This document defines and describes foreign direct investment and foreign institutional investment. It provides key points about each: - Foreign direct investment is investment from one country into the assets and businesses of another, including buying shares/equity in companies or establishing new operations. It requires at least a 10% ownership stake. - Foreign institutional investment refers to investment from foreign investment funds, pension funds, insurance companies etc. into the stock markets of another country. - The document provides statistics on top source countries for FDI in India and monthly FII flows into Indian equity and debt markets in 2012.

1. Think Beyond
“FOREIGN DIRECT
INVESTMENT”
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2. 1. A component of a country's national
financial accounts.
2. Investment of foreign assets into domestic
structures, equipment, and organizations.
3.It does not include foreign investment into
the stock markets.
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3. • Foreign investment that establishes a
lasting interest in or effective management
control over an enterprise.
• Foreign direct investment can include
buying shares of an enterprise in another
country, reinvesting earnings of a foreign-
owned enterprise in the country where it is
located, and parent firms extending loans
to their foreign affiliates.www.StudsPlanet.com

4. • International Monetary Fund (IMF) guidelines
consider an investment to be a foreign direct
investment if it accounts for at least 10 percent
of the foreign firm's voting stock of shares.
• However, many countries set a higher threshold
because 10 percent is often not enough to
establish effective management control of a
company or demonstrate an investor's lasting
interest.
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5. • Foreign investment in India is regulated by
Government of India’s FDI policy. The FDI guidelines
administered by the “Ministry of Commerce and
Industry”.
• GOI has set up the Foreign Investment
Implementation Authority (FIIA) to facilitate quick
translation of Foreign Direct Investment (FDI)
approvals into implementation, to provide a one-
window to foreign investors by helping them obtain
necessary approvals, sort out operational problems
and meet with various Government agencies
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6. 6
1. Maharashtra
Maharashtra received the lion's share of the FDI $2.43
billion (Rs 11,154 crore), which is 35% of the total FDI
inflows in to the country.
2. National Capital Region
NCR received $1.85 billion (Rs 8,476 crore) in FDI during
the period. The region accounted for 20% of the total FDI.
3. West Bengal, Sikkim, Andaman & Nicobar Islands
These states attracted the third highest FDI inflows worth
$1.416 billion (Rs 6,050 crore)
4. Karnataka - $936 million (Rs 4,333 crore)
5. Punjab, Haryana, Himachal Pradesh -
$904 million (Rs 4,141 crore)
Data: Jan – Jun 2010www.StudsPlanet.com

7. (In Rs. Crore) (In US$ mn)
1. April 2011 13,847 3,121
2. May 2011 20,946 4,664
3. June 2011 25,371 5,656
4. July 2011 4,886 1,099
5. August 2011 12,814 2,830
6. September 2011 8,407 1,766
7. October 2011 5,715 1,161
8. November 2011 12,909 2,538
9. December 2011 7,124 1,353
10 January 2012 10,288 2,004
11. February 2012 10,874 2,211
2011-12 (up to February 2012) # 133,181 28,403
2010-11 (up to February 2011) 83,687 18,354
%age growth over last year ( + ) 59 % ( + ) 55 %
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8. Rank
s
Country 2009-10
(April-
March)
2010-11
( April-
March)
2011-12
(April-
Feb.)
Cumulative
Inflows
(April ‟00 -
Feb.12)
%age to
total
Inflows
(in terms
of US $)
1. MAURITIU
S
49,633
(10,376)
31,855
(6,987)
44,116
(9,426)
286,876
(63,653)
39 %
2. SINGAPO
RE
11,295
(2,379)
7,730
(1,705)
23,770
(5,070)
76,646
(16,965)
10 %
3. JAPAN 5,670
(1,183)
7,063
(1,562)
13,570
(2,869)
57,332
(12,210)
8 %
4. U.S.A. 9,230
(1,943)
5,353
(1,170)
4,648
(976)
47,190
(10,425)
6 %
5. U.K. 3,094
(657)
3,434
(755)
12,525
(2,758)
41,958
(9,397)
6 %
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9. 49 49 51
26
49
100 100 100 100 100 100 100
0
20
40
60
80
100
120
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10. 0%
10%
20% 20%
8% 7% 7% 7%
6%
4% 4% 4%
2%
INFLOW
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11. FII
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12. FII denotes all those investors or investment
companies that are not located within the territory
of the country in which they are investing.
FIIs were first allowed to transact in Indian markets
in 1993.
The collective FII holding in a listed company
cannot exceed 40 per cent of its equity capital.
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13. • Mutual funds, insurance companies, pension
funds, investment trusts, endowment funds and
charitable trusts incorporated outside India but
investing in equity and debt securities in the
country are known as FIIs.
• They collect money from individuals and
corporates (primarily from countries belonging to the European and
American continents), and invest it in
financial instruments worldwide, with India being
one of the targeted markets.www.StudsPlanet.com

14. • FIIs wanting to invest in equity and debt
securities in India have to register with SEBI.
Under SEBI (Foreign Institutional Investors)
Regulations, 1995, they also have to get
approval from the RBI to operate foreign
currency accounts (to bring in and take out
funds) and rupee bank accounts (to pay for
transactions).
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15. • Enhanced flows of equity capital
• FII inflows help in financial innovation and development
of hedging instruments.
• Improving capital markets.
• FIIs as professional bodies of asset managers and
financial analysts enhance competition and efficiency of
financial markets.
• Equity market development aids economic development.
• Improved corporate governance.
• FIIs constitute professional bodies, improve corporate
governance.
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16. • Problems of Inflation
• Problems for small investor
• Adverse impact on Exports
• Hot Money
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17. Month(2012) Equity Debt Total
January 10,357.70 15,971.20 26,328.90
February 25,212.10 10,015.80 35,227.90
March 8,381.10 -6,588.60 1,792.50
April -1,109.10 -3,787.50 -4,896.60
May NA
June NA
July NA
August NA
September NA
October NA
November NA
December NA
Total 42,841.80 15,610.90 58,452.70
* The data presented above is compiled on the basis of reports submitted to SEBI by custodians and
constitutes trades conducted by FIIs on and up to the previous trading day(s).www.StudsPlanet.com

18. Thank you
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