Irfan's Report

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A

CONTEMPORARY ISSUE REPORT

ON

CHANGING ROLE OF FOREIGN DIRECT INVESTMENT

Submitted in Partialfulfillment of

the requirements for the Award of the degreeof

Master of Business Administration

SUBMITTED TO: SUBMITTED TO:

Ms. Chitra Sharma Mr. Irfan Ali

(Asst. professor) MBA- II SEM

2009-2011

Maharshi Arvind International Institute Of Technology

{Affiliated to Rajasthan Technical University, Kota}

Kota, Rajasthan

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MAHARISHI ARVIND INTERNATIONAL INSTITUTE OF

TECHNOLOGY, KOTA

(Affiliated to Rajasthan Technical University, Kota, Approved by

All-India Council for Technical Education-Government of India)

CERTIFICATE

This is to certify that Mr.Irfan ali student ofMBA I year at Maharishi Arvind

International Institute of Technology, Kota has submitted Contemporary Issue

Project Report entitled CHANGING ROLE OF FOREIGN DIRECT

INVESTMENT

TheContemporary Issue Project Report has been completed after studying for

one year in MBA course and for partially fulfilling the requirements for award

of degree of Master of Business Administration of Rajasthan Technical

University, Kota.

The Contemporary Issue ProjectReport has been completed under the

guidance OfMs. CHITRA SHARMA faculty of MBA of MAIIT and is as pernorms and guidelines provided.

H.O.D (MAIIT) Academic Guide:

Mr. Sohan L. Sharma Ms.CHITRA SHARMA

KOTA

Date:

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MAHARISHI ARVIND INTERNATIONAL INSTITUTE OF

TECHNOLOGY, KOTA

(Affiliated to Rajasthan Technical University, kota, Approved by

All-India Council For Technical Education-Government Of India)

CERTIFICATE

This is to certify that Mr.Irfan Ali student of MBA I year at Maharishi Arvind

International Institute of Technology, kota has submitted Contemporary Issue

Project Report entitled CHANGING ROLE OF FOREIGN DIRECT

INVESTMENT

The Contemporary Issue Project Report has been completed after studying for

one year in MBA course and for partially fulfilling the requirements for award of

degree of Master of Business Administration of Rajasthan Technical University,

Kota.

The Contemporary Issue Project Report has been evaluated and viva-voce

conducted by the undersigned panel of examiners. The project has been found

satisfactory/ unsatisfactory and is recommended / not recommended for

acceptance.

Prof.: Prof.:

Internal examiner External examinerKOTA

Date:

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DECLARATION

I IRFAN ALI S/O Mr.ASGAR ALI Student of MBA I Year here by declares

that for the purpose of Contemporary Issue Project Report.

I have conducted study on CHANGING ROLE OF FOREIGN DIRECT

INVESTMENT

for the partial fulfillment of M.B.A degree. It is my original work.

Place: IRFAN ALI

Date:

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ACKNOWLEDGEMENT

I express my sincere thanks to my report guide, Ms.CHITRA SHARMA, Asst.

professor of finance, for guiding me right form the inception till the successful

completion of the report. I am also thankful to Mr. Sohan Lal Sharma, HOD

MBA for providing me help and facilities in the campus for my project. I

sincerely acknowledge him/her/them for extending their valuable guidance,

support for literature, critical reviews of project and the report and above all the

moral support he/she/they had provided to me with all stages of this report.

I would also like to thank the supporting staff of finance Department, for their

help and cooperation throughout my report.

IRFAN ALI

MBA II SEM.

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Preface

In present scenario we are surviving in the age of Globalization and we are

facing cut throat competition. So practical knowledge is essential as well as

bookish knowledge for surviving in this competitive era.

Realizing that the practical experience is an academic for all around developing

of a personal, as a part of the course curriculum for (MBA)Master of Business

Administration, the student has to prepare a Contemporary Issue Project

Report.

The objective of Contemporary Issue Project Report is to provide the student

with insight to the practical aspect of organizational working conditions and

environment, and to gain practical knowledge and build confidence.

Indian industry is waking up to the challenges thrown in by market economy,

policies and globalization. To survive in this highly competitive scenario, heavy

emphasis is laid on getting to know the customers basic needs and keepingabreast with the latest technology. The collective efforts of both assume

relevance in this context.

Knowledge of market is essential for the development of the product. The needs

of the consumers change very often and so the companies are forced to

incorporate these changes within themselves.

The objectives of this report are to provide the detailed study of the foreign

direct investment and the impact of the FDI over the economy as well as capital

market.

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Executive summary

This project is based on the CHANGING ROLE OF FOREIGN DIRECT

INVESTMENT

Further, this project has been divided into 4 chapters.

Chapter 1 includes the project profile.

Chapter 2 includes research methodology in which objectives of the report,

Research design and modes of the data collection has been included.

Chapter 3 included findings & conclusions.

Chapter4 included recommendations.

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Certificates

Declaration

Acknowledgement

Preface

Executive summary

Table of Contents

Bibliography

Appendix

S.N Contents Page No.

