Foreign Direct Investment (FDI) and Foreign Institutional Investment (FII) are two types of foreign investment in India. FDI refers to long-term investment in physical assets and management control, while FII refers to short-term investment in financial assets without management control. The presentation provides an overview of FDI and FII guidelines in India, including the distinction between the two, sector-specific guidelines for different industries, and recent developments in India's consolidated FDI policy.
The document summarizes India's consolidated FDI policy framework, which integrates all prior FDI regulations into a single document for greater clarity and ease of understanding. Key points include:
- The Commerce Minister released the final consolidated FDI policy document.
- It rescinds all past press notes and provides a single platform for all FDI policy information.
- The document will be updated every 6 months to keep the framework current.
- Several issues like FDI in LLPs are still under discussion and will be added later.
FDI involves a foreign company obtaining controlling ownership in a business located in another country. FII involves an overseas institutional investor purchasing shares of a company on the stock market of another country. Key differences are that FDI provides control over operations while FII does not, FDI is a long term investment in direct production while FII is short term investment in financial markets, and FDI brings long term capital while FII brings short term capital. The Indian government promotes FDI through policies like allowing 100% ownership in certain sectors like retail, agriculture and manufacturing in order to boost the economy.
This document provides an overview of foreign direct investment (FDI) and foreign institutional investment (FII) in India. It begins with defining FDI and FII, then outlines the key differences between the two. The presentation reviews India's FDI policy evolution and liberalization over time. It also provides sector-specific FDI guidelines for various industries like telecommunications, aviation, broadcasting, print media, and insurance. The procedural aspects of investing under the automatic and approval routes are also summarized.
FDI and FII in India can contribute to economic growth. FDI refers to investment from foreign companies that have control over local firms. FII refers to investments from institutional investors in foreign stock markets. Key differences are that FDI goes to primary markets while FII goes to secondary markets, and FDI is generally longer term while FII is shorter term and more liquid. Factors affecting FDI include wages, infrastructure, economic growth potential, and political stability. India has increasingly liberalized and now allows FDI in many industries like infrastructure, IT, automobiles and more. FDI can promote industrialization, technology, jobs and exports but also risks unbalanced development and monopolies. FIIs have invested over $171
The document discusses foreign direct investment (FDI) and foreign institutional investment (FII) in India. It provides an overview of types of foreign investment including wholly owned subsidiaries, joint ventures, acquisitions, and portfolio investments. Benefits of foreign investment are described such as job creation, technological advancement, and economic growth. Factors affecting foreign investment in India and growth trends over time are also examined. The document focuses on FDI in India's retail sector and the potential advantages it may provide.
This document provides an overview of foreign direct investment (FDI) and foreign institutional investors (FII) in India. It defines FDI and FII, describes their key features and differences. FDI refers to investment by a company from one country into business interests located in another country, while FII involves investment in a country's financial assets and secondary markets. The document outlines the advantages and disadvantages of both, their permitted sectors in India, impact on the economy, and concludes that while both help an economy grow, FDI proves more effective long-term.
Effects of fdi and fii on indian economySwapnil Matte
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.
The document summarizes India's consolidated FDI policy framework, which integrates all prior FDI regulations into a single document for greater clarity and ease of understanding. Key points include:
- The Commerce Minister released the final consolidated FDI policy document.
- It rescinds all past press notes and provides a single platform for all FDI policy information.
- The document will be updated every 6 months to keep the framework current.
- Several issues like FDI in LLPs are still under discussion and will be added later.
FDI involves a foreign company obtaining controlling ownership in a business located in another country. FII involves an overseas institutional investor purchasing shares of a company on the stock market of another country. Key differences are that FDI provides control over operations while FII does not, FDI is a long term investment in direct production while FII is short term investment in financial markets, and FDI brings long term capital while FII brings short term capital. The Indian government promotes FDI through policies like allowing 100% ownership in certain sectors like retail, agriculture and manufacturing in order to boost the economy.
This document provides an overview of foreign direct investment (FDI) and foreign institutional investment (FII) in India. It begins with defining FDI and FII, then outlines the key differences between the two. The presentation reviews India's FDI policy evolution and liberalization over time. It also provides sector-specific FDI guidelines for various industries like telecommunications, aviation, broadcasting, print media, and insurance. The procedural aspects of investing under the automatic and approval routes are also summarized.
FDI and FII in India can contribute to economic growth. FDI refers to investment from foreign companies that have control over local firms. FII refers to investments from institutional investors in foreign stock markets. Key differences are that FDI goes to primary markets while FII goes to secondary markets, and FDI is generally longer term while FII is shorter term and more liquid. Factors affecting FDI include wages, infrastructure, economic growth potential, and political stability. India has increasingly liberalized and now allows FDI in many industries like infrastructure, IT, automobiles and more. FDI can promote industrialization, technology, jobs and exports but also risks unbalanced development and monopolies. FIIs have invested over $171
The document discusses foreign direct investment (FDI) and foreign institutional investment (FII) in India. It provides an overview of types of foreign investment including wholly owned subsidiaries, joint ventures