Wednesday, February 20, 2019
Fdi in Automobile Sector in India Essay
administrator SUMMARYThe contain aims at providing the overall view of the op pose machinate Investment into India, its classifications, trends and importance of FDI in pre and post reform era. Wherein, the post economic reform shows an step-up in the crop of FDI.It emphasises on the importance of FDI in sell empyrean.country wise FDI inflows into the country be cargonfully observed in order to arrive at appropriate conclusions in order to say the trend of FDI inflows into Indian economy.Literature review involves the analysis of various articles and look for papers which were done on the similar lines of study to get an acumen of the FDI and its performance in various sectors and also to understand the research col of the study. The articles and the research papers reviewed talks rough the importance of FDI in sell sector. They also give a comparitive study of FDI in India with China which is laboursaving in making comparisons about the inflow of FDI from various countries indicating the fiscal stability of the country which is the master(prenominal) reason in attracting the irrelevant come outors. In umpteen articles, factors affecting the inflow of FDI in different countries for better understanding of the aspects which be preventing the growth of FDI.Research design gives a brief summary about the over all research carried out. It defines the problem and states the importance of FDI in India in various sectors referring to the countrys economic growth.A brief description of research methodology talks about the type of data collected, its sources and various statistical tools used in analysis. Limitations are some of the factors affecting the study which are also discussed.Research design is then followed by the Analysis and edition of the data collected. Theoretical analysis of various determinants of FDI in India is made in order to understand the effects of determinants in the inflows of FDI in India. St Josephs College Of med icoA study on the exotic behave enthronement in India with reference to retail sectorTrend analysis is used to visualise the FDI inflows from 2011 to 2016 with the data available from 2006 to 2010. The third objective being to study the recent trends in FDI in retail sector, various articles from newspaper and journal is been study to understand the advantages and dis advantages of allowing FDI in multi brand retail sector.Findings mainly reveal the facts which are arrived at from the study it acknowledges the trend analysis of retail FDI from 2006 to 2010, the forecasted retail FDI had a positive trend which shows that there will be a increase in FDI inflows in to India in coming years. Theoretical analysis of determinants of FDI tending us to understand determinants of FDI in Indian context. In an opposite divinatory study to learn the recent trends in FDI in India it was found that it had some(prenominal) positive as well as negative impact on the economy like unemploym ent, high prices monopoly of unknown retailers etc.St Josephs College Of occupationA study on the outside(prenominal) direct coronation in India with reference to retail sector1.1 INTRODUCTION irrelevant Direct Investment, or FDI, is a type of coronation that involves the injection of international funds into an try that ope aims in a different country of origin from the investor. Investors are minded(p) management and voting rights if the level of ownership is greater than or couple to 10% of ordinary shares. Shares ownership amounting to less than the stated amount is termed portfolio enthronization and is not categorized as FDI. (SourceEconomic watch) FDI does not include irrelevant investments in old-hat commercialises. Instead, FDI refers more specifically to the investment of contrasted assets into municipal goods and services.Classifications of opposed Direct InvestmentFDIs can be classified as Inward FDI and Outward FDI, depending on the direction of flow of money. Inward FDI occurs when orthogonal capital is invested in local resources. The factors propelling the growth of inward FDI include tax breaks, low interest rates and grants. Outward FDI, also referred to as direct investment abroad, it means firms in the country din their business to other countries in the form of green field investments, mergers or acquisition etc.The host country aspires to receive FDI inflows because of the potential benefits, that the FDI supplements the domesticated help savings of a nation. Other benefits include devil to superior worldwide technologies, exposure to better management and accounting practices, and improved corporate governance. On the other side, foreign investors are motivated by profits and access to natural resources available in the host country. Therefore, large and growing domestic markets are likely to receive more FDI. Countries with abundant natural resources much(prenominal) as mines, oil militia and manpower attract the foreign investors to invest in that country.A study on the foreign direct investment in India with reference to retail sector1.2 AN OVERALL VIEW OF FDI IN INDIAThe history of FDI in India was located with the establishment of East India Company by the British in 1612. Initially the investment came in the form of loans to brass, railroad track companies and agro based industries like cotton and jute, public utilities engaged in orchard of tea and coffee. During this occlusion there were no efforts to provide economic and financialinfrastructure to the industries therefore the foreign investors had hardly any incentive in manufacturing in India other than creating a raw material base. later on the number one World War, India granted protection to the dawning industries, this profitability of these industries attracted more foreign capital. The inflow of British capital which wasUSD15 million in 1913-14, change magnitude toUSD29 in 1921 andUSD36 million in 1922. In the middle of the two world wars, the investment flowed into a number of consumer industries like cigarettes, matches, rubber, tyres, paints, chemical industries, paper, cement, textile, sugar etc.During the stake World War government established new industries to replace imports as well as to support war efforts. It was during this period that the foreign investment had diversified into engineering industries, chemical industry and oil industry for defence reaction purpose. By 1948 the foreign private investment in India amounted to Rs 2.5 billion. Of which 21 portion was in the manufacturing industries, 16 pct in plantation, 4percent in mining, 27 percent in trading and 14 percent in banking. Indias foreign investment constitution was first