entity resident in an economy other than that of the Investor (Direct investments enterprise). The lasting interest implies the existing of a long-term relation between the direct investor and the enterprise and a significant degree influence on the management of the enterprise. Direct investment involves both the initial transaction between the two entities and all the subsequent capital transactions between them and among affiliated enterprises, both incorporated and unincorporated.

Most of the developing countries suffer from low level of income and low level of capital formation. However, despite this shortage of capital, these countries have developed a strong urge for industrializing and economic development. Consequently, they have embarked upon large-scale programs of industrialization. Since the domestic resources to carry out such programs have been entirely in adequate, these countries have had to depend on foreign capital

Foreign capital takes two main forms – private foreign investments and foreign aid. Private foreign investment as far as FDI is concerned, the private foreign investor either sets up a branch or a subsidiary in the recipient country. Of particular importance has been the increasing role of the multi-national corporations (MNCs) in the underdeveloped countries. These MNCs have set up a large number of branches and subsidiaries in these countries and have bought with them new technological expertise, machinery and equipment, better management and organization, superior marketing techniques etc.

Indirect foreign investment or portfolio investment takes place when the nationals (includes foreign institutional investors) (FIIs) of one-country purchase shares or debentures floated by industries in some other countries (operating in the stock market).

[...] If there is any transfer of existing shares from any resident or non resistant holder, it requires government approval that is followed by the approval from the Reserve Bank of India 1.5 EVOLUTION OF FDI IN INDIA Post 1948, the industrial policy announced by the government of India focused on the industrial growth and the overall development of the nation. The primary trust was given in the areas of consistent increase in production and a fair and equitable distribution of food grains. [...]


[...] Interpretation of Industrial Development before and after introducing FDI in India It was by the P.V.Narasimha Rao, the Prime Minister of India in 1991 and by Man Mohan Singh the Finance Minister of India in 1991, passed the act of LPG (Liberalization, Privatization and Globalization). From 1991 the actual inflow of FDI started in India. Before independence for a long period of time, FDI was used by colonial powers to exploit Indian resources. Till 1968 India was positively receptive of FDI because India lacked significantly in capital, technology, skills and entrepreneurship. [...]


[...] Company wise Non-life insurers equity share capital with FDI proportion has been presented in Table- 3.2 .B Table- 3.2 .B Equity Share Capital of Non-life Insurance Companies (Rs in crores) General Interpretation Table- 2.2 .B discloses that the ICICI Lombard has invested Rs 220 crore with Rs 57.2 crore with Rs 57.2 crore of foreign equity which is the highest among the non-life insurance players in India, followed by Cholamandalam with an investment of Rs 141.96 crore with Rs 36.91 foreign equity On the other hand, Reliance General has invested Rs 102 crore without any foreign equity. [...]

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