FDI Policies and Licensed Sectors in India

Transcription

1 FDI Policies and Licensed Sectors in India GUDURU NARESH Research scholar, Assoc Professor Department of Management Sciences, Balaji Institute of Technology & Science, Narsampet, Warangal. mail : nareshbies@gmail.com & SAMUDRALA NAVEEN, Kakatiya University - Warangal Mail id: samunaveen@gmail.com Abstract India is identified as one of the most attractive long-term investment destinations. The presence of large domestic market, fairly well developed financial architecture and skilled human resources, it can attract much larger foreign investments than it has done in the past. India's present international investment regime facilitates easy entry of foreign capital in almost all areas subject to specific limits on foreign ownership. Entry options have not only become procedurally simpler, but prospects for higher yields from investment have also become brighter. But further boost to Foreign Direct Investment (FDI) will depend significantly on further liberalization of its foreign investment regime. The paper provides the brief synthesis of the regime and analyzes the economic and policy variables as the important determinants of FDI inflows to India. It also emphasizes the areas where the policy needs to be reviewed and to be made more conducive for foreign investment. Key Words: Foreign Direct Investment (FDI), Foreign Portfolio Investment (FPI), Gross Domestic Product (GDP). FDI Policies and licenses sectors I. INTRODUCTION One of the most prominent and striking feature of today s globalised world is the exponential growth of FDI in both developed and developing countries. In the last two decades the pace of FDI flows are rising faster than almost all other indicators of economic activity worldwide. Developing countries, in particular, considered FDI as the safest type of external finance as it not only supplement domestic savings, foreign reserves but promotes growth even more through spillovers of technology, skills, increased innovative capacity, and domestic competition. Now a day, FDI has become an instrument of international economic integration. Located in South Asia, India is the 7th largest, and the 2nd most populated country in the world. India has long been known for the diversity of its culture, for the inclusiveness of its people and for the convergence of geography. Today, the world s largest democracy has come to the forefront as a global resource for industry in manufacturing and services. Its pool of technical skills, its base of an English speaking populace with an increasing disposable income and its burgeoning market has all combined to enable India emerge as a viable partner to global industry. Recently, investment opportunities in India are at a peak. This chapter covers the trends and patterns of FDI inflows at World, Asian and Indian level during > RJSSM: Volume: 06, Number: 07, November 2016 Page 100

2 2. FDI policies in permitted sectors in India Sl. Sector/Activity % of FDI Entry Route No Cap/Equity AGRICULTURE 1 Agriculture & Animal Husbandry a) Floriculture, Horticulture, Apiculture and Cultivation of Vegetables & Mushrooms under controlled conditions. b) Development and production of Seeds and planting material. 100% Automatic c) Animal Husbandry, Pisciculture, Aquaculture under controlled conditions and d) services related to agro and allied sectors Note- Besides the above, FDI is not allowed in any other agricultural sector/activity Tea Plantation Tea sector including tea plantations. 100% Note- Besides the above, FDI is not allowed in any other plantation sector/activity Other conditions: 1) Compulsory divestment of 26% equity of the company in favour of an Indian partner/indian public within a period of 5 years 3 Mining 100% Automatic a) Mining and Exploration of metal and non metal ores including diamond, gold, silver but excluding titanium bearing minerals and its ores; subject to Mines and Minerals (Development & Regulation) Act, b) Coal and Lignite 1) Coal and Lignite mining for captive consumption by power 100% Automatic projects, iron & steel and cements units and other eligible activities permitted under and subject to provisions of Coal and Mines (Nationalization) Act, ) Setting up coal processing plants like washeries subject to the condition that co. shall not do coal mining and shall not sell washed coal from its processing unit in open market 100% Automatic c) Mining and mineral separation of titanium bearing minerals and ores, its value addition and integrated activities. Mining and mineral separation of titanium bearing minerals and 100% ores, its value addition and integrated activities. 4 Petroleum & Natural Gas: Exploration activities of oil and 100% Automatic natural gas fields, infrastructure related to marketing of petroleum products and natural gas, marketing of natural gas and petroleum products, petroleum product pipelines, natural gas/pipelines, LNG Regasification infrastructure, market study and formulation and Petroleum refining in the private sector, subject to the existing sectoral policy and regulatory framework in the oil marketing sector and the policy of the on private participation in exploration of oil and the discovered fields of national oil companies Petroleum refining by the Public Sector Undertakings (PSU), 49% without any disinvestment or dilution of domestic equity in the existing PSUs. 5 Manufacturing Manufacture of items reserved for production in Micro and Small Enterprises (MSEs) FDI in MSEs will be subject to the sectoral caps, entry routes and other relevant sectoral regulations. Any industrial undertaking which is not a Micro or Small Scale Enterprise, but manufactures items reserved for the MSE sector would require route where foreign investment is more than 24% in the capital. Such an undertaking would also require an Industrial License under the Industries (Development & Regulation) Act 1951, for such manufacture. The issue of Industrial License is subject to a few general conditions and the specific condition that the Industrial Undertaking shall undertake to export a minimum of 50% of the new or additional annual production of the MSE reserved items to be achieved within a maximum period of three years. The export obligation would be applicable from the date of commencement of commercial production and in accordance with the provisions of section 11 of the Industries (Development & Regulation) Act Defence Industry subject to Industrial license under the 26% > RJSSM: Volume: 06, Number: 07, November 2016 Page 101

