FDI and FII investments rules, are they good,
do they have an impact on the Rupee/ Dollar rate



                        ...
TYPES OF INFLOWS
                            Types of
                            Inflows


                      FDI     ...
ROUTES OF FDI



                           INVESTING IN INDIA




                                       PRIOR PERMISSION...
 Automatic Route

  No prior Government approval is required if the investment to be
  made falls within the sectoral cap...
   Most manufacturing activities
   Non-banking financial services
   Drugs and pharmaceuticals
   Food processing
  ...
FDI is not permissible in the following cases

    Gambling and Betting, or

    Lottery Business, or

    Business of c...
AIRPORTS



    Foreign Investment upto 100% is allowed in green field projects under

    automatic route
    Foreign D...
INSURANCE



    FDI upto 26% allowed on the automatic route
    However, license from the Insurance Regulatory & Develop...
PRIVATE SECTOR BANKING



    Foreign Investment upto 74% is permitted from all sources (FDI +FII)
    under the automati...
Large and growing market


    World class scientific, technical and managerial manpower


    Cost-effective and highly...
Crowding of local industry



    Loss of control


    Repatriation of profits ( dividends by investor)



    Effects...
Foreign Institutional Investment is used to denote an investor -
  mostly of the form of an institution or entity, which i...
FDI                                               FII


1.   FDI is when a foreign company brings capital     FII is when ...
Trading and delivery volume raises



    Volatility will be curtailed


    More liquidity will created



    Standar...
Disadvantages of FII

 Problems of Inflation.

 Hot Money.

 False representation of economy.

 Cannot be utilized for...
Stock market



    The FII’s profit from investing in emerging financial stock markets, say the
    Indian stock Exchang...
 Exports & Imports
  The FII lead to appreciation of the currency, they lead to the exports industry
  becoming uncompeti...
THANK YOU
FDI and FII impact on dollar rupee exchange rate
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FDI and FII impact on dollar rupee exchange rate

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FDI and FII impact on dollar rupee exchange rate