1. Project Profile 6 - 12

2. Research Methodology 13 - 21

3. Findings & conclusion 22 - 32

4. Recommendation 33- 43

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Introduction

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Foreign direct investment (FDI) is defined as a long-term investment by a

foreign direct investor in an enterprise resident in an economy other than that in

which the foreign direct investor is based. Foreign direct investment (FDI) is

aiso defined as "investment made to acquire lasting interest in enterprises

operating outside of the economy of the investor. The FDI relationship consists

of a parent enterprise and a foreign affiliate which together form a Multinational

corporation (MNC). In order to qualify as FDI the investment must afford the

parent enterprise control over its foreign affiliate. The UN defines control in this

case as owning 10% or more of the ordinary shares or voting power of an

incorporated firm or its equivalent for an unincorporated firm; lower ownership

shares are known asportfolio investment.

Foreign Direct Investment (FDI) flows have increased dramatically in last few

decades. As developing countries, particularly in Asia, remove restrictions and

implement policies to attract FDI inflows, trade and investment have become

increasingly intertwined. As such, there have been growing calls for a

multilateral framework of foreign investment rules to be negotiated under the

auspices of the World Trade Organization (WTO). This paper reviews

developments in FDI flows and their impacts in developing Asia, and the

importance of the policy context in which those flows occur. It discusses

advantages and disadvantages of including FDI in WTO negotiations, and

related policy options for developing Asian economies.

History

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In the years after the Second World War global FDI was dominated by the

United States, as much of the world recovered from the destruction brought by

the conflict. The US accounted for around three-quarters of new FDI (including

reinvested profits) between 1945 and 1960. Since that time FDI has spread to

become a truly global phenomenon. FDI has grown in importance in the global

economy with FDI stocks now constituting over 20 percent of global GDP.

In the US, in the late 1960s and early 1970s, foreign direct investment became

increasingly politicized. Organized labor, convinced that foreign investment

exported jobs, undertook a major campaign to reform the tax provisions which

affected foreign direct investment. The Foreign Trade and Investment Act of

1973 (or the Burke-Hartke Bill) would have eliminated both the tax credit and

tax deferral. The Nixon Administration, influential members of Congress of both

parties, and well-financed lobbying organizations came to the defense of the

multinational. The massive counterattack of the multinational corporations and

their allies defeated this first major challenge to their interests.

Different Types of FDI

By Direction

Inward:

Inward foreign direct investment is a particular form ofinward investment when

foreign capital is invested in local resources.

InwardFDI is encouraged by:

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Tax breaks, subsidies, low interest loans, grants, lifting of certain

restrictions

The thought is that the long term gain is worth more than the short term

loss of income

InwardFDI is restricted by:

Ownership restraints or limits

Differential performance requirements

Outward:

Outward foreign direct investment, sometimes called "direct investment abroad",

is when local capital is invested in foreign resources. Yet it can also be used to

invest in imports and exports from a foreign commodity country.

OutwardFDI is encouraged by:

Government-backed insurance to cover risk

OutwardFDI is restricted by:

Tax incentives or disincentives on firms that invest outside of the home

country or on repatriated profits

Subsidies for local businesses

Leftist government policies that support the nationalization of industries

(or at least a modicum of government control)

Self-interested lobby groups and societal sectors who are supported by

inward FDI or state investment, for example labour markets and

agriculture.

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Security industries are often kept safe from outwards FDI to ensure

localised state control of the military industrial complex

By Target

Greenfield investment

Direct investment in new facilities or the expansion of existing facilities.

Greenfield investments are the primary target of a host nations promotional

efforts because they create new production capacity and jobs, transfer

technology and know-how, and can lead to linkages to the global marketplace.

The Organization for International Investment cites the benefits of greenfield

investment (or insourcing) for regional and national economies to include

increased employment (often at higher wages than domestic firms); investments

in research and development; and additional capital investments. Criticism of the

efficiencies obtained from greenfield investments include the loss of market

share for competing domestic firms. Another criticism of greenfield investment

is that profits are perceived to bypass local economies, and instead flow back

entirely to the multinational's home economy. Critics contrast this to local

industries whose profits are seen to flow back entirely into the domestic

economy.

Mergers and Acquisitions

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Transfers of existing assets from local firms to foreign firms takes place; the

primary type of FDI. Cross-border mergers occur when the assets and operation

of firms from different countries are combined to establish a new legal entity.

Cross-border acquisitions occur when the control of assets and operations is

transferred from a local to a foreign company, with the local company becoming

an affiliate of the foreign company. Unlike greenfield investment, acquisitions

provide no long term benefits to the local economy-- even in most deals the

owners of the local firm are paid in stock from the acquiring firm, meaning that

the money from the sale could never reach the local economy. Nevertheless,

mergers and acquisitions are a significant form of FDI and until around 1997,

accounted for nearly 90% of the FDI flow into the United States. Mergers are the

most common way for multinationals to do FDI.

Horizontal FDI

Horizontal FDI occurs when the multinational undertakes the same production to

activities in multiple countries.

Vertical FDI

Backward Vertical FDI

Where an industry abroad provides inputs for a firm's domestic productions.