3 Industries (Development & Regulation) Act Service Sector a) Broadcasting Terrestrial Broadcasting FM (FM Radio) subject to such terms and conditions as specified from time to time by Ministry of Information and Broadcasting for grant of permission for setting up of FM Radio Stations Cable Network, subject to Cable Television Network Rules, 1994 and other conditions as specified from time to time by Ministry of Information and Broadcasting Direct to-home subject to such guidelines/terms and conditions as specified from time to time by Ministry of Information and Broadcasting 26% (FDI, NRI & PIO investments and portfolio investment) 49% (FDI, NRI & PIO investments and portfolio investment) 49% (FDI, NRI & PIO investments and portfolio investment) Within this limit, FDI component not to exceed 20% Headend-In-The-Sky (HITS) Broadcasting Service refers to the multichannel downlinking and distribution of television programme in C-Band or Ku Band wherein all the pay channels are downlinked at a central facility (Hub/teleport) and again uplinked to a satellite after encryption of channel. At the cable headend these encrypted pay channels are downlinked using a single satellite antenna, transmodulated and sent to the subscribers by using a land based transmission system comprising of infrastructure of cable/optical fibres network. FDI limit in (HITS) Broadcasting Service is subject to such guidelines/terms and conditions as specified from time to time by Ministry of Information and Broadcasting. 74% (total direct and indirect foreign investment including portfolio and FDI Setting up hardware facilities such as up-linking, HUB etc. 1) Setting up of Up-linking HUB/ Teleports 49% (FDI & FII) Automatic up to 49% route beyond 49% and up to 74% (2) Up-linking a Non-News & Current Affairs TV Channel 100% (3) Up-linking a News & Current Affairs TV Channel subject to 26% (FDI & the condition that the portfolio investment from FII/ NRI shall not be persons acting in concertǁ with FDI investors, as defined in the SEBI(Substantial Acquisition of Shares and Takeovers) Regulations, 1997 FII) b) Print Media Publishing of Newspaper and periodicals dealing with news and current affairs Publication of Indian editions of foreign magazines dealing with news and current affairs Publishing/printing of Scientific and Technical Magazines/specialty journals/ periodicals, subject to compliance with the legal framework as applicable and guidelines issued in this regard from time to time by Ministry of Information and Broadcasting. 26% (FDI and investment by NRIs/PIOs/FII) 26% (FDI and investment by NRIs/PIOs/FII) 100% Publication of facsimile edition of foreign newspapers 100% c) Civil Aviation & Airports (a) Greenfield projects 100% Automatic (b) Existing projects 100% Automatic up to 74% route beyond 74% d) Air Transport Services 1) Scheduled Air Transport Service/ Domestic Scheduled Passenger Airline 49% FDI (100% for NRIs) Automatic (2) Non-Scheduled Air Transport Service 74% FDI Automatic up to > RJSSM: Volume: 06, Number: 07, November 2016 Page 102

