Foreign direct investment
A Foreign Direct Investment (FDI) is a controlling ownership in a business enterprise in one country by an entity based in another country.
Foreign direct investment is distinguished from portfolio foreign investment, a passive investment in the securities of another country such as public stocks and bonds, by the element of "control". According to the Financial Times, "Standard definitions of control use the internationally agreed 10 percent threshold of voting shares, but this is a grey area as often a smaller block of shares will give control in widely held companies. Moreover, control of technology, management, even crucial inputs can confer de facto control."
The origin of the investment does not impact the definition as an FDI, i.e., the investment may be made either "inorganically" by buying a company in the target country or "organically" by expanding operations of an existing business in that country.
What is FDI ?
Foreign direct Investement(FDI) is direct Investment by a company in production Located in another country either by buying a company in the country or by Expanding Operations Of an Existing Business In the country.
Types OF FDI
- 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.
Foreign investment was introduced in 1991 under Foreign Exchange Management Act (FEMA), driven by then finance minister Manmohan Singh. As Singh subsequently became the prime minister, this has been one of his top political problems, even in the current times.India disallowed overseas corporate bodies (OCB) to invest in India. India imposes cap on equity holding by foreign investors in various sectors, current FDI in aviation and insurance sectors is limited to a maximum of 49%.
Starting from a baseline of less than $1 billion in 1990, a 2012 UNCTAD survey projected India as the second most important FDI destination (after China) for transnational corporations during 2010–2012. As per the data, the sectors that attracted higher inflows were services, telecommunication, construction activities and computer software and hardware. Mauritius, Singapore, US and UK were among the leading sources of FDI. Based on UNCTAD data FDI flows were $10.4 billion, a drop of 43% from the first half of the last year.
Nine from 10 largest foreign companies investing in India(from April 2000- January 2011) are based in Mauritius . List of the ten largest foreign companies investing in India(from April 2000- January 2011) are as follows
- TMI Mauritius Ltd. ->Rs 7294 crore/$1600 million
- Cairn UK Holding -> Rs6663 crores/$1492 million
- Oracle Global (Mauritius) Ltd. -> Rs 4805 crore/$1083 million
- Mauritius Debt Management Ltd.-> Rs 3800 crore/$956 million
- Vodafone Mauritius Ltd. – Rs 3268 crore/$801 million
- Etisalat Mauritius Ltd. – Rs 3228 crore
- CMP Asia Ltd. – Rs 2638.25 crore/$653.74 million
- Oracle Global Mauritius Ltd. – Rs 2578.88 crore / $563.94 million
- Merrill Lynch(Mauritius) Ltd. – Rs 2230.02 crore / $483.55 million
- Name of the company not given (but the Indian company which got the FDI is Dhabol Power company Ltd.)
Foreign Direct Investment : In Different Sector of Indian Economy
*.Civil aviation- 49%
*.Courier service- 100%
*.Credit rating- 74%
*.FM radio- 26%
*.Multi brand- 51%
*.Print media- 26%
*.Pvt bank- 74%
*.Railway infrastructure- 100%
*.Single brand- 100%
*.Stock exchange- 49%
*.Telecom - 100%
*.White Label ATMs -100%