Forward Vertical FDI

Where an industry abroad sells the outputs of a firm's domestic production.

By Motive

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FDI can also be categorized based on the motive behind the investment from the

perspective of the investing firm:

Resource-Seeking

Investments which seek to acquire factors of production that are more efficient

than those obtainable in the home economy of the firm. In some cases, these

resources may not be available in the home economy at all (e.g. cheap labor and

natural resources). This typifies FDI into developing countries, for example

seeking natural resources in the Middle East and Africa, or cheap labor in

Southeast Asia and Eastern Europe.

Market-Seeking

Investments which aim at either penetrating new markets or maintaining existing

ones. FDI of this kind may also be employed as defensive strategy; it is argued

that businesses are more likely to be pushed towards this type of investment out

of fear of losing a market rather than discovering a new one. This type of FDI

can be characterized by the foreign Mergers and Acquisitions in the 1980s by

Accounting, Advertising and Law firms.

Efficiency-Seeking

Investments which firms hope will increase their efficiency by exploiting thebenefits ofeconomies of scale and scope, and also those of common ownership.

It is suggested that this type of FDI comes after either resource or market

seeking investments have been realized, with the expectation that it further

increases the profitability of the firm.

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]

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Research:

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In fact research is an art of scientific investigation. research can

be define as logical & systematized application of the fundamentals of science to

the general and overall questions of a study and scientific techniques which

provide precise tools; specific procedure and technical means rather than

philosophical means for ordering& gathering the data prior to their logical &

manipulation.

In short the search for knowledge through objectives & systematic method for

finding solution to a problem is research. Research is basic method to evaluate;

analyze and collecting the facts about the particular organization.

Research methodology-:

Research methodology is a way to systematically

solve the research problem. It includes the various steps that are generally

adopted by a researcher in studying of the research problem along with reason

behind them.

When we study research methodology concerning a research problem; a number

of questions are answered such as-:

1. Why a research study has been undertaken?

2. How the research problem has been defined?

3. In what way the hypothesis has been formulated?

4. What data have been collected and what particular method has been adopted?

5. What particular techniques of analysis of data have been used.

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Research process

Research objectives

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Problem

definition

Extensive

literature survey

Developing the

hypothesis

Determining sample

design

Preparing the

research design

Analysis of dataHypothesis testing

Execution of the

project

Collecting of data

Generalizations

&Interpretation

Preparation of theReport


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A problem well defined is half solved

Poorly defined problems cause confusion and dont allow the

researcher to develop a good research design. The purpose of research is to

discover answers to question through the application or scientific procedure. The

main aim of research is to find out the truth which is hidden and which has been

not discovering as yet.

The objectives of this project are following.

To identify the actual status of FDI.

What kind of changes has brought by the FDI in the world economy.

In what condition FDI may be beneficial for a country.

What type of FDI can bring what type of benefits.

Which country has created the highest potentiality in FDI, which is the

leading country in respect of this.

Research design

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A research design is simply the framework or plan for a study that is used as a

guide in collecting the data. It is blue print that is followed in completing a

study

A research design is the arrangement of condition for collection

and analysis the data in a manner that aims to combine relevance to their

research purpose with economy in procedure

In fact research design is the conceptual structure within which

research is conducted. In constitutes the blue print for the collection;

measurement & analysis of data.

It is plan that specifies the sources & types of the information relevant to

the research problem. It also includes the time and cost budget. Since most

studies are done under these constraints.

Research may be the following types-;

1. Descriptive

2. Analytical

3. Conceptual

This project contains analytical research. The basic characteristics of

this method are that the researcher has no control over the variables. This

research is very helpful to find out the causes.

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DATA COLLECTION

Data collection is very necessary to find the approximate opinion of customers.It provides a platform for taking the decision and very helpful in finding the

main problem. Through the data collection one can achieve his/her objectives.

The tool of data collection in this project is secondary data collection.

Secondary data may be described as those data that have been already collected

and researcher has to analyze those data.

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FINDINGS

1. FDI Policy

FDI upto 100% is allowed under the automatic route in all activities/sectors

except the following which will require approval of the Government:

Activities/items that require an Industrial License;

Proposals in which the foreign collaborator has a previous/existing

venture/ tie up in India in the same or allied field,

All proposals relating to acquisition of shares in an existing Indian

company by a foreign/NRI investor.

All proposals falling outside notified sectoral policy/caps or under sectors

in which FDI is not permitted.

FDI policy is reviewed on an ongoing basis and measures for its further

liberalization are taken. Change in sectoral policy/sectoral equity cap is notified

from time to time through Press Notes by the Secretariat for Industrial

Assistance (SIA) in the Department of Industrial Policy & Promotion. Policy

announcement by SIA are subsequently notified by RBI under FEMA. All Press

Notes are available at the website of Department of Industrial Policy &

Promotion.

Automatic Route

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FDI Policy permits FDI up to 100 % from foreign/NRI investor without prior

approval in most of the sectors including the services sector under automatic

route. FDI in sectors/activities under automatic route does not require any prior

approval either by the Government or the RBI. The investors are required to

notify the Regional office concerned of RBI of receipt of inward remittances

within 30 days of such receipt and will have to file the required documents with

that office within 30 days after issue of shares to foreign investors.