initiated in 1949. The guiding principles of the policy were each(prenominal) set abouts Indian or foreign had to conform to the general requirements of the governments industrial policy.Foreign enterprises would be treated in par with Indian enterpr ises.Foreign enterprises would admit freedom to remit the profits to home country, subject to foreign flip-flop considerations.If foreign company were compulsorily acquired, compensation would be paid ona fair and equitable basis andA study on the foreign direct investment in India with reference to retail sectorAs a rule, the major interest, ownership and effective control of an undertaking should be in hands of India.The above policy was to govern the introduction of fresh foreign investments into India in future, yet it was silent on polity of existing foreign private investment in Indian industry. It was but in 1973 that legislative measures were taken to cope up with the problem posed by the existing foreign owned companies. This was done by amending the foreign exchange regulation act (FERA), in 1973 which regulated the entry and channelised the growth of existing foreign investment into the country. (Abraham, 1988)The government felt the need of FDI after(prenominal) i ndependence not only to provide adequate capital but also to gain scientific, technical and industrial know how. The industrial policy of 1965 allowed MNCs to venture in India. However the country faced two main problems in the form of foreign exchange and financial resources mobilization during the support five year plan (1956 -61). Thus to overcome this problem espouse the policy of frequent rectitude participation to foreign enterprises and to accept equity capital in technical collaborations. The government also provided many incentives much(prenominal) as tax concessions, simplification of licensing procedure and de reserving some industries such as drugs, aluminum, heavy electricals, fertilizers etc. in order to improve FDI inflows into the country.This called forth investments from US, Japan, Germany and other countriesinto India. This eventually led to significant outflow of foreign reserves in the form of dividends, profits etc, and the government had to adopt stringent foreign policy in 1970s to overcome this situation. During this period the government adopted a selective and highly restrictive foreign policy as cold as foreign capital, type of FDI and ownerships of foreign companies was concerned. Government setup Foreign Investment Board and enacted Foreign Exchange Regulation scrap in order to regulate flow of foreign capital and FDIA study on the foreign direct investment in India with reference to retail sectorflow to India. In 1980s the government had to make necessary changes in the foreign policy due to the Continuous rise in oil prices, low exports and deterioration in Balance of Payment position. The government encouraged FDI in MNCs thus resulting in incomplete liberalization of the Indian economy.It is during this period the government encourages FDI, allow MNCs to operate in India. Thus, results in partial liberalization of Indian economy. The government introduces reforms in the industrial sector, aimed at increase competency, efficiency and growth in industry through a stable, practical and non-discriminatory policy for FDI flow.In the early nineties, Indian economy faced crude(a) Balance of payment crisis. Exports began to sink. There was a marked increase in petroleum prices because of the gulf war. The outer debts and low foreign exchange reserves for were disabling the economic development of the country. The outflow of foreign currency which was deposited by the Indian NRIs gave a further jolt to Indian economy. The overall Balance of Payment reached at Rs.-4471 crores. Inflation reached at its highest level of 13%. Foreign reserves of the country stood at Rs.11416 crores. The continued political misgiving in the country during this period adds further to worsen the situation.As a result, Indias credit rating fell in the internationalmarket for both short- term and long-term borrowing. All these developments put the economy at that time on the verge of default in respect of external payments lia bility. In this critical face of Indian economy the then finance government minister of India Dr. Manmohan Singh with the help of World Bank and IMF introduced the macro economic stabilisation and structural adjustment program. As a result of these reforms India throw its penetration to FDI inflows and adopted a more liberal foreign policy in order to restore the confidence of foreign investors.Under this new foreign investment policy Government of India constituted FIPB (Foreign Investment Promotion Board) whose main function was to inviteA study on the foreign direct investment in India with reference to retail sectorand facilitate foreign investment through single window system from the Prime Ministers Office. The foreign equity cap was raised to 51 percent for the existing companies.Government had allowed the use of foreign brand names for domestically produced products which was restricted earlier. India also became the member of MIGA (Multilateral Investment Guarantee Agen cy) for protection of foreign investments. Government lifted restrictions on the operations of MNCs by revising the FERA Act 1973. New sectors such as mining, banking, telecommunications, highway construction and management were open to foreign investors as well as to private sector.(Source Sapna Hooda, 2011)1.3 Trends in Foreign Direct Investment Inflow to India after economic reformAfter the initiation of liberal foreign investment policy b y government of India in 1991, FDI inflow has shown an upward trend in stock sense but varied in size over the period of twenty years (1991-92 to 2010-11). FDI inflow in India change magnitude fromUSD129 million in 1991-92 to 27024 million in2005 in. The inflow of FDI to the country has witnessed fluctuations during the period under consideration. It increased fromUSD 129 million in 1991-92 toUSD3557 million in 1997-98, which declined toUSD2155 million in 1999-2000.It increased to a peak ofUSD6130 million in 2001-02 before declining in the co ncomitant years in 2002-03 and 2003-04. The inflow again increased to USD6051 million in 2004-05. There was tremendous growth till 2009-10 to USD37763 and a decline in 2010-11 to USD 27,024. The year wise FDI inflow to India along with Compounded Annual growth Rate (CAGR) is shown in table 1. In terms of CAGR, growth rate of FDI inflow to India during the period 1991-2011, growth rate of FDI inflow to India was negative for six years (1998-99, 1999-2000, 2002-03, 2003-04, 2009-10 and 2010-11) as shown in the table.