FDI in India

Overview by Globlatrade.net:

FDI in Figures

Thanks to its many assets, especially a high specialization in services, with skilled, English-speaking and inexpensive labor force, and a potential market of one billion inhabitants, India is a country that welcomes more and more foreign investment.  The inflow of FDI in India registered a record of  USD 40 billion in 2008, and the FDI has remained, since then, very stable.  In the context of the global economy crisis, the foreign investors tried to limit their exposition in the surging markets.  However, there was not a decline of FDI in India.  According to the UNCTAD report, India is placed in third position in terms of FDI inflows in 2009.

Foreign Direct Investment 2007 2008 2009
FDI Inward Flow (million USD) 25,001 40,418 34,613
FDI Stock (million USD) 105,790 123,294 163,959
Performance Index*, Ranking on 141 Economies 111 82 63
Potential Index**, Ranking on 141 Economies 84 84 -
Number of Greenfield Investments*** 695 965 742
FDI Inwards (in % of GFCF****) 6.3 9.6 6.6
FDI Stock (in % of GDP) 8.8 9.6 12.9

Source: UNCTAD

Note: * The UNCTAD Inward FDI Performance Index is Based on a Ratio of the Country's Share in Global FDI Inflows and its Share in Global GDP. ** The UNCTAD Inward FDI Potential Index is Based on 12 Economic and Structural Variables Such as GDP, Foreign Trade, FDI, Infrastructures, Energy Use, R&D, Education, Country Risk. *** Green Field Investments Are a Form of Foreign Direct Investment Where a Parent Company Starts a New Venture in a Foreign Country By Constructing New Operational Facilities From the Ground Up. **** Gross Fixed Capital Formation (GFCF) Measures the Value of Additions to Fixed Assets Purchased By Business, Government and Households Less Disposals of Fixed Assets Sold Off or Scrapped.


FDI Inflows By Countries and Industry

Main Investing Countries 2010, in %
Mauritius 42.0
Singapore 9.0
United States 7.0
United Kingdom 5.0
Netherlands 4.0
Cyprus 4.0
Japan 4.0
Main Invested Sectors 2010, in %
Service sector 21.0
Computer software & hardware 9.0
Telecommunications 8.0
Real estate 7.0
Construction 7.0
Energy 4.0
Automobile industry 4.0
Metallurgy 3.0
Oil and natural gas 3.0
Chemical products 2.0

Source: Department of Industrial Policy and Promotion, Ministry of Commerce and Industry

Form of Company Preferred By Foreign Investors
Partnership or Private Limited.
Form of Establishment Preferred By Foreign Investors
Joint Venture company
Sources of Statistics
Investment Commission
Ministry of Finance
Department of Industrial Policy and Promotion
India Brand Equity Foundation

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Why You Should Choose to Invest in India

Strong Points
- A three-tiered democratic system that ensures a stable polical environment;
- a well developed administration and an independent judicial system;
- a vast geography making India a repository of resources;
- an unparallel resource of an educated, hard-working and skilled work force, which includs engineers, management personnel, accountants and lawyers;
- a ever growing consumer base making it one of the world's largest markets for manufactured goods and services;
- a dynamic and robust financial system consisting of a comprehensive banking network, a number of financial institutions both at the national and State levels as well as a vibrant financial market;
- an economy that will continue to grow despite the international economic crisis.
Weak Points
- The corruption (particularly at the federal level)
- political pressures;
- restricted FDI in certain sectors;
- the weakness of infrastructures;
- inadequate security & safety in certain areas.
Government Measures to Motivate or Restrict FDI
The government has set up tax and non-tax incentives to establish new industrial entities in specific sectors, which include energy, ports, highways, electronics and software. The government has also created special areas dedicated to export, called export-processing zones (EPZs) or special economic zones (SEZs), to encourage foreign investment.
The central government development banks and state industrial development banks offer medium to long-term loans and sometimes invest their own capital in new projects.
However, the government has set sector-specific ceilings on foreign assets in certain industries, such as basic and cellular telecommunications services, banking, retail and civil aviation.
For more details visit: Investment Commission of India.

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