Government approval route

All activities which are not covered under the automatic route, prior Government

approval for FDI/NRI shall be necessary. Areas/sectors/activities hitherto not

open to FDI/NRI investment shall continue to be so unless otherwise decided

and notified by Government. An investor can make an application for prior

Government approval even when the proposed activity is under the automatic

route.

Procedure for obtaining Government approval -FIPB

All proposals for foreign investment requiring Government approval are

considered for approval by the Foreign Investment Promotion Board (FIPB). The

FIPB also grants composite approvals involving foreign investment/foreigntechnical collaboration.

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For seeking the approval for FDI other than NRI Investments and 100% EOU,

applications in form FC-IL should be submitted to the Department of Economic

Affairs (DEA), Ministry of Finance.

FDI from NRI & for 100% EOU

FDI applications with NRI Investments and 100% EOU should be submitted to

the Public Relation & Complaint (PR&C) Seetion of Secretariat of Industrial

Assistance (SIA), Department of Industrial Policy & Promotion.

Proposals requiring Govts Approval

Application for proposals requiring prior Govts approval should be submitted to

FIPB in FC-IL form. Plain paper applications carrying all relevant details are

also accepted. No fee is payable. The following information should form part of

the proposals submitted to FIPB: -

(a) Whether the applicant has had or has any previous/existing financial

technical collaboration or trade mark agreement in India in the same or alliedfield for which approval has been sought; and

(b) If so, details thereof and the justification for proposing the new venture/

technical collaboration (including trade marks).

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General Permission of RBI under FEMA

RBI has granted general permission under Foreign Exchange Management Act

(FEMA) in respect of proposals approved by the Government. Indian companiesgetting foreign investment approval through FIPB route do not require any

further clearance from RBI for the purpose of receiving inward remittance and

issue of shares to the foreign investors. The companies are, however, required to

notify the Regional office concerned of the RBI of receipt of inward remittances

within 30 days of such receipt and to file the required documents with the

concerned Regional offices of the RBI within 30 days after issue of shares to the

foreign investors or NRIs.

Investment by Existing companies

Besides new companies, automatic route for FDI/NRI investment is also

available to the existing companies proposing to induct foreign equity. For

existing companies with an expansion programme, the additional requirements

include

(i) The increase in equity level resulting from the expansion of the equity base of

the existing company without the acquisition of existing shares by NRI/foreign

investors,

(ii) The money to be remitted should be in foreign currency and

(iii) proposed expansion programme should be in the sector(s) under automaticroute. Otherwise, the proposal would need Government approval through the

FIPB. For this the proposal must be supported by a Board Resolution of the

existing Indian company.

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For existing companies without an expansion programme, the additional

requirements for eligibility for automatic approval are

(i) that they are engaged in the industries under automatic route,

(ii) the increase in equity level must be from expansion of the equity base

and

(iii) The foreign equity must be in foreign currency.

The earlier SEBI requirement, applicable to public limited companies, that

shares allotted on preferential basis shall not be transferable in any manner for a

period of 5 years from the date of their allotment has now been modified to the

extent that not more than 20 per cent of the entire contribution brought in by

promoter cumulatively in public or preferential issue shall be locked-in.

Participation by international financial institutions

Equity participation by international financial institutions such as ADB, IFC,

CDC, DEG, etc. in domestic companies is permitted through automatic route

subject to SEBI/RBI regulations and sector specific cap on FDI.

Issue and valuation of shares in case of existing companies

In case of listed companies, according to RBI/SEBI guidelines, the issue price

shall be either at:

(a) The average of the weekly high and low of the closing prices of the related

shares quoted on the stock exchange during the six months preceding the

relevant date or

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(b) The average of the weekly high and low of the closing prices of the related

shares quoted on the stock exchange during the two weeks preceding the

relevant date.

The stock exchange referred to is the one at which the highest trading volume in

respect of the share of the company has been recorded during the preceding six

months prior to the relevant date.

The relevant date is the date thirty days prior to the date on which the meeting of

the General Body of the shareholder is convened.

In all other cases a company may issue shares as per the RBI regulation in

accordance with the guidelines issued by the erstwhile Controller of Capital

Issues.

Other relevant guidelines of Securities and Exchange Board of India (SEBI)/

RBI including the SEBI (Substantial Acquisition of Shares and Takeover)

Regulations, 1997, wherever applicable, would need to be followed. Further

information could be obtained at Security and Exchange Board of Indias (SEBI)

website : www.sebi.gov.in

ADR/GDR

An Indian corporate can raise foreign currency resources abroad through the

issue of American Depository Receipts (ADRs) or Global Depository Receipts

(GDRs). Regulation 4 of Schedule I of FEMA Notification no. 20 allows an

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Indian company to issue its Rupee denominated shares to a person resident

outside India being a depository for the purpose of issuing Global Depository

Receipts (GDRs) and/ or American Depository Receipts (ADRs), subject to the

conditions that:

The ADRs/GDRs are issued in accordance with the Scheme for issue of

Foreign Currency Convertible Bonds and Ordinary Shares (Through

Depository Receipt Mechanism) Scheme, 1993 and guidelines issued by

the Central Government thereunder from time to time

The Indian company issuing such shares has an approval from the

Ministry of Finance, Government of India to issue such ADRs and/or

GDRs or is eligible to issue ADRs/ GDRs in terms of the relevant scheme

in force or notification issued by the Ministry of Finance, and

There are no end-use restrictions on GDR/ADR issue proceeds, except for

an express ban on investment in real estate and stock markets.