4 (3) Helicopter services/seaplane services requiring DGCA approval e) Other services under Civil Aviation sector (1) Ground Handling Services subject to sectoral regulations and security clearance (100% for NRIs) 49% route beyond 49% and up to 74% 100% Automatic 74% FDI (100% for NRIs) Automatic up to 49% route beyond 49% and up to 74% (2) Maintenance and Repair organizations; flying training 100% Automatic institutes; and technical training institutions Courier services for carrying packages, pareels and other items which do not come within the ambit of the Indian Post Office Act, 1898 and excluding the activity relating to the distribution of letters. 100% f) Construction Development: Townships, Housing, Built-up infrastructure Townships, housing, built-up infrastructure and constructiondevelopment projects (which would include, but not be restricted to, housing, commercial premises, hotels, resorts, hospitals, educational institutions, recreational facilities, city and regional level infrastructure) 100% Automatic g) Industrial Parks new and existing 100% Automatic h) Satellites Establishment and operation Satellites Establishment and operation, subject to the sectoral guidelines of Department of Space/ISRO 74% i) Private Security Agencies 49% j) Telecom Services 74% Automatic up to 49% route beyond 49% and up to 74% k) Trading Cash & Carry Wholesale Trading/ Wholesale Trading (including sourcing from MSEs) 100% Automatic l) E-commerce activities 100% Automatic Test marketing of such items for which a company has approval for manufacture, provided such test marketing facility will be for a period of two years, and investment in setting up manufacturing facility commences simultaneously with test marketing. 100% Single Brand product trading 51% m) Financing Services Foreign investment in other financial services, other than those indicated below, would require prior approval of the : Asset Reconstruction Companies Asset Reconstruction Company (ARE) means a company registered with the Reserve Bank of India under Section 3 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). 49% of paid-up capital of ARE n) Banking Private sector Banking Private sector 74% including investment by FIIs Banking- Public Sector Banking- Public Sector subject to Banking Companies (Acquisition & Transfer of Undertakings) Acts 1970/80. This ceiling (20%) is also applicable to the State Bank of India and its associate Banks. 20% (FDI and Portfolio Investment) Automatic up to 49% route beyond 49% and up to 74% > RJSSM: Volume: 06, Number: 07, November 2016 Page 103

5 0) Policy for FDI in Commodity Exchange 49% (FDI & FII) [Investment by Registered FII under Portfolio Investment Scheme (PIS) will be limited to 23% and Investment under FDI Scheme limited to 26%) p) Infrastructure Company in the Securities Market Infrastructure companies in Securities Markets, namely, stock exchanges, depositories and clearing corporations, in compliance with SEBI Regulations 49% (FDI & FII) [FDI limit of 26 per cent and an FII limit of 23 per cent of the paid-up capital ] ( For FDI) q) Insurance 26% Automatic Non-Banking Finance Companies (NBFC) r) Foreign investment in NBFC is allowed under the automatic route in only the following activities: (i) Merchant Banking (ii) Under Writing (iii) Portfolio Management Services (iv) Investment Advisory Services (v) Financial Consultancy (vi) Stock Broking (vii) Asset Management (viii) Venture Capital (ix) Custodian Services (x) Factoring (xi) Credit Rating Agencies (xii) Leasing & Finance (xiii) Housing Finance (xiv) Forex Broking (xv) Credit Card Business (xvi) Money Changing Business (xvii) Micro Credit (xviii) Rural Credit 100% Automatic 3. FDI INFLOWS IN INDIA( INWARD & OUTWARD) LOCATION INDICATOR SUBJECT MEASURE FREQUENCY YEAR Value IND FDIFLOW INWARD MLN_USD Annual IND FDIFLOW OUTWARD MLN_USD Annual IND FDIFLOW INWARD PC_GDP Annual IND FDIFLOW OUTWARD PC_GDP Annual IND FDIFLOW INWARD MLN_USD Annual IND FDIFLOW OUTWARD MLN_USD Annual IND FDIFLOW INWARD PC_GDP Annual IND FDIFLOW OUTWARD PC_GDP Annual IND FDIFLOW INWARD MLN_USD Annual IND FDIFLOW OUTWARD MLN_USD Annual IND FDIFLOW INWARD PC_GDP Annual IND FDIFLOW OUTWARD PC_GDP Annual IND FDIFLOW INWARD MLN_USD Annual IND FDIFLOW OUTWARD MLN_USD Annual IND FDIFLOW INWARD PC_GDP Annual > RJSSM: Volume: 06, Number: 07, November 2016 Page 104

