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- 1. I N TE R N A T I O N A L B U S I N E S S FOREIGN INVESTMENT BY; RICHAVERMA(BCH2018064) DIYA GUPTA(BCH2018037) B.COM(H)
- 2. Outline of Topics Whatis the FOREIGN investment? Types Methods Routes Flows Foreign investment in India
- 3. Foreign investment iswhen a domestic investor decides to purchase ownership of an asset in a foreign country. It involves cash flows moving from one country to another to execute the transaction. If the ownership stake is large enough, the foreign investor may be able to influence the entity’s business strategy. FOREIGN INVESTMENT
- 4. The effect offoreign investment, however, varies from country to country. It can affect the factor productivity of the recipient country and can also affect the balance of payments. Foreign investment provides a channel through which countries can gain access to foreign capital.
- 5. TYPES OF FOREIGNINVESTMENT Foreign Direct Investment (FDI) Foreign Portfolio Investment (FPI) Foreign Institutional Investment (FII)
- 6. FDI is aninvestment made by a company or individual who is an entity in one country, in the form of controlling ownership in business interests in another country. FDI could be in the form of either establishing business operations or entering into joint ventures by mergers and acquisitions, building new facilities, etc. F D I
- 7. There are two types of foreign direct investme nt: 1 – HORIZONTALINVESTMENT When an investor establishes the same type of business in a foreign country in which he operates in his country or when two companies of the same business but operating in different countries merge, it is called a Horizontal investment. 2 - VERTICAL INVESTMENT When companies of one country merge with the company of another country or acquire the company of another country but both the company are not in the same business rather they are related with each other like manufacturing company of one country acquire the business of another country who is supplying raw material for production.
- 8. Foreign Portfolio Investment(FPI) means investing in the financial assets of a foreign country, such as stocks or bonds available on an exchange. This kind of investment is considered less favourable than direct investment because portfolio investment can be sold off quickly and these are at times seen as short term attempts to make money, rather than a long-term investment in the economy. F P I
- 9. Investments made inthe shares of a foreign country. Investment by purchasing the bonds floated by a foreign government. Purchase of shares in a foreign company. Purchase of bonds issued by a foreign government. Acquisition of assets in a foreign country. A few examples of FPI- F P I
- 10. Foreign Institutional Investors(FIIs) are large companies that invest in countries other than where their headquarters are located. The term FII is most commonly used in India, where it refers to outside entities investing in the nation’s financial markets. However, this term is also used officially in China. FIIs can include hedge funds, insurance companies, pension funds, investment banks and mutual funds. F I I
- 11. Some of thecountries with the highest volume of foreign institutional investments are those with developing economies, which generally provide investors with higher growth potential than mature economies. This is one reason FIIs are commonly found in India, which has a high-growth economy and attractive individual corporations to invest in. All FIIs in India must register with the Securities and Exchange Board of India (SEBI) to participate in the market. F I I
- 12. Methods of ForeignInvestment THERE ARE TWO METHODS OR STRATEGIES FOR THIS INVESTMENT: Greenfield Investment: – In this strategy, the company starts its business operation in another country from zero means they have to set up their own factory, plant, and offices. For e.g., Domino’s and McDonald’s are US-based companies that have started his business in India from zero now they are leading in there segment. Brownfield Investment: – In this strategy, the company does not start its business from scratch rather go by merger or acquisition like recently Walmart inc of US has acquired the Flipkart which is an Indian company and gets all the assets and liability of the Flipkart.
- 13. Routes of ForeignInvestment Below are the two routes – Automatic route: – In Automatic route foreign company/institutions does not require any approval of the government or any agencies for making an investment in another country. Approval route:- In approval route foreign company/institutions requires to get approval from government or any specified body of that country where they want to invest. 1. 2.
- 14. FDI INFLOWS ININDIA FROM 2015-2020 source- https://m.rbi.org.in/Scripts/AnnualReportPublications.aspx?Id=1307
- 15. Foreign Investment inIndia Foreign Investment in India has been the direct outcome of the liberal trade policies undertaken and implemented by successive governments. The liberalization program of the government aims at rapid and substantial growth of the country's economy and besides a harmonious integration with global economy. While foreign investment in India comprises of investments made by overseas companies in India, the reverse i.e. outflow of foreign investment from India is also prevalent in the Indian economy. Foreign investment in India has created some wonderful opportunities in the country in terms of creating employment and improving the basic infrastructure of the country.
- 16. Foreign Investment Policyin India THE GOVERNMENT HAS UNDERTAKEN VARIOUS LIBERAL POLICY DECISIONS TO MAKE THE WHOLE PROCESS OF FOREIGN INVESTMENT IN INDIA HASSLE FREE 1. The list of industries that are eligible for automatic approval of foreign investment has been expanded by the Ministry of industry. 2. The upper limit of the rate of foreign investment in India has been raised to 74% from the earlier 51%; in some cases, this has been increased to 100%. 3. Indian companies will no longer need prior clearance from the Reserve Bank of India. 4. The exchange control regulations have been amended by the government.
- 17. 5. The banagainst the use of foreign brand names/trademarks has been removed. 6. The corporate rate of corporate tax on foreign companies has been reduced from 65% to 55% by the government in the annual budget of 1994-95. 7. The government reduced long term capital gains rate for overseas companies to 20% 8. Under the Indian Income Tax Act, export earnings are exempted from corporate income tax for both overseas and domestic firms. 9. 100% inflow of foreign investment is permitted in strategic sectors such as roads, ports, tunnels, highways, and harbors on the condition that the total investment in any of the sectors should not exceed ` 1500 crore. 10. Any increase within the prescribed limit does not require permission from the foreign investment promotion board.
- 18. 10 Countries ThatReceive the Most Foreign Direct Investment United States China Singapore Brazil United Kingdom Hong Kong France India Canada Germany 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. - $47 billion in 2019 - $40 billion in 2019 - $251 billion in 2019 - $140 billion in 2019 - $110 billion in 2019 - $75 billion in 2019 - $61 billion in 2019 - $55 billion in 2019 - $52 billion in 2019 - $49 billion in 2019 source- https://seasia.co/2020/02/02/top-10-countries-that-attracted-the-most-foreign-direct-investment-in-2019
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