The FCCB issue proceeds need to conform to external commercial

borrowing end use requirements; in addition, 25 per cent of the FCCB

proceeds can be used for general corporate restructuring

Is not otherwise ineligible to issue shares to persons resident outside India

in terms of these Regulations.

There is no limit upto which an Indian company can raise ADRs/GDRs.

However, the Indian company has to be otherwise eligible to raise foreign

equity under the extant FDI policy.

A company engaged in the manufacture of items covered under Automatic route,

whose direct foreign investment after a proposed GDRs/ADRs/FCCBs issue is

likely to exceed the percentage limits under the automatic route, or which is

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implementing a project falling under Government approval route, would need to

obtain prior Government clearance through FIPB before seeking final approval

from the Ministry of Finance.

Foreign currency convertible Bonds

FCCBs are issued in accordance with the scheme [the Scheme for issue of

Foreign Currency Convertible Bonds and Ordinary Shares (Through Depository

Receipt Mechanism) Scheme, 1993] and subscribed by a non-resident in foreign

currency and convertible into ordinary shares of the issuing company in any

manner, either in whole, or in part, on the basis of any equity related warrants

attached to debt instruments;

Eligibility

The eligibility for issue of Convertible Bonds or Ordinary Shares of Issuing

Company is given as under:

(i) An issuing company desirous of raising foreign funds by issuing Foreign

Currency Convertible Bonds or ordinary shares for equity issues through Global

Depositary Receipt

(ii) Can issue FCCBs upto USD 50 Million under the Automatic route,

(iii) From USD 50 100 Million, the companies have to take RBI approval,

(iv) From USD 100 Million and above, prior permission of the Department ofEconomic Affairs is required.

Preference shares

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Foreign investment through preference shares is treated as foreign direct

investment. Proposals are processed either through the automatic route or FIPB

as the case may be, as per the following guidelines:-

(i) Foreign investment in preference share are considered as part of share capital

and fall outside the External Commercial Borrowing (ECB) guidelines/ cap.

(ii) Preference shares to be treated as foreign direct equity for purpose of sectoral

caps on foreign equity, where such caps are prescribed, provided they carry a

conversion option. Preference shares structured without such conversion option

fall outside the foreign direct equity cap.

(iii) Duration for conversion shall be as per the maximum limit prescribed under

the Companies Act or what has been agreed to in the shareholders agreement

whichever is less.

(iv) The dividend rate would not exceed the limit prescribed by the Ministry of

Finance.

(v) Issue of preference shares should conform to guidelines prescribed by the

SEBI and RBI and other statutory requirements.

FDI in EOUs/SEZs/Industrial Park/EHTP/STP

Special Economic Zones (SEZs)

100% FDI is permitted under automatic route for setting up of special Economic

Zone.Units in SEZ qualify for approval through automatic route subject to sectoral

norms. Details about the type of activities permitted are available in the Foreign

Trade Policy issued by Department of Commerce. Proposals not covered under

the automatic route require approval by FIPB..

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100% Export Oriented Units (EOUs)

100% FDI is permitted under automatic route for setting up 100% EOU, subject

to sectoral norms. Proposals not covered under the automatic route would be

considered and approved by FIPB.

Industrial Park

100% FDI is permitted under automatic route for setting up of Industrial Park

Electronic Hardware Technology Park (EHTP) Units

All proposals for FDI/NRI investment in EHTP Units are eligible for approval

under automatic route. For proposals not covered under automatic route, the

applicant should seek separate approval of the FIPB.

Software Technology park Units

All proposals for FDI/NRI investment in STP Units are eligible for approval

under automatic route. For proposals not covered under automatic route, the

applicant should seek separate approval of the FIPB

Capitalization of Import Payables

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FDI inflows are required to be under the following modes;

I. By inward remittances through normal banking channels or

ii. By debit to the specified account of person concerned maintained in an

authorized dealer/authorized bank. Issue of equity to non-residents against other

modes of FDI inflows or in

kind is not permissible. However, Issue of equity shares against lump sum fee,

royalty payable and external commercial borrowings (ECBs) in convertible

foreign currency are permitted, subject to meeting all applicable tax liabilities

and sector specific guidelines.

Conclusion

Foreign direct investment (FDI) is an investment involving a long-term

relationship and reflecting a lasting interest and control by a resident entity in

one economy (foreign direct investor or parent enterprise) in an enterprise

resident in an economy other than that of the foreign direct investor (FDI

enterprise or affiliate enterprise or foreign affiliate). FDI implies that the investor

exerts a significant degree of influence on the management of the enterprise

resident in the other economy. Such investment involves both the initial

transaction between the two entities and all subsequent transactions between

them and among foreign affiliates, both incorporated and unincorporated. FDImay be undertaken by individuals as well as business entities.

