FDI and FII and various international issues.

1. ROLE AND STATUS OF FDI
AND FII IN INDIAAND
CURRENT
INTERNATIONAL ISSUES
TO: BY:
UTKAL KUSHWAHA SIR VAISHALI SHRIVASTAVA (20051)
AYUSHI THAKUR(20012)
SATYAM RAI(20042)
VIVEK GUPTA(20052)

2. The company has two options FDI and FII.

3. Concept Of FDI:

4. METHOD OF FDI
• Acquiring voting stock in a foreign company.
• mergers and acquisitions.
• joint ventures with foreign corporations.
• starting a subsidiary of a domestic firm in a foreign country.

5. TYPES OF FDI:
Horizontal
Vertical
Conglomerate
platform

6. BENFITS OF FDI:
For INVESTORS
• Market diversification
• Tax Incentives
• Low labour cost
• Subsidies
• Preferential tariffs
FOR HOST COUNTRY
• economic stimulation
• -development in human capital
• increase in employment
• access to management expertise,
skills and technology

7. DISADVANTAGES OF FDI:
• Displacement of local business.
• Profit repatriation.
• Loss of domestic industries

8. ROLE OF FDI IN INDIA:
• Foreign exchange management act (2000).
• All sector development.
• Boost in employment
• Increase in exports.
• Advancement in various fields- competitive market

9. Concept Of FII:
OR INVEST
FOREIGN
INDIVIDUAL INSTITUTION
MARKET
If an investor, invests in the Indian Market by buying
debt or equity Instrument then he is basically
investing through the medium of FII
It is a Short Term investment made in the
markets of the country.

10. FOREIGN INSTITUTIONAL INVESTORS
• “Foreign Institutional Investors (FII) are an investment fund or a gathering of
investors. Such a fund is registered in a foreign country, i.e. not in the country it is
investing in. Such institutional investors mostly involve hedge funds, mutual
funds, pension funds, insurance bonds, high-value debentures, investment banks
etc.”
• So when such FII’s buy shares and securities the market is bullish and trends
upwards. The opposite may also happen when they withdraw their funds from the
markets.

11. HOW FII STARTED IN INDIA?
• FII refers to outside companies investing in the financial markets of India.
• India opened its stock market to foreign investors in September 1992.
• Since 1993, received portfolio investment from foreigners in form of FII in
equities.
• This has become one of the main channels of FII in India for foreigners.
• In order to trade in Indian equity market foreign corporation need to register with
SEBI as FII.

12. WHERE FII CAN INVEST ?
• Securities in primary and secondary markets including shares,debentures and
warrants of companies, unlisted,listed or to be listed on a recognized stock
exchange in India.
• Units of mutual funds.
• Government securities.
• Commercial papers.

13. Advantages of FII’s
• FII’s will enhance the flow of capital into the
country
• These investors generally prefer equity over
debt. So this will also help maintain and even
improve the capital structures of the
companies they are investing in.
• They have a positive effect on the competition
in the financial markets
• FII help with the financial innovation of
capital markets
• These institutions are professionally managed
by asset managers and analysts. They
generally improve the capital markets of the
country.
Disadvantages of FII’s
• The demand for the local currency (rupee)
increases. This can cause severe inflation in
the economy.
• These FII’s drive the fortune of big companies
in which they invest. But their buying and
selling of securities have a huge impact on the
stock market. The smaller companies are taken
along for the ride.
• Sometimes these FII’s seek only short-term
returns. When they pull their
investments banks can face a shortage of
funds.

14. FDI vs FII
Control of
management
FDI being a direct form of investment into a foreign company, the investors are more interested and even get to
enjoy a higher control on the management of the company, even if it is in the foreign country.
On the contrary, FII just allows for funds to be invested into the financial market of the host country and
therefore, doesn’t have much hold onto the managerial decisions, or rather are referred to as just passive
investors.
Regulations on Entry
and Exit criteria
Truth be told, usually, there are more barriers on the entry and exit criteria of the FDI as opposed to the FII
which is pretty lenient in that case. For example, the nuclear energy sector does not allow for FDI.
What they result in? FDI for sure results in a long-term capital inflow, as it really takes time to settle from the planning and strategy
stage to the implementation and execution phase of a company.
On the other hand, for FII, their investment horizon entirely depends upon the current situation in the host
country’s economy, which when stable leads to long-term investments, and when turbulent, results in capital
pull back by the investors.
Economic development of
the host country
FDI results in the overall economic growth that is long-term by bringing in not only the capital into the host
country, but also takes it further on the route to development through new technology and infrastructure
investment, increasing new employment opportunities, increased skilled workforce by proper training, etc.
On the other hand, FII just brings in funds, which certainly does not help in the economic growth or increment
in the GDP of the host country as such. But it just adds into the capital in the economy.

16. STATUS OF FII IN INDIA
• Foreign Institutional Investors (FIIs) have been a major driver of India's financial
markets, investing Rs. 50,089 crore (US$ 7.06 billion) in the calendar year 2021.
• The country has attracted FIIs/FPIs due to its well-developed primary and
secondary markets.
• The Securities and Exchange Board of India (SEBI) regulates foreign institutional
investors' (FIIs/FPIs) investments in India, while the Reserve Bank of India sets a
limit
• The total market capitalisation (M-cap) of all companies listed on the Bombay
Stock Exchange (BSE) rose to a record level of Rs. 264.06 trillion (US$ 3.42
trillion) in 2021-22, from Rs. 204.31 trillion (US$ 2.76 trillion) in 2020-21.on
such investments (RBI).

17. RECENT DEVELOPMENTS
• As per the depositories data, foreign portfolio investors (FPIs) invested Rs. 3,202 crores (US$ 428.03 million)
in India during the first week of January 2022.
• India’s National stock exchange (NSE) had the eighth largest market capitalization in the world with a total
market value of US$3.337 trillion in FY22.
• In December 2020, Embassy Office Parks REIT ('Embassy REIT'), India's first listed REIT and one of Asia's
largest by area, announced that through an institutional placement of units, it has successfully completed a unit
capital raise of Rs. 36.8 billion (US$ 501 million).
• In the calendar year of 2021, India’s stock rally made investors rich by Rs. 72 lakh crore (US$ 962.22 billion)
with the Sensex crossing the 50,000 mark for the first time ever reaching a lifetime high of 61,765.59 on
October 18th 2021.
• In April 2022, Domestic Institutional Investors (DIIs) were the net buyers in the Indian equity market and
accounted for Rs. 29,869.52 crores (US$ 3.86 billion).
• Foreign investors invested >Rs. 1.4 trillion (US$ 19 billion) in the Indian stock market in 2020.
• In 2021, ~ 63 initial public offerings (IPOs) (including Brookfield REIT,PowerGrid Infrastructure Investment
Trust, Nykaa and Zomato) have raised Rs. 1.19 trillion (US$ 15.89 billion).
• In April 2021, Amazon India launched US$ 250 million the ‘Amazon Smbhav Venture Fund’ (the venture
fund) for Indian start-ups and entrepreneurs to boost technology innovations in areas of digitisation,
agriculture and healthcare.

18. CONCLUSION
• FDI has played an important role in development of indian economy. It has helped
achieved a certain level of financial stability and production growth. It begins a
long term investment has also imporved the BOP amd employment generation.
• FII do have significant impact on the Indian stock market but there are other
factors like government policies, budgets, bullion market,inflation,economical and
political condition ets do also have impact on the Indian stock market. Also FII is
not only the factor affecting the stock market indices. There are major factors that
influence the stock market. Now a days FII are the major contributors to stock
market.
The pros of allowing FII to invest in Indain markets far outweigh the cons.

19. CURRENT INTERNATIONAL ISSUES

20. 1. Dumping
AT
“If a company exports a product at a price lower than the price it normally charges on its own home
market, it is said to be “dumping” the product. ”
– WTO

21. Impact of Dumping
• It can push the manufacturers and producers in the importing country
out of business – which leads to higher employment.
WTO Agreement
• Disciplines anti-dumping actions – “Anti-dumping Agreement”
Article VI of the GATT – the right of measures against imports of
a product at an export price below its “normal value” – if such
dumped imports cause injury to a domestic industry.

22. Issues with imposing Anti-dumping duties
• Increase of anti-dumping duties decreases the import of the targeted products
in that country – injury to the exporting country.
• Causal relationship between dumping actions and industrial injuries – affects
the economic relations between the countries.
Anti-dumping measures taken by countries in recent times
India imposed Anti-dumping duty on,
• 99 Chinese products on January 28, 2019 - includes chemicals & petrochemicals,
fibers & yarn, machinery items, pharmaceutical, rubber & steel.

23. 2. Agricultural Protectionism
It is a system of government measures to protect domestic agricultural
production from foreign competition, usually by preventing or discouraging of
imports.
Tariff protection involves; Tariff on cheaper imports, Quotas on imports,
Government subsidies to domestic farmers.
Reasons for Protectionism –
• Farmers have lower incomes and don’t tend to benefit from economic growth
(low income elasticity of demand for food)
• Farmers often a Powerful political lobby
• Farming plays an important role in rural areas

24. Problems of Agricultural Protectionism
• Foreign Farmers are worse off because they cannot export
• Higher Food Prices
• Cost to Government
• dead weight Economic loss
• Retaliation affects our exporters
Agricultural protectionism in recent time -
Food Protectionism in 2022
• it is on the rise in the developing world
• trying to safeguard local supplies – effects are threatening to spill over rich
economies.

25. • Restricting exports to cope with high prices – due to war in Ukraine.
• According to Flitch Solutions – 30 countries curbed exports by 28th May, 2022.
• Malaysia announced ban on chicken exports on 25th May – affecting Singapore –
imports a third of its supply from there.
• India curbed wheat and Sugar shipments.
• Indonesia – limited palm oil sales

26. 3. Economic Warfare
“Economic strategy utilized by belligerent nations with the goal of weakening the
economy of other nations.”
• Kaushik Basu says, “Economic warfare in a globalized world is so novel that we
do not yet fully understand it and have few rules to regulate it. There is no well-
defined list of punitive instruments, much less credible estimates of the direct and
collateral damage each is likely to cause.“
• The crucial instrument is sanctions – 3 stages – threat stage, limited use of
sanctions, economic warfare.

27. Economic Warfare in Recent time –
• US and Nato allies over Russia (Russia-Ukraine War)
• US sanctions on Cuba
• US sanctions on Iran
• US sanctions on Russia, Russia’s invasion of Crimea(2015)
• China Sanctions over Australia

28. 4. Price Fluctuations of Oil
• Oil price increases generally leads to increase inflation and reduce economic
growth.
• Oil prices directly affect the prices of goods made with petroleum products and
indirectly affect costs such as transportation, manufacturing, and heating.
• The extent to which oil price increases lead to consumption price increases
depends on how important oil is for the production of a given type of good or
service.
• Despite these effects on supply and demand, the correlation between oil price
increases and economic downturns in the U.S. is not perfect. Not every sizeable
oil price increase has been followed by a recession. However, five of the last seven
U.S. recessions were preceded by considerable increases in oil prices (Sill 2007)
• geopolitical tensions cause price fluctuations.

29. Recent Rise in Oil Prices and its impact –
• Demand for oil plunged in 2020 during the pandemic when lockdowns led the
price to fall below zero first time in history due to a major downturn in economic
activity.
• Post that, Oil prices have since risen sharply to nearly $100 per barrel due to,
economic recovery post-lockdowns – so does the demand for oil.
 rising geopolitical tensions between Russia and Ukraine and in the Middle
East – stoking supply fears.
To counter the impact of Oil prices – World needs an Energy transition.

30. THANK YOU