6 IND FDIFLOW OUTWARD PC_GDP Annual IND FDIFLOW INWARD MLN_USD Annual IND FDIFLOW OUTWARD MLN_USD Annual IND FDIFLOW INWARD PC_GDP Annual IND FDIFLOW OUTWARD PC_GDP Annual IND FDIFLOW INWARD MLN_USD Annual IND FDIFLOW OUTWARD MLN_USD Annual IND FDIFLOW INWARD PC_GDP Annual IND FDIFLOW OUTWARD PC_GDP Annual IND FDIFLOW INWARD MLN_USD Annual IND FDIFLOW OUTWARD MLN_USD Annual IND FDIFLOW INWARD PC_GDP Annual IND FDIFLOW OUTWARD PC_GDP Annual IND FDIFLOW INWARD MLN_USD Annual IND FDIFLOW OUTWARD MLN_USD Annual IND FDIFLOW INWARD PC_GDP Annual IND FDIFLOW OUTWARD PC_GDP Annual IND FDIFLOW INWARD MLN_USD Annual IND FDIFLOW OUTWARD MLN_USD Annual IND FDIFLOW INWARD PC_GDP Annual IND FDIFLOW OUTWARD PC_GDP Annual IND FDIFLOW INWARD MLN_USD Annual IND FDIFLOW OUTWARD MLN_USD Annual IND FDIFLOW INWARD PC_GDP Annual IND FDIFLOW OUTWARD PC_GDP Annual IND FDIFLOW INWARD MLN_USD Annual IND FDIFLOW OUTWARD MLN_USD Annual IND FDIFLOW INWARD PC_GDP Annual IND FDIFLOW OUTWARD PC_GDP Annual IND FDIFLOW INWARD MLN_USD Quarterly 2013-Q IND FDIFLOW OUTWARD MLN_USD Quarterly 2013-Q IND FDIFLOW INWARD MLN_USD Quarterly 2013-Q IND FDIFLOW OUTWARD MLN_USD Quarterly 2013-Q2-11 IND FDIFLOW INWARD MLN_USD Quarterly 2013-Q IND FDIFLOW OUTWARD MLN_USD Quarterly 2013-Q3 627 IND FDIFLOW INWARD MLN_USD Quarterly 2013-Q IND FDIFLOW OUTWARD MLN_USD Quarterly 2013-Q4-288 IND FDIFLOW INWARD MLN_USD Quarterly 2014-Q IND FDIFLOW OUTWARD MLN_USD Quarterly 2014-Q IND FDIFLOW INWARD MLN_USD Quarterly 2014-Q IND FDIFLOW OUTWARD MLN_USD Quarterly 2014-Q2 149 IND FDIFLOW INWARD MLN_USD Quarterly 2014-Q IND FDIFLOW OUTWARD MLN_USD Quarterly 2014-Q3 624 IND FDIFLOW INWARD MLN_USD Quarterly 2014-Q IND FDIFLOW OUTWARD MLN_USD Quarterly 2014-Q4 306 IND FDIFLOW INWARD MLN_USD Quarterly 2015-Q IND FDIFLOW OUTWARD MLN_USD Quarterly 2015-Q1 720 IND FDIFLOW INWARD MLN_USD Quarterly 2015-Q IND FDIFLOW OUTWARD MLN_USD Quarterly 2015-Q IND FDIFLOW INWARD MLN_USD Quarterly 2015-Q > RJSSM: Volume: 06, Number: 07, November 2016 Page 105