Foreign direct investment (FDI) continues to gain in importance as a form of

international economic transactions and as an instrument of international

economic integration. The rate of growth of worldwide FDI inflows in the past

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two decades has substantially exceeded that of worldwide gross domestic

product (GDP), exports and domestic investment. Transnational corporations

(TNCs) account for an increasing share and, in some cases, a substantial part of

the assets, employment, domestic capital formation, research and development,

sales and trade of many countries and have become one of the driving forces of

integration in the world economy.

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International investment position

A country's international investment position (IIP) is a financial statement setting

out the value and composition of that country's external financial assets and

liabilities. The IIP is one component of the capital account of a country'sbalance

of payments, containing for example stock of companies, real estate, financial

instruments, and so on. By comparison, imports and exports of goods and

services are part of the current account.

The difference between a country's external financial assets and liabilities is the

net international investment position (NIIP).

International Investment Position = domestically owned foreign assets - foreign

owned domestic assets.

India:

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http://en.wikipedia.org/wiki/Balance_of_paymentshttp://en.wikipedia.org/wiki/Balance_of_paymentshttp://en.wikipedia.org/wiki/Financial_instrumenthttp://en.wikipedia.org/wiki/Financial_instrumenthttp://en.wikipedia.org/wiki/Balance_of_paymentshttp://en.wikipedia.org/wiki/Balance_of_paymentshttp://en.wikipedia.org/wiki/Financial_instrumenthttp://en.wikipedia.org/wiki/Financial_instrument


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China

So by the above facts, findings and conclusion it has recommended that foreign

direct investment is direct affects the growth of the economy of the country and

the ministry of the finance and the trade business houses should try to enhance it

by various promotional activities such as:-

1. reifies in foreign investment policy

2. subsidy should be given to the investors

3. Flexible foreign exchange management act.

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BIBLIOGRAPHY

1. BOOKS

1. Anyahwu, J.C., Housing Finance in Nigeria: The Role of Financial Institutions,

Prajnan, Vol. XIX, No. 4, Oct-Dec. 1990.2. Baltensperger, Ernst, Alternative Approaches to the Theory of the Banking

Firm, Monetary Economics, Vol. 6, 1980.

2.JOURNALS

1. Aai, K., The Optimal Insurance Against Consumption Price Risks, Hitotsubashi

Journal of Economics, Vol. 35, No. 1, June 1994.

2. Adams, T.F.M. and Hoshii, Iwao, A Financial History of the New Japan,

Kodansha

International Ltd., Lokyo 1972.

3.MAGAZINES & NEWS PAPERS

1.BusinessIndia

2.BUSINESS LINE Financial Daily from THE HINDU group of

publications

3.Saturday, Nov 09, 2002

4. Hindustan times

5. Marketing environment

4 WEBSITES

1. http://www.gnr2.org/html/2007/4-19.pdf

42
http://www.gnr2.org/html/2007/4-19.pdfhttp://www.gnr2.org/html/2007/4-19.pdfhttp://www.gnr2.org/html/2007/4-19.pdf


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List of countries by received FDI

This is a list of countries by FDI (Foreign direct investment) in 2006 mostly

based on CIA Factbookaccessed in January 2008.

Rank by sovereign state Country/Region FDI (in US$)