  1. 1. FDI and FII investments rules, are they good, do they have an impact on the Rupee/ Dollar rate Presented By: Bhupendra Choubisa 06 Jitesh Jain 13 Rishon Bhastekar 32 Shoeb Pathan 40 Swanand Bhadang 45 Tushar Bhosale 48
  2. 2. TYPES OF INFLOWS Types of Inflows FDI FII Foreign Direct Investment Foreign direct investment (FDI) in its classic form is defined as a company from one country making a physical investment into building a factory in another country. It is the establishment of an enterprise by a foreigner.
  3. 3. ROUTES OF FDI INVESTING IN INDIA PRIOR PERMISSION AUTOMATIC ROUTE (F.I.P.B.) ONLY DECISION INFORMATION GENERALLY TO RBI WITHIN GENERAL RULE EXCEPTION 30 DAYS OF WITHIN 4 NO PRIOR PRIOR INFLOW/ ISSUE TO 6 WEEKS PERMISSION GOVERNMENT OF SHARES REQUIRED APPROVAL NEEDED
  4. 4.  Automatic Route No prior Government approval is required if the investment to be made falls within the sectoral caps specified for the listed activities. Only filings have to be made by the Indian company with the concerned regional office of the Reserve Bank of India (“RBI”) within 30 days of receipt of remittance and within 30 days of issuance of shares  FIPB Route Investment proposals falling outside the automatic route would require prior Government approval. Foreign Investment requiring Government approvals are considered and approved by the Foreign Investment Promotion Board (“FIPB”). Decision of the FIPB usually conveyed in 4-6 weeks. Thereafter, filings have to be made by the Indian company with the RBI 4
  5. 5.  Most manufacturing activities  Non-banking financial services  Drugs and pharmaceuticals  Food processing  Electronic hardware  Software development  Film industry  Advertising  Hospitals  Pollution control and management  Management consultancy  Computer related Services  Research and Development Services  Construction and related Engineering Services  Pollution Control and Management Services  Health related & Social Services  Travel related services
  6. 6. FDI is not permissible in the following cases Gambling and Betting, or  Lottery Business, or  Business of chit fund  Housing and Real Estate business.  Trading in Transferable Development Rights (TDRs)  Retail Trading  Atomic Energy 
  7. 7. AIRPORTS  Foreign Investment upto 100% is allowed in green field projects under  automatic route Foreign Direct Investment is allowed in existing projects  - upto 74% under automatic route - beyond 74% and upto 100% subject to Government approval TELECOM  - Automatic upto 49% - FIPB beyond 49% but upto 74%
  8. 8. INSURANCE  FDI upto 26% allowed on the automatic route However, license from the Insurance Regulatory & Development Authority (IRDA) has to be obtained PETROLEUM  For petroleum refining activity 100% FDI is permitted in Indian Private Companies under automatic route and upto 26% FDI is permitted in Public Sector Undertakings with Government approval
  9. 9. PRIVATE SECTOR BANKING  Foreign Investment upto 74% is permitted from all sources (FDI +FII) under the automatic route subject to guidelines for setting up of branches/subsidiaries of foreign banks issued by RBI from time to time. PRINT MEDIA  FDI upto 26% in publishing news papers and periodicals dealing in news and current affairs subject to verification of antecedents of foreign investor and keeping editorial and management control in the hands of resident Indians
  10. 10. Large and growing market  World class scientific, technical and managerial manpower  Cost-effective and highly skilled labor  Access to global market place for domestic players  Contribution to exports growth  Large availability of capital  Increase domestic savings and investments  Increase in Forex Reserves 
  11. 11. Crowding of local industry  Loss of control  Repatriation of profits ( dividends by investor)  Effects on local culture / sentiments – socio cultural effects 
  12. 12. Foreign Institutional Investment is used to denote an investor - mostly of the form of an institution or entity, which invests money in the financial markets of a country different from the one where in the institution or entity was originally incorporated. FII investment is frequently referred to as hot money for the reason that it can leave the country at the same speed at which it comes in. Agencies Regulating FII in India  RBI: the apex bank  FIPB: reviews all foreign investment proposals  SEBI: which regulates India's capital markets
  13. 13. FDI FII 1. FDI is when a foreign company brings capital FII is when a foreign company buys equity in into a country or an economy to set up a a company through the stock markets. production or some other facility. FDI gives Therefore, in this case, FII would not give the the foreign company some control in the foreign company any control in the company. operations of the company 2. Foreign direct investment involves in the Foreign portfolio investment is a short-term direct production activity and also of medium investment mostly in the financial markets to long-term nature and it consists of Foreign Institutional Investment (FII). 3. It enables a degree of control in the company. It does not involve obtaining a degree of control in a company. 4. FDI brings long-term capital, The FII brings short-term one
  14. 14. Trading and delivery volume raises  Volatility will be curtailed  More liquidity will created  Standard will be improved because of investors quality 
  15. 15. Disadvantages of FII  Problems of Inflation.  Hot Money.  False representation of economy.  Cannot be utilized for long term.  Problem for small investor.
  16. 16. Stock market  The FII’s profit from investing in emerging financial stock markets, say the Indian stock Exchange. If the cap on FII is high then they can bring in lot of funds in the countries stock markets and thus have great influence on the way the stock markets behaves, going up or down. The FII buying pushes the stocks up and their selling shows the stock market the downward path. So this is how influencing FII can be, as is seen in the present downtrend of the stock markets in India courtesy heavy FII selling. Exchange Rates  The simple way of understanding is through Demand and Supply. If say US imports from India it is creating a demand for Rupee thus the Indian rupee appreciates w.r.t the dollar. If India imports then the dollar appreciates w.r.t the Indian rupee.
  17. 17.  Exports & Imports The FII lead to appreciation of the currency, they lead to the exports industry becoming uncompetitive due to the appreciation of the rupee. For e.g. if 1 USD = Rs.40 and a soap costs 1 USD. Now when the rupee appreciates 1 USD = Rs. 20, I will have to sell the same soap to the US for 2 US Dollars in order to sustain the same income that I have been making i.e. Rs.40. Thus excess FII fund inflow in the country can also make a negative impact on the economy of the country.  Inflation The huge amount of FII fund inflow into the country creates a lot of demand for rupee, and the RBI pumps the amount of Rupee in the market as a result of demand created by the FII’s. This situation could lead to excess liquidity Thus there should be a limit to the FII inflow in the country.
  18. 18. THANK YOU

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