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INDIA’S OVERSEAS INVESTMENTS A Case Study

INDIA’S OVERSEAS INVESTMENTS A Case Study. Ketaki Bhirdikar Pushkar Borse Nupur Khanna Shantala Samant. INDIA – A STEP ANALYSIS. POLITICAL ENVIRONMENT. Stable democracy Deregulation of most sectors Dominant role of Congress (UPA) Internal party dynamics

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INDIA’S OVERSEAS INVESTMENTS A Case Study

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  1. INDIA’S OVERSEAS INVESTMENTSA Case Study Ketaki Bhirdikar Pushkar Borse Nupur Khanna Shantala Samant

  2. INDIA – A STEP ANALYSIS

  3. POLITICAL ENVIRONMENT • Stable democracy • Deregulation of most sectors • Dominant role of Congress (UPA) • Internal party dynamics • Combating effects of slowing economic growth • Measures targeting rural sector • Budget 09-10 high on spending • Corruption

  4. ECONOMIC ENVIRONMENT • Industry and service economy • Indian overseas investment policies liberalized • Large public sector • Sizeable, diversified private sector • Trade deficit US$129.1bn in 2008 • Imports jumped by 31.9% to US$305.5bn • Real GDP growth forecast to slow to 5.5% • Consumer price inflation forecast 6%

  5. SOCIAL ENVIRONMENT • Population 1.1 billion • Age structure: 0-14 years – 31.8%, 15-64 years – 63.1% and 65 years and above – 5.1% • 52% literacy rate • Domestic demand - mainstay of economy • 16 national languages but English speaking • Country of two speeds: urban vs. rural • New middle class with purchasing power

  6. TECHNOLOGIC ENVIRONMENT • R&D expenditure less than 1% of GDP • Number of international patents • Infrastructure, energy, power • Manual skill and knowledge based sectors • Technically qualified low cost workforce • Low cost of operations • Coping with globalization and time compression • Second-rate technology investment

  7. What has prompted Indian firms to operate abroad? • Events: • Post 1947 : Socialist Policy • Regulations were dubbed by License Raj • Central government controlled foreign exchange transactions • FERA rarely allowed Foreign Exchange holdings • There was slow growth rate -> Hindu Growth Rate • 1985 : India in great debts -> Balance of Payment problem • 1990 : Economic Crisis

  8. What has prompted Indian firms to operate abroad? • 1991 break through reform started: • Opening up of International trade & Investment • Deregulation • Initialization of Privalization • Automatic approval of FDI • Foreign investment in form of cash was raised.

  9. What has prompted Indian firms to operate abroad? • Access to high-growth markets • Technology and knowledge • Economies of size and scale of operations • Tapping global natural resource banks • Leverage of international brands • MnAs and direct investments • Favourable policy changes • Introduction of FEMA

  10. Areas showing liberalization in policy towards overseas investment? • Till 1991- low integration with the world • Export promotion with restrictions to conserve forex • In 1992 – Economy liberalized • ‘Automatic Route’ for overseas investment • 1995- further liberalization • Single window for approval • Leads to access to : • Technology sourcing • Resource seeking • Market seeking

  11. How have Indian firms helped improve the country’s balance of payment? • Globalization • Leveraging competences • Expansion of markets • Capital outflow returns • Capital a/c surplus • Increased foreign exchange inflows

  12. THANK YOU!

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