1. United States 1,818,000,000,000

2. United Kingdom 1,135,000,000,000

3. Hong Kong 769,100,000,000

4. Germany 763,900,000,000

5. China 699,500,000,000

6. France 697,400,000,000

7. Belgium 633,500,000,000

8. Netherlands 450,900,000,000

9. Spain 439,400,000,000

10. Canada 398,400,000,000

11. Italy 294,800,000,000

12. Russia 271,600,000,00013. Australia 246,200,000,000

14. Mexico 236,200,000,000

15. Switzerland 232,500,000,000

16. Brazil 214,300,000,000

17. Sweden 199,600,000,000

18. Singapore 189,700,000,000

19. Ireland 179,000,000,000

20. Denmark 138,400,000,000

21. South Korea 118,000,000,00022. Poland 104,200,000,000

23. Hungary 96,610,000,000

24. Japan 88,620,000,000

25. Portugal 85,520,000,000

26. Turkey 84,530,000,000

27. Chile 84,070,000,000

44
http://en.wikipedia.org/wiki/Foreign_direct_investmenthttps://www.cia.gov/library/publications/the-world-factbook/rankorder/2198rank.htmlhttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/Hong_Konghttp://en.wikipedia.org/wiki/Germanyhttp://en.wikipedia.org/wiki/Chinahttp://en.wikipedia.org/wiki/Francehttp://en.wikipedia.org/wiki/Belgiumhttp://en.wikipedia.org/wiki/Netherlandshttp://en.wikipedia.org/wiki/Spainhttp://en.wikipedia.org/wiki/Canadahttp://en.wikipedia.org/wiki/Italyhttp://en.wikipedia.org/wiki/Russiahttp://en.wikipedia.org/wiki/Australiahttp://en.wikipedia.org/wiki/Mexicohttp://en.wikipedia.org/wiki/Switzerlandhttp://en.wikipedia.org/wiki/Brazilhttp://en.wikipedia.org/wiki/Swedenhttp://en.wikipedia.org/wiki/Singaporehttp://en.wikipedia.org/wiki/Republic_of_Irelandhttp://en.wikipedia.org/wiki/Denmarkhttp://en.wikipedia.org/wiki/South_Koreahttp://en.wikipedia.org/wiki/Polandhttp://en.wikipedia.org/wiki/Hungaryhttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/Portugalhttp://en.wikipedia.org/wiki/Turkeyhttp://en.wikipedia.org/wiki/Chilehttp://en.wikipedia.org/wiki/Foreign_direct_investmenthttps://www.cia.gov/library/publications/the-world-factbook/rankorder/2198rank.htmlhttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/Hong_Konghttp://en.wikipedia.org/wiki/Germanyhttp://en.wikipedia.org/wiki/Chinahttp://en.wikipedia.org/wiki/Francehttp://en.wikipedia.org/wiki/Belgiumhttp://en.wikipedia.org/wiki/Netherlandshttp://en.wikipedia.org/wiki/Spainhttp://en.wikipedia.org/wiki/Canadahttp://en.wikipedia.org/wiki/Italyhttp://en.wikipedia.org/wiki/Russiahttp://en.wikipedia.org/wiki/Australiahttp://en.wikipedia.org/wiki/Mexicohttp://en.wikipedia.org/wiki/Switzerlandhttp://en.wikipedia.org/wiki/Brazilhttp://en.wikipedia.org/wiki/Swedenhttp://en.wikipedia.org/wiki/Singaporehttp://en.wikipedia.org/wiki/Republic_of_Irelandhttp://en.wikipedia.org/wiki/Denmarkhttp://en.wikipedia.org/wiki/South_Koreahttp://en.wikipedia.org/wiki/Polandhttp://en.wikipedia.org/wiki/Hungaryhttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/Portugalhttp://en.wikipedia.org/wiki/Turkeyhttp://en.wikipedia.org/wiki/Chile


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28. Malaysia 77,700,000,000

29. Czech Republic 77,460,000,000

30. South Africa 77,350,000,000

31. Thailand 69,060,000,000

32. India 67,720,000,000

33. Austria 66,320,000,00034. Finland 64,180,000,000

35. New Zealand 63,120,000,000

36. Argentina 60,040,000,000

37. Norway 56,700,000,000

38. Israel 47,390,000,000

39. Venezuela 45,400,000,000

40. Colombia 45,010,000,000

41. Taiwan 44,880,000,000

42. UAE 42,580,000,00043. Greece 41,320,000,000

44. Romania 40,690,000,000

45. Egypt 37,660,000,000

46. Nigeria 31,660,000,000

47. Kazakhstan 29,820,000,000

48. Vietnam 26,270,000,000

49. Morocco 23,500,000,000

50. Indonesia 21,910,000,000

51. Tunisia 21,220,000,00052. Ukraine 21,190,000,000

53. Bulgaria 20,860,000,000

54. Peru 19,360,000,000

55. Slovakia 19,080,000,000

56. Croatia 18,330,000,000

57. Angola 17,600,000,000

58. Philippines 16,370,000,000

59. Estonia 16,320,000,000

60. Ecuador 14,670,000,00061. Pakistan 14,670,000,000

62. Algeria 14,370,000,000

63. Azerbaijan 12,580,000,000

64. Bahrain 11,550,000,000

65. Cuba 11,240,000,000

66. Lithuania 10,940,000,000

45
http://en.wikipedia.org/wiki/Malaysiahttp://en.wikipedia.org/wiki/Czech_Republichttp://en.wikipedia.org/wiki/South_Africahttp://en.wikipedia.org/wiki/Thailandhttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Austriahttp://en.wikipedia.org/wiki/Finlandhttp://en.wikipedia.org/wiki/New_Zealandhttp://en.wikipedia.org/wiki/Argentinahttp://en.wikipedia.org/wiki/Norwayhttp://en.wikipedia.org/wiki/Israelhttp://en.wikipedia.org/wiki/Venezuelahttp://en.wikipedia.org/wiki/Colombiahttp://en.wikipedia.org/wiki/Taiwanhttp://en.wikipedia.org/wiki/UAEhttp://en.wikipedia.org/wiki/Greecehttp://en.wikipedia.org/wiki/Romaniahttp://en.wikipedia.org/wiki/Egypthttp://en.wikipedia.org/wiki/Nigeriahttp://en.wikipedia.org/wiki/Kazakhstanhttp://en.wikipedia.org/wiki/Vietnamhttp://en.wikipedia.org/wiki/Moroccohttp://en.wikipedia.org/wiki/Indonesiahttp://en.wikipedia.org/wiki/Tunisiahttp://en.wikipedia.org/wiki/Ukrainehttp://en.wikipedia.org/wiki/Bulgariahttp://en.wikipedia.org/wiki/Peruhttp://en.wikipedia.org/wiki/Slovakiahttp://en.wikipedia.org/wiki/Croatiahttp://en.wikipedia.org/wiki/Angolahttp://en.wikipedia.org/wiki/Philippineshttp://en.wikipedia.org/wiki/Estoniahttp://en.wikipedia.org/wiki/Ecuadorhttp://en.wikipedia.org/wiki/Pakistanhttp://en.wikipedia.org/wiki/Algeriahttp://en.wikipedia.org/wiki/Azerbaijanhttp://en.wikipedia.org/wiki/Bahrainhttp://en.wikipedia.org/wiki/Cubahttp://en.wikipedia.org/wiki/Lithuaniahttp://en.wikipedia.org/wiki/Malaysiahttp://en.wikipedia.org/wiki/Czech_Republichttp://en.wikipedia.org/wiki/South_Africahttp://en.wikipedia.org/wiki/Thailandhttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Austriahttp://en.wikipedia.org/wiki/Finlandhttp://en.wikipedia.org/wiki/New_Zealandhttp://en.wikipedia.org/wiki/Argentinahttp://en.wikipedia.org/wiki/Norwayhttp://en.wikipedia.org/wiki/Israelhttp://en.wikipedia.org/wiki/Venezuelahttp://en.wikipedia.org/wiki/Colombiahttp://en.wikipedia.org/wiki/Taiwanhttp://en.wikipedia.org/wiki/UAEhttp://en.wikipedia.org/wiki/Greecehttp://en.wikipedia.org/wiki/Romaniahttp://en.wikipedia.org/wiki/Egypthttp://en.wikipedia.org/wiki/Nigeriahttp://en.wikipedia.org/wiki/Kazakhstanhttp://en.wikipedia.org/wiki/Vietnamhttp://en.wikipedia.org/wiki/Moroccohttp://en.wikipedia.org/wiki/Indonesiahttp://en.wikipedia.org/wiki/Tunisiahttp://en.wikipedia.org/wiki/Ukrainehttp://en.wikipedia.org/wiki/Bulgariahttp://en.wikipedia.org/wiki/Peruhttp://en.wikipedia.org/wiki/Slovakiahttp://en.wikipedia.org/wiki/Croatiahttp://en.wikipedia.org/wiki/Angolahttp://en.wikipedia.org/wiki/Philippineshttp://en.wikipedia.org/wiki/Estoniahttp://en.wikipedia.org/wiki/Ecuadorhttp://en.wikipedia.org/wiki/Pakistanhttp://en.wikipedia.org/wiki/Algeriahttp://en.wikipedia.org/wiki/Azerbaijanhttp://en.wikipedia.org/wiki/Bahrainhttp://en.wikipedia.org/wiki/Cubahttp://en.wikipedia.org/wiki/Lithuania


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67. Dominican Republic 10,670,000,000

68. Qatar 10,630,000,000

69. Jordan 8,154,000,000

70. Slovenia 7,459,000,000

71. Costa Rica 6,897,000,000

72. Latvia 6,418,000,00073. El Salvador 4,377,000,000

74. Iran 4,345,000,000

75. Libya 4,305,000,000

76. Bangladesh 4,208,000,000

77. Kenya 1,169,000,000

78. Bosnia and

Herzegovina

833,482,000

79. Kuwait 818,000,000
http://en.wikipedia.org/wiki/Dominican_Republichttp://en.wikipedia.org/wiki/Qatarhttp://en.wikipedia.org/wiki/Jordanhttp://en.wikipedia.org/wiki/Sloveniahttp://en.wikipedia.org/wiki/Costa_Ricahttp://en.wikipedia.org/wiki/Latviahttp://en.wikipedia.org/wiki/El_Salvadorhttp://en.wikipedia.org/wiki/Iranhttp://en.wikipedia.org/wiki/Libyahttp://en.wikipedia.org/wiki/Bangladeshhttp://en.wikipedia.org/wiki/Kenyahttp://en.wikipedia.org/wiki/Bosnia_and_Herzegovinahttp://en.wikipedia.org/wiki/Bosnia_and_Herzegovinahttp://en.wikipedia.org/wiki/Kuwaithttp://en.wikipedia.org/wiki/Dominican_Republichttp://en.wikipedia.org/wiki/Qatarhttp://en.wikipedia.org/wiki/Jordanhttp://en.wikipedia.org/wiki/Sloveniahttp://en.wikipedia.org/wiki/Costa_Ricahttp://en.wikipedia.org/wiki/Latviahttp://en.wikipedia.org/wiki/El_Salvadorhttp://en.wikipedia.org/wiki/Iranhttp://en.wikipedia.org/wiki/Libyahttp://en.wikipedia.org/wiki/Bangladeshhttp://en.wikipedia.org/wiki/Kenyahttp://en.wikipedia.org/wiki/Bosnia_and_Herzegovinahttp://en.wikipedia.org/wiki/Bosnia_and_Herzegovinahttp://en.wikipedia.org/wiki/Kuwait

Irfan's Report

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