Ramkiran Nanduri Roll No 05/2001 . 14 Oct 12 . EEB Assignment Question. Is India an attractive site for FDI?

Give reasons with a focus on Specific Sectors. Answer. India an ideal FDI destination 1. India with the sudden pace of economic reforms now offers attractive investment opportunities for foreign companies and has adopted a number of policies to attract foreign direct investment into the country and the country seems to offer perhaps one of the most liberal FDI regimes in Asia. As a result, the FDI inflows in India has increased considerably from US$ 4 Billion in 2000-01 to 47 Billion in 2011-12 with an expectance of further increase to 100 Billion in 2012-13. 2. A recent UNCTAD survey projected India as the second most important FDI destination (after China) for transnational corporations during 20102012. India has seen an eightfold increase in its FDI in March 2012. As per the data, the sectors which 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 for India. FDI in Semiconductor Industry. 3. FDI in the semiconductor industry primarily was from the USA. Globally the first FDI in Semiconductor industry was in South-East Asian countries due to cheap labour and material in the years 1960-70. The second phase, in the 1970s consisted of acquisitions and mergers with the entry of European and Japanese firms in the US. The third wave consisted of consolidation research facilities in the USA. Now is the fourth phase of FDI where there is a need for specialized talent and educated manpower for design and research. India with its vast population of IT and electronic engineers is an ideal destination for FDI in semiconductor research. 4. With an aim to create a globally competitive electronics design and manufacturing industry to meet the country's needs and serve the international market, the National Policy of Electronics (NPE) (2011) was formulated. It aims to provides impetus to fast expansion of the Semiconductor Industry with an aim to get US$ 100 Billion FDI by 2020. The highlights of the policy are:(a) To promote indigenous manufacturing in the entire value-chain of ESDM for economic development.

(b) To develop capacities for manufacture of strategic electronics within the country. (c) To promote a vibrant and sustainable ecosystem of R&D, design and engineering and innovation in Electronics. (d) To develop high-quality electronic products at affordable prices for inclusive adoption and deployment to improve productivity, efficiency and ease of operations in other sectors. (e) To promote environmentally friendly global best practices in the use and disposal of electronic products. 5. This NPE 2000 will create an eco-system for a globally competitive ESDM sector in the country to achieve a turnover of about USD 400 Billion by 2020 involving investment of about USD 100 Billion and employment to around 28 Million people at various levels. The country is being seen as an emerging chip design and embedded software industry to achieve global leadership in VLSI, chip design and other frontier technical areas. FDI in Aviation 6. The Aviation industry in India though passing through difficult phase has a very bright future ahead. With a growth rate of 18 percent per annum over that decade, the industry will see rapid expansion in terms of players as well as the number of aircrafts. The strength of the Indian fleet was 500-550 in 2010. Cargo transportation is likely to touch 5 million tonnes in 2012. 480 additional aircrafts were planned for delivered by 2012. The total number of passengers is expected to touch 400 million by 2020. 7. However, even though the Aviation Industry has bright prospects, it is facing an acute financial crunch and presents an ideal environment for Foreign Direct Investment. Higher foreign investment inflows are necessary at the present juncture in order to strengthen the sector, as most Airlines like King Fisher, Jet etc are facing a " a huge financial crunch. Except IndiGo, all airlines have posted losses in the financial year ending on March 31. 8. In a move aimed at boosting the cash-strapped aviation sector, the government decided to allow foreign airlines to pick stakes up to 49 percent in private Indian carriers, which was immediately welcomed by the industry. The decision of Cabinet Committee on Economic Affairs to permit foreign airlines to invest in scheduled and non-scheduled air transport services would pave way for much-needed equity infusion into Indian carriers which are in dire need of funds for operations.