This document discusses the effects of foreign direct investment (FDI) and foreign institutional investment (FII) in the Indian economy. It defines FDI and FII, describes the types of FDI and its impacts. The document also outlines the advantages and disadvantages of both FDI and FII, and examines their growth in India over time. It analyzes sector-wise FDI inflows and concludes that FDI has played an important role in developing the Indian economy through financial stability, productivity growth, and employment generation.

1. EFFECTS OF FDI & FII IN INDIAN
ECONOMY
PRESENTED BY:
SUPRIYA PATWARI (161)
SURESH S (162)
SURYA PRATAP (163)
SWAPNIL MATTE (164)
SWETA GHOSH (165)

2. CONTENTS
1. INTRODUCTION OF FDI & FII
2. TYPES OF FDI
3. IMPACTS OF FDI
4. ADVANTAGES OF FDI
5. DISADVANTAGES OF FDI
6. IMPACTS OF FII
7. ADVANTAGES OF FII
8. DISADVANTAGES OF FII
9. GROWTH OF FDI & FII IN INDIAN ECONOMY
10.CONCLUSION

3. INTRODUCTION OF FDI & FII
• FDI – Foreign Direct Investment
• FII – Foreign
Institutional
Investors

6. TYPES OF FDI
Direct Investment (FDI)
Horizontal FDI
Vertical FDI
Platform FDI

7. BACKGROUND: INDIA
TRANSFORMED !!
…Yesterday
 Slow rate of growth
 Bureaucratic
 Protected and slow
 Small consumer markets
 Weak infrastructure
…Today
Strong Macro Economic
Fundamentals
Encouraging Foreign Investment
Outsourcing Destination
Growing Consumerism
Impetus On Infrastructure
Development

8. IMPACT OF FDI
• Financial Transfer
In Foreign
Exchange
• Production
Technology
• Management Skills
• Physical Resources
Like Machinery
Tools Equipment
Etc.
• Institutional System
• Information &
Database
• Worldwide Contacts
• Research &
Development
• Training Resources
• Trade Channels

9. ADVANTAGES OF FDI
• Inflow of equipment & technology
• Competitive advantage & innovation
• Financial resources for expansion
• Employment generation
• Contribution to exports growth
• Access to low cost resources for investor
• Access to new market/distribution channel for
products
• Improved consumer welfare through reduced costs,
wider choice and improved quality

10. DISADVANTAGES OF FDI
• Crowding of local industry
• Loss of control
• Repatriation of profits/dividends by investor
• Conflicts of codes/laws
• Possible exploitation of resources- material/wages
• Effect on local culture/sentiments – socio cultural
effect
• Effect on natural environment

11. FII: IMPACT ON INDIAN ECONOMY
• FII leads to appreciation of Currency: FII Need to
maintain an account with RBI For all transactions
• FII and Exports: If our Indian currency appreciates
just because of FII then there will be adverse effect
on exports
• FII and Stock Market: When FII cap is on high they
can bring in lot of funds in stock market
• FII and Inflation: The huge amount of FII flow
creates The huge demands for Indian rupees so
excess liquidity leads to inflation

12. ADVANTAGES OF FII
• Enhanced flows of equity capital
• Economic Development
• Improved Corporate Governance

13. DISADVANTAGES OF FII
• Problems for Small Investors
• Problems of Inflation
• Adverse Impact on Export
• Hot Money

14. GROWTH OF FDI & FII IN INDIA
• UNCTAD’s World Investment Report (2014) – India
is the 14th Largest Recipient of FDI
• Factors Affecting FDI & FII:
– Infrastructure
– Labor Laws
– Corruption
– Corporate Taxes
– Geographical Disparities

15. DIPP’S – FINANCIAL YEAR-WISE FDI EQUITY INFLOWS
180,000
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
10733
18654
12871
10064
14653
24584
56390
98642
142829
123120
97320
165146
121907
147518
10290
Amt of FDI Inflows (In ` Crores)

16. 200000
150000
100000
50000
0
-50000
9933
8763
2689
45765
45881
41467
30840
66179
-45811
142658
146438
93726
168367
51649
418
FII (Equity+Debt) in ` Crores
FINANCIAL YEAR-WISE FII FLOWS
2008 Financial Crisis

17. SECTOR-WISE FDI INFLOWS
0.00
50,000.00
100,000.00
150,000.00
200,000.00
250,000.00
300,000.00
350,000.00
400,000.00
187,872.98
108,973.98
66,782.31
59,949.17
56,076.07
48,332.02
45,541.08
42,964.09
38,682.87
36,868.84
362,144.22
Amount of FDI Inflows (In ` crore)
(18.17 %)
(10.66%)
(6.46%)
(5.87%)
(5.29%)
(4.48%)
(4.43%)
(4.08%)
(3.71%)
(3.30%)
(33.55%)

18. FDI & FII - DIFFERENCE
• It is long-term investment
• Investment in physical
assets
• Aim is to increase
enterprise capacity or
productivity or change
management control
• Leads to technology
transfer access to markets
and management inputs
• FDI flows into the primary
market
• It is generally short-term
investment
• Investment in financial
assets
• Aim is to increase capital
availability
• FII results in only capital
inflows
• FII flows into the
secondary market

19. FDI & FII - DIFFERENCE
• Entry and exist is
relatively easy
• FII is eligible for capital
gain
• Tends to be speculative
• No direct impact on
employment of labour
and wages
• Fleeting interest in
Management
• Entry and exit is relatively
difficult
• FDI is eligible for profits
of the company
• Does not tend be
speculative
• Direct impact on
employment of labour
and wages
• Abiding interest in
Management

20. WHAT IS THE NEED OF THE
HOUR FOR INDIA?
FDI

21. CONCLUSION
• FDI has played an important role in the development
of Indian economy.
• It has helped achieved a certain level of financial
stability and productivity growth.
• It being a long term investment has also improved
the balance of payment and employment generation

22. REFERENCES (WEB)
• http://en.wikipedia.org/wiki/Foreign_direct_investment
• http://en.wikipedia.org/wiki/Foreign_Institutional_Investor
• http://dipp.nic.in/
• http://www.sebi.gov.in/
• http://www.nseindia.com/
• http://unctad.org/en/PublicationsLibrary/wir2014_overview_en.pdf
• http://www.equitymaster.com/5MinWrapUp/detail.asp?date=03/23/2
010&story=3&title=We-are-advising-our-clients-to-buy-India-long-term

23. REFERENCES (ARTICLES)
• Anitha R, “Foreign Direct Investment And Economic Growth In
India”, International Journal of Marketing, Financial Services &
Management Research, Volume 1, Issue 8, August 2012, pp. 108-
125.
• Dr.N.K.Sathya Pal Sharma, Guruprasad B G, “Role Of Foreign
Institutional Investors In Indian Investment Arcade Growth”,
International Journal of Advancements in Research & Technology,
Volume 2, Issue4, April-2013, pp. 272-280.

24. ANY
QUESTIONS?

25. THANK
YOU