7 IND FDIFLOW OUTWARD MLN_USD Quarterly 2015-Q IND FDIFLOW INWARD MLN_USD Quarterly 2015-Q IND FDIFLOW OUTWARD MLN_USD Quarterly 2015-Q IND FDIFLOW INWARD MLN_USD Quarterly 2016-Q IND FDIFLOW OUTWARD MLN_USD Quarterly 2016-Q FDI - INFLOWS AND OUT FLOWS CHART Ranking of Sector wise FDI inflows in India since April Dec 2015 Industrial Sector Rank Service Sector 1 Telecommunication 2 Computer Hardware & Software 3 Housing and Real Estate 4 Construction Activities 5 Drugs and Pharmaceuticals 6 Automobile Industry 7 Metallurgical Industry 8 Power 9 Petroleum and Natural Gas 10 Pie chart representing % of total FDI inflows in different sectors Series1, METALLURGICAL INDUSTRIES, , 6% Series1, AUTOMOBILE INDUSTRY, , 6% Series1, POWER, , 6% Series1, PETROLEUM & NATURAL GAS, , 3% Chart Title Series1, DRUGS & PHARMACEUTICAL S, , 6% Series1, SERVICES SECTOR, , 30% Series1, CONSTRUCTION ACTIVITIES, , 9% Series1, HOUSING & REAL ESTATE, , 11% Series1, TELECOMMUNICAT IONS, , 12% Series1, COMPUTER SOFTWARE & HARDWARE, , 11% > RJSSM: Volume: 06, Number: 07, November 2016 Page 106

8 The Sector wise Analysis of FDI Inflow in India reveals that maximum FDI has taken place in the service sector including the telecommunication, information technology, travel and many others. The service sector is followed by the computer hardware and software in terms of FDI. High volumes of FDI take place in telecommunication, real estate, construction, power, automobiles, etc. 4. TRENDS AND PATTERNS OF FDI FLOW IN THE WORLD The liberalization of trade, capital markets, breaking of business barriers, technological advancements, and the growing internationalization of goods, services, or ideas over the past two decades makes the world economies the globalised one. Consequently, with large domestic market, low labour costs, cheap and skilled labour, high returns to investment, developing countries now have a significant impact on the global economy, particularly in the economics of the industrialized states. Trends in World FDI flows (Table -5.1 and Chart-5.1) depict that developing countries makes their presence felt by receiving a considerable chunk of FDI inflows. Developing economies share in total FDI inflows rose from 26% in 2000 to 52% in 2014 SERVICES SECTOR (2inancial & non- 2inancial) SERVICES SECTOR (_inancial & non- _inancial) y = - 690x Linear + (SERVICES SECTOR R² (_inancial = & non- _inancial)) Linear (SERVICES SECTOR (_inancial & non- _inancial)) India stands out for the size and dynamism of its services sector. The importance of the services sector can be gauged by looking at its contributions to different aspects of the economy. The share of services in India s GDP at factor cost (at current prices) increased rapidly: from 30.5 per cent in to 55.2 per cent in The overall growth rate (compound annual growth rate) of the Indian economy from 5.7 per cent in the 1990s to 8.6 per cent during the period to was to a large measure due to the acceleration of the growth rate (CAGR) in the services sector from 7.5 per cent in the 1990s to 10.3 per cent in to The services sector growth was significantly faster than the 6.6 per cent for the combined agriculture and industry sectors annual output growth during the same period. In , services growth was 10.1 per cent and in it was 9.6 per cent. India s services GDP growth has been continuously above overall GDP growth, pulling up the latter since , It has also been more stable. An international comparison of the services sector shows that India compares well even with the developed countries in the top 12 countries with highest overall GDP. The two broad services categories, namely trade, hotels, transport, and communication; and financing, insurance, real estate, and business services have performed well with growth of 11 per cent and 10.6 per cent, respectively in Only community, social and personal services have registered a low growth of 5.7 per cent due to base effect of fiscal stimulus in the previous two years, thus contributing to the slight deceleration in growth of the sector. Among the subsectors of services sectors, financial services attract of total FDI inflows followed by banking services, insurance and nonfinancial services respectively. Outsourcing, banking, financial, information technology oriented services make intensive use of human capital. The trend in this sectors first declines till 2011 and increases in 2012 due to strong RBI policy and increase in consultancy services and devaluation of rupees against dollar. > RJSSM: Volume: 06, Number: 07, November 2016 Page 107

