Case Study of Fdi in India vs China

Topics: Investment, Foreign direct investment, Macroeconomics Pages: 25 (8109 words) Published: March 21, 2013
A project ReportOnCASE STUDY OF FDI IN INDIA VS CHINASubmitted toMrs. Smita KashiramkaByRamya Singh2010B3A2613PIn Fulfilment ofStudy oriented ProjectBIRLA INSTITUTE OF TECHNOLOGY AND SCIENCE, PILANI30th November 2012| |


The report begins with the FDI definition and FDI reference with respect to India and its sect-oral and regional comparisons. This report undertakes a comparative analysis of the foreign direct investment (FDI) flowing from the multinational corporations (MNCs) into China and India. Examining the prevailing investment climate to account for the differences in FDI between the two countries and finally suggest some recommendations for India to achieve higher FDI. A review of Mckinsey report on India’s economic performance and growth potential has been done at the end of the report. Acknowledgements

A Study oriented project is a golden opportunity for learning and self development. I consider myself very lucky and honoured to have been able to get this opportunity of doing such a project.

My grateful thanks to Mrs. Smita Kashiramka mam who in spite of being extraordinarily busy with her duties, took time out to hear, guide and keep me on the correct path. I do not know where I would have been without her.

Ramya Singh
ID- 2010B3A2613P

Table of Contents-
1. Introduction
2.1. FDI definition
2.2. Benefits of FDI
2.3. FII’s
2. FDI Routes to India
3.4. Forbidden territories
3.5. Forms of FDI Investment
3.6. Automatic Route
3.7. Government approved Route
3. Amendments in FDI and Industrial Policies
4.8. FEMA
4.9. FIIA
4. Status of FDI in India
5. Round Tripping of FDI to China
6. Directional comparison of FDI in India and China
7. Recommendations for improving FDI to India
8. FDI in Retail
9. Review of Mckinsey Report of FDI in India
10. Conclusion
11. References

The official statistics of foreign direct investment (FDI) inflows in China and India exhibits a remarkable discrepancy that consequently establishes the unmatched superiority of China in attracting FDI inflows. China ventured into the path of liberalization in 1979 by gradually liberalizing and opening up its economy. Removal of restrictions on inward FDI has figured out to be one of the prominent features in the Chinese reforms. China has indeed achieved remarkable success in FDI since it formally opened its door to FDI with the passage of the “Law of People’s Republic of China on Joint Ventures using Chinese and Foreign Investment” in 1979. By virtually having their non-state sector (counterpart of India’s private sector) run on free market principles and setting up large special economic zones, encouraging competition among Chinese provinces to attract FDI, offering substantial tax concessions, permitting the leasing of land and property, introducing government guarantees for investment and special arrangements regarding retention and repatriation of foreign exchange, China has been able to attract significant sums of FDI inflows. India, the only developing country of size and diversity of industrial base comparable to China, has also adopted a similar path of liberalization since 1991, by slowly shedding its FDI restrictions and allowing FDI through automatic route barring a few strategic industries of security concern . It is important to note that in 1997, India had joined the band of the top ten developing country recipients of FDI flows, whereas China had already acquired prominent positions at least since 1991. UNCTAD’s ranking of countries based on FDI relative to the size of the economy was 121 for India and 61 for China for the period 1988 to 1990. The corresponding figures for 1998-2000 are 119 and 47 respectively. While...
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