Fdi & Fii Final

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Fdi & Fii Final

  1. 1. -Jonty Mohta IIPM- Ahmedabad (UGP/09-12)
  2. 2. GDP (IN Rs crore) GDP (IN Rs crore) 6164178 5574449 4947857 4283979 3706473 3239224 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
  3. 3. GDP Growth Rate (in %) 9.5 9.7 9.2 6.9 7.2 6.7 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
  4. 4. Chart Title Inflation (WPI) Inflation (CPI ) 11.4 9.1 8.4 6.5 6.7 6.2 5.4 4.4 4.4 4.7 3.8 1.6 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
  5. 5. Chart Title Exports (US$ Mn.) Imports (US$ Mn.) 307651 257629 190670 189001 193820 157056 166162 118908105152 128888 117580 85,206 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
  6. 6. Trade Balance (US$ Mn.) 0 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 -20000 -40000 -60000 Trade Balance (US$ Mn.) -80000 -100000 -120000 -140000
  7. 7. 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.
  8. 8. 1) By Direction  Inward  Outward 2) By Target  Mergers and Acquisitions  Horizontal FDI  Vertical FDI 3 )By Motive  Resource-Seeking  Market-Seeking  Efficiency-Seeking
  9. 9. 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
  10. 10.  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
  11. 11. FDI Amount in US bn $ %age growth over 29.89 27.92 22.08 8.96 6.13 6.05 4.03 5.04 4.32 52.10% 146.40% 40.00%48.10% 35.40% FY 2001 FY 2002 -17.90% 2004 FY 2005 FY 2003 -14.20% FY FY 2006 FY 2007 FY 2008 FY 2009 (till dec.)
  12. 12. Rank Country Total 2000 to % of 2009 Total of all Countries 1. Mauritius 39,379 44 2. Singapore 8,071 9 3. U.S.A 6,508 7 4. U.K 5,289 6 5. Netherlands 3,701 4 5. Cyprus 2,579 3 6. Germany 2,379 3 7. France 1,233 1
  13. 13. CONTRIBUTION IN FDI (in %) MAURITIUS SINGAPORE U.S.A. U.K. JAPAN NETHERLANDS CYPRUS OTHERS 22% 44% 4% 4% 4% 5% 8% 9%
  14. 14. Investing in India – Entry Routes Investing in India Prior Permission Automatic Route (FIPB) General rule By exception No prior permission Prior Government required Approval needed Only information to the Reserve Bank of India Decision generally within 15 days of inflow/ Within 4-6 weeks Issue of shares
  15. 15. Sector/Activity FDI Cap/Equity Entry Route Airports 100% Automatic Construction 100% Automatic Development Petroleum & Natural Gas 26% (For PSUs) FIPB (b) Refining 100% ( Private Automatic companies) Other than Refining 100% Automatic Telecommunication Basic and 74% Automatic up to 49% cellular;STD/ISD Manufacture of telecom 100% Automatic equipment Power ( Except Atomic energy); regulations transmission, distribution and Power
  16. 16. Ranks Sector 2006- 2007- 2007- 2007- Cum % of Inflows 07 08 08 08 Till total (Apr- (Apr- (Apr- (Apr- Nov09 Inflows Mar) Mar) Mar) Mar) 1. SERVICES 21,047 26,589 28,411 16,566 101,019 22 % SECTOR (4,664) (6,615) (6,116) (3,438) (22,687) (fin& non- financial) 2. COMPUT. 11,786 5,623 7,329 2,763 42,259 9% SOFT & (2,614) (1,410) (1,677) (575) (9,529) HARD. 3. TELE 2,155 5,103 11,727 10,811 39,179 8% COMMUN (478) (1,261) (2,558) (2,223) (8,600) ICATIONS 4. HOUSING 2,121 8,749 12,621 10,565 34,348 7% & REAL (467) (2,179) (2,801) (2,189) (7,701) ESTATE 5. CONSTRU 4,424 6,989 8,792 8,380 30,557 7% CTION (985) (1,743) (2,028) (1,754) (6,945) (inroads &
  17. 17.  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
  18. 18.  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)
  19. 19.  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.
  20. 20. Pension Funds Mutual Funds Insurance Companies Investment Trusts Banks Endowments Foundations Charitable Trusts / Charitable Societies
  21. 21. 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.
  22. 22. Chart Title 100000 80000 60000 40000 Axis Title YEAR 20000 FII in Rs Cr. 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 -20000 -40000 -60000
  23. 23. 25000 20000 15000 FII 10000 5000 Sensex 0 -5000 Exchange Ra -10000 -15000
  24. 24. 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.
  25. 25.  Unavailability of Corporate  Problem of inflation Debt  Reduces flexibility of Policy makers  Increase Forex Reserve  Hot Money  Increase Domestic Savings  False representation of and Investments Economy Large Availability of Capital  Can’t be used for long term Advantages Disadvantages  Problems for small investors
  26. 26.  FDI is when a foreign  FII is when a foreign company brings capital into a company buys equity in any company or economy to set up company through stock a production or some other market. facility.  FDI gives some CONTROL in  FII does not give any operation of foreign company control in operation of FDI FII to the foreign company foreign company
  27. 27.  FDI involves in direct  FII is mostly the short term production activity and is investment mostly in long term in nature. financial market.  It enables a degree of  It does not involve in degree control in the company. of control in the company.  FDI brings long term  FII brings short term capital. capital. FDI FII
  28. 28.  www.ibef.org  www.imf.org  www.rbi.org.in  www.tradechakra.com  www.tradingeconomy.com

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