2. INDIAN ECONOMY
• 7th in the world measured by normal GDP in 2016.
• GDP growth 0.6% (2012, Q3)
• 3rd largest by PPP.
3. TYPES OF FOREIGN CAPITAL
• FOREIGN DIRECT INVESTMENT(FDI)
• FOREIGN INSTITUTIONAL
Foreign Direct Investment (FDI) occurs when an investor based
in one country (the home country) acquires an asset in another
country (the host country) with the intent to manage the asset.
5. WHY FDI IN INDIA ?
• Liberal, Largest Democracy, Political Stability
• Second Largest emerging market (US$2.4 trillion)
• Skilled & Competitive labors force
• Highest rates of return on investment
6. WHY FDI IN INDIA ?(CONT…)
• Growth over the past few years averaging 8%.
• Destination for BPO, KPO, etc..,
• Second largest English speaking, scientific, technical
• Low costs & Tax exemptions in SEZ.
7. FACTORS REQUIRED TO ATTRACT
• Low cost.
• Qualified, educated/skilled labor pool.
• Long term market potential.
• Access to natural resources.
• Population of a country plays an important role.
8. • Political & environment stability.
• Financial incentives (funds from local govt.)
• Fiscal incentives (exemption from import duties)
• Indirect incentives (provides land & other
9. • 1991- Foreign Investment Promotion Board (FIPB).
• 1996- Foreign Investment promotion council (FIPC).
• 1999- Foreign Investment implementation Authority (FIIA).
• 2004- Investment Commission Secretariat of Industrial Assistance
MAJOR BODIES CONSTITUTED FOR
10. FDI in India are approved through two
• Automatic approval by RBI.
• The FIPB route – processing of non-automatic
12. • Inflow of equipment & technology.
• Competitive advantage & innovation.
• Financial resources for expansion.
• Employment generation.
• Contribution to exports growth.
13. • Crowding of local industry.
• Repatriation of profits/dividends by investor.
• Conflicts of codes/laws.
• Loss of control.
FIIs are defined under SEBI Regulations as
“ an institution that is a legal entity established or
incorporated outside India proposing to make
investments in India only in securities. “
15. WHY INDIA NEED FII ?
• Large unexploited natural resource.
• To share technical know-how.
• To bring in new technology in country.
• To share good foreign relation.
16. WHO CAN GET REGISTERED AS FII ?
• Pension funds
• Mutual funds
• Investment Trust
• Insurance companies
• University funds
• Foundations or Charitable trusts
• Asset management companies
• Power of Attorney holders
17. CATEGORIES OF REGISTERED FIIs
• Normal FIIs:
- not less than 70% in equity related instruments
- 30% in non-equity instruments
• 100% Debt FIIs:
- permitted to invest only in debt instruments
18. AN FII CAN INVEST ONLY IN THE
• Securities in the Primary & Secondary markets.
• Units of schemes floated by Domestic mutual funds & Collective investment scheme.
• Dated Government Securities.
• Derivatives traded on a recognized stock exchange.
• Commercial paper.
• Security receipts.
• Indian Depository receipts.
19. MERITS OF FII
• Large availability of capital
• Unavailability of Corporate Debt
• Increases FOREX reserves
• Increases domestic saving and investments
20. DEMERITS OF FII
• Problems of Inflation
• Adverse impact on exports
• Problem for small investor
• Revival of developed economies
21. DIFFERENCE BETWEEN FDI & FII
1 FDI is when foreign company brings
capital into a country or an economy to
set up a production or some other facility.
FDI gives the foreign company some
control in the operations of the company
FII is when a foreign company buys equity in
a company through the stock markets.
Therefore, in this case, FII would not give the
foreign company any control in the company
2 FDI involves in the direct production
activity & also of medium to long term
FII is a short term investment mostly in the
financial markets & it consist of FII
3 It enables a degree of control in the
It does not involve obtaining a degree of
control in a company
4 FDI brings-long term capital FII brings short-term capital
• The last two decade of the 20th century witnessed a dramatic world-wide increase in
foreign direct investment (FDI), accompanied by a marked change in the attitude of
most developing countries towards inward FDI.
• As against a highly suspicious attitude of these countries towards inward FDI in the
past, most countries now regard FDI as beneficial for their development efforts and
compete with each other to attract it.
• Such shift in attitude lies in the changes in political and economic systems that have
occurred during the closing years of the last century.