The document explains foreign direct investment (FDI) and foreign institutional investment (FII) in India, highlighting the methods and benefits of investing in the country. It details how foreign entities can establish a presence in India and the impact of these investments on the economy, including employment generation and capital flow. Additionally, it compares FDI and FII, outlining their differences in terms of taxation, market involvement, and duration of investments.

1. FDI and FII
Foreign Direct Investment
Foreign Institutional Investor

2. Introduction
Foreign Direct Investment Foreign Instituitional Investor
• When a company makes a
long term investment in a
foreign country by either
setting up the subsidiary
company or working in
association over there and
getting involved in business
process of buying,
producing and selling in that
foreign country
• It is an entity or institution
which makes investment in
a foreign country by getting
registered in the stock
exchange of foreign market
to trade in securities

3. Foreign Direct Investment
Parent
Company
Subsidiary
Foreign Direct Investment
Domestic
Country
Foreign
Country
Expansion

4. Foreign Institutional Investor
Foreign
Institutions
Banks
Mutual
Funds
Corporations
Insurance
Companies
Stock Market
Asset
Management
Company
BSE
MSEI
NSE
Invests
US India

5. Foreign Investments
• A Foreign business entity can enter India via a number of alternatives, subject to general
conditions mentioned in FDI Policy:
1. As an Indian Company-
a. By setting up a wholly owned subsidiary
b. Joint Venture with an Indian entity/person
2. Operate as a foreign company and be registered with the Registrar of Companies, MCA
• Foreign companies invest in India to take advantage of relatively lower wages, cheaper
production, new potential customers, special investment privileges such as tax exemptions,
tapping growth potential of market, interest rate arbitrage
• Benefits to host country- Generates employment, capital flow, greater investment because
others also view as stable economy, foreign exchange, new technology, skills &
knowledge

6. • From 1990 to 2018, FIIs net investment has been 8.5 lakh crore in Indian
equity market
• Since 1992 till date each year around 20 billion dollars of FDI is received
• India is highest recipient of remittance from abroad mostly from the gulf
countries
• When FIIs invests in large in Indian stock market, rupee appreciates and the
balance of payment improves
• When FIIs withdraws, rupee depreciates and the balance of payment
weakens

7. Comparison
Foreign Direct Investment Foreign Institutional Investor
1. Invests in the real economy
2. Pays corporate tax of 40% and
dividend distribution tax of 30%
3. Entry and exit controlled by Parliament
& RBI
4. They create mass employment
5. Long-term
6. It flows into the primary market
7. Stable
1. Invests only in the stock market
2. Pays only long-term capital gain tax of
10%
3. No entry and exit barrier
4. They create few job opportunities
5. Short-term
6. It flows into the secondary market
7. Hot money

8. Examples
Foreign Direct Investments Foreign Institutional Investor
• Examples-
• Amazon
• Walmart
• Bajaj Allianz
• Citibank
• Glaxosmith kline
• Ikea
• Starbucks
• Examples -
• Europacific growth fund- Invested in 16
companies with a total valuation
51,564 cr.
• Abudhabi Investment Authority-
Invested in 21 companies with a total
valuation 18,943 cr.
• Govt.Pension Fund Global- Invested in
77 companies with a valuation of
14,600 cr.

9. Thank you for watching
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