9 COMPUTER SOFTWARE & HARDWARE COMPUTER SOFTWARE & HARDWARE Linear y = x (COMPUTER R² = SOFTWARE & HARDWARE) Over the past few years the computer software industry has been one of the fastest growing sectors in Indian economy. FDI Inflows to Computer Software and Hardware Industry in India have been significant. 100 percent FDI is permitted under automatic route to the E-Commerce activities in India. Software Technology Parks (STP) have been a major initiative in India to drive in Foreign Direct Investment in the computer software industry. These Software Technology Parks provide highly developed infrastructure and facilities that attract foreign investors. Regulatory measures by the Indian government have also played a positive role in this regard. Measures like increased freedom of recruiting and laying-off employees, tax benefits and easing of export producers have contributed to the growth of FDI in this sector. Telecom is one of the fastest growing industries in India, and everyone, including foreign players and investors, are eager to be a part of this growth. The last few years have witnessed many activities on the foreign direct investment front with world's leading telecom operators picking up large stakes in domestic operators. The telecom services industry registered a growth of 20.7 percent clocking revenues of 1, 57,542 crore in compared to Rs Crore in the previous year. During the year 2005, government had raised the FDI limit in telecom sector from 49 percent to 74 percent, which has contributed to the robust growth of FDI in the sector. In February 2009, the has further revised the methodology of calculation of indirect foreign investment, according to which FDI of less than 50% in investing company is not counted in the licensee company if the investing company is owned and controlled by resident Indian citizens. This change of methodology of calculation of indirect foreign investment from earlier proportionate basis to owned and controlled basis has brought down composite FDI in some of the licensee companies and have given more room to bring in further investment. However, actual foreign investment requirement of a licensee company depends on its business case. FDI in Indian Telecommunications Industry is one of the most crucial parts that have caused such a hike in the telecom market so far. Inflow of FDI into India s telecom sector during April 2000 to Dec was about US $ million which constitute 8% of total FDI inflows and is second after FDI in services (with reference to table 4.3). The trend in telecom sector due to above reasons remains almost stable in but declines in 2011 due to 2G scam and again increases in HOUSING & REAL ESTATE HOUSING & REAL ESTATE Linear (HOUSING & y = - 483x REAL ESTATE) R² = The housing and real estate sector in India witnessed foreign direct investment (FDI) of US $ 5600 million in April-September , according to the Department of Industrial Policy and Promotion > RJSSM: Volume: 06, Number: 07, November 2016 Page 108

10 (DIPP). Housing and real estate sector including Cineplex, multiplex, integrated townships and commercial complexes etc, attracted a cumulative foreign direct investment (FDI) worth US $ million from April 2000 to Dec 2010 Foreign investors have so far contributed significant capital to India s real estate market. Aggregate FDI inflows into the real estate sector are recorded at approximately 7% of the total inflows. The relaxed FDI rules implemented by India last year has invited more foreign investors and real estate sector in India is seemingly the most lucrative ground at present. Private equity players are considering big investments, banks are giving loans to builders, and financial institutions are floating real estate funds. Indian property market is immensely promising and most sought after for a wide variety of reasons. However the trend in this sector is declining from year due to current FDI regulations for the sector stipulate certain conditions, such as minimum area of square metres to be developed, minimum capitalisation requirements, lock-in period of 3 years, due to economic debt crisis in Europe and America and also due to higher interest rate on loans that have been put in place from the perspective of preventing growth in the sector. Such conditions, however, pose challenges for FDI inflows into various projects, where given the nature of projects, it may not be possible to complete with such conditions. Construction activities Sector CONSTRUCTION y = x + ACTIVITIES R² = (including roads & highways) Construction activities Sector includes construction development projects viz. housing, commercial premises, resorts, educational institutions, recreational facilities, city and regional level infrastructure, township. The amount of FDI in construction activities during Jan 2000 to Dec is US$ million which is 6% (with reference to table 4.3) of the total inflows received through FIPB/SIA route, acquisition of existing shares and RBI s automatic route. The construction activities sector shows a steep rise in FDI inflows from 2007 onwards. Major investment in construction activities is received from Mauritius which is accounted for maximum of total FDI inflows during In India Delhi, Mumbai, and Hyderabad receives maximum amount of investment. The trend in this sector has declined from due to RBI policy, financial debt crisis and there has been increase from 2011 because of the acceded to a long-pending demand and permitted 100 percent foreign direct investment (FDI) in construction housing and commercial premises, including hotels, resorts, hospitals, educational institutions, recreational facilities, and city and regional level infrastructure. According to the new norms, the existing 100-acre minimum area stipulation has been reduced to 25. As of now, all such projects needed mandatory clearance from the Union. With the power to approve being vested with the local s, FDI projects will now be treated on par with any other project. Also India has several joint construction agreements with Japan and Russia to develop infrastructure and transportation facilities in India. 5. Analysis of State wise inflows of FDI in India No. RBI s - Regional Office2 State covered ( Apr.- Mareh) 1 MUMBAI MAHARASHTRA, DADRA & NAGAR HAVELI, DAMAN & DIU 2 NEW DELHI DELHI, PART OF UP AND HARYANA 27,669 (6,097) 12,184 (2,677) Cumulative Inflows (April 00 Mareh 11) 201,471 (45,068) 113,689 (25,088) %age to total Inflows (in terms of US$) > RJSSM: Volume: 06, Number: 07, November 2016 Page 109

11 3 BANGALORE KARNATAKA 6,133 (1,332) 4 AHMEDABAD GUJARAT 3,294 (724) 5 CHENNAI TAMILNADU, 6,115 PONDICHERRY (1,352) 6 HYDERABAD ANDHRA PRADESH 5,753 (1,262) 7 KOLKATA WEST BENGAL, SIKKIM, 426 ANDAMAN & NICOBAR (95) ISLANDS 8 CHANDIGARH` CHANDIGARH, PUNJAB, 1,892 HARYANA, HIMACHAL (416) PRADESH 9 PANAJI GOA 1,376 (302) 10 BHOPAL MADHYA PRADESH, 2,093 CHATTISGARH (451) 11 JAIPUR RAJASTHAN 230 (51) 12 KOCHI KERALA, LAKSHADWEEP 167 (37) 13 BHUBANESHWAR ORISSA 68 (15) 14 KANPUR UTTAR PRADESH, 514 UTTRANCHAL (112) 15 GUWAHATI ASSAM, ARUNACHAL 37 PRADESH, MANIPUR, (8) MEGHALAYA, MIZORAM, NAGALAND, TRIPURA 16 PATNA BIHAR, JHARKHAND 25 (5) 17 REGION NOT INDICATED 20,543 (4,491) Sub. Total 88,520 (19427) 36,657 (8,229) 31,693 (7,156) 30,848 (6,851) 26,562 (5,961) 6,368 (1,488) 4,685 (1,024) 3,326 (725) 3,009 (654) 2,450 (520) 1,658 (368) 1,207 (261) 812 (177) 316 (72) 27 (6) 115,943 (26,070) 580,722 (129,716) 6. Concluding Remarks The present study analysis the policy related variables like openness of the economy, foreign exchange reserves, debt service ratio, strength of legal rights, tax policies and economic determinant, that is, GDP to throw light at the possible variables influencing the foreign direct investment inflows in India. The analysis shows that independent variables including GDP, Openness and LR affect the inflows of FDI to India. Among the major reasons which discourage the international investors from investing in India despite of its consistent economic growth includes: 1) Politics and corruption 2) Lack of infrastructure 3) Inadequate Legal system 4) Instability of Indian Social and Political environment practices 5) Maturity of the financial markets All in all a more open policy frame is required which can be integrated with developing economies policy frame so that India becomes the most attractive destination and actually receive Foreign Direct Investment in the sectors which has potential to grow from foreign capital. Further more the integration at National level is required as sectors which are covered under automatic route are subject to other caveats imposed by State and respective Ministry. REFERENCES * A.T. Kearney (2007). FDI Confidence Index 2007, A.T. Kearney D a m i j a, N i d h i ( ) * Agnès Bénassy-Quéré, Maylis Coupet,Thierry Mayer(2005), Institutional Determinants of Foreign Direct Investment, CEPII, Working Paper No Aitken, B & Harrison A(1994), Do Domestic firms benefit from Foreign Direct Investment?, Washington, World Bank Research > RJSSM: Volume: 06, Number: 07, November 2016 Page 110

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