FDI & FII in India
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FDI & FII in India

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FDI & FII in India FDI & FII in India Presentation Transcript

  • PRESENTATION ON FDI & FII
    Presented To:
    Ms. PallaviDawra Presented By:
    ParvMahajan
    Vinod Kumar
    Sanjeev Kr. Singh
  • ECONOMIC INDICATOR
  • GDP Growth Rate (in %)
  • Inflation Rate
  • Export and Import
  • Trade Balance
  • Definition of FDI
    Foreign direct investment is that investment, which is made to serve the business interests of the investor in a company, which is in a different nation distinct from the investor's country of origin.
    The parent enterprise through its foreign direct investment effort seeks to exercise substantial “Control” over the foreign affiliate company.
    Exp. - An American company taking a majority stake in a company in India.
  • Modes of FDI
    1) By Direction
    • Inward
    • Outward
    2) By Target
    • Mergers and Acquisitions
    • Horizontal FDI
    • Vertical FDI
    3 )By Motive
    • Resource-Seeking
    • Market-Seeking
    • Efficiency-Seeking
  • FDI Investment Schemes
    Available Financial Instruments
    Equity Shares, Compulsorily Convertible Preference Shares and compulsorily Convertible Debentures.
    Not Available to Investors who are
    Citizens of Pakistan OR Entities of Pakistan
    Available with approval of FIPB (AP (DIR) No.22 dt.19/12/2007)
    To Citizens & Entities of Bangladesh
  • Factors Affecting FDI
    • Financial incentives (Funds from local Government)
    • Fiscal incentives (Exemption from import duties)
    • Indirect incentives (Provides land and other resources)
    • Political stability
    • Market potential & accessibility
    • Large economy
    • Market size
  • FDI in India
  • SHARE OF TOP INVESTING COUNTRIES - FDI INFLOWS (US$ Mn.)
  • Share of countries
  • Investing in India – Entry Routes
    Investing in India
    Automatic Route
    Prior Permission
    (FIPB)
    General rule
    No prior permission
    required
    Only information to the
    Reserve Bank of India
    within 15 days of inflow/
    Issue of shares
    By exception
    Prior Government
    Approval needed
    Decision generally
    Within 4-6 weeks
  • FDI Limit in Different Sector
  • Sectors attracting highest FDI Equity Inflows
  • Advantages of FDI
    • Economic growth
    • Trade
    • Employment and skill levels
    • Technology diffusion and knowledge transfer
    • Linkages and spillover to domestic firms
    • Improved technology.
    • Management expertise.
    • Access to international markets
  • Prohibited Sectors For FDI
    • Gambling and betting
    • Lottery Business
    • Atomic Energy
    • Retail Trading
    • Agricultural or plantation activities of Agriculture
    (excluding Floriculture, Horticulture, Development of Seeds, Animal Husbandry, Pisiculture and Cultivation of Vegetables, Mushrooms etc., under controlled conditions and services related to agro and allied sectors) and Plantations other than Tea Plantations)
  • Foreign Institutional Investor
    An investor or investment fund that is from or registered in a country outside of the one in which it is currently investing.
    Institutional investors include
    • hedge funds,
    • insurance companies,
    • pension funds and mutual funds.
  • Entities / funds eligible to get registered as FII:
    • Pension Funds
    • Mutual Funds
    • Insurance Companies
    • Investment Trusts
    • Banks
    • Endowments
    • Foundations
    • Charitable Trusts / Charitable Societies
  • Parameters on which SEBI decides FII applicants’ eligibility
    • Applicant’s track record, professional competence, financial soundness, experience,
    general reputation of fairness and integrity. (The applicant should have been in existence for at least one year)
    • whether the applicant is registered with and
    regulated by an appropriate Foreign Regulatory
    Authority in the same capacity in which the application is filed with SEBI
    • Whether the applicant is a fit & proper person.
  • Indian stock Market
  • Year wise FII
  • Relation among Exchange Rate, Sensex, FII
  • Foreign Institutional Investor
    • Foreign Institutional Investors can individually purchase up to 10% and collectively up to 24% of the paid up share capital of any company.
    • This limit of 24% can be increased to sectoral cap/ statutory limit applicable to the Indian company by passing Board or shareholder resolution.
    • FIIs can purchase shares through open offer/ private placement/ stock exchange.
    • shares purchased by FII through stock exchange can’t be sold through a private arrangement.
  • Positives and Negatives of FII
    Advantages
    • Unavailability of Corporate Debt
    • Increase Forex Reserve
    • Increase Domestic Savings and Investments
    • Large Availability of Capital
    Disadvantages
    Problem of inflation
    Reduces flexibility of Policy makers
    Hot Money
    False representation of Economy
    Can’t be used for long term
    Problems for small investors
  • Differences..
    FDI
    • FDI is when a foreign company brings capital into a company or economy to set up a production or some other facility.
    • FDI gives some CONTROL in operation of foreign company to the foreign company
    FII
    • FII is when a foreign company buys equity in any company through stock market.
    • FII does not give any control in operation of foreign company
  • Contd…
    FDI
    • FDI involves in direct production activity and is long term in nature.
    • It enables a degree of control in the company.
    • FDI brings long term capital.
    FII
    • FII is mostly the short term investment mostly in financial market.
    • It does not involve in degree of control in the company.
    • FII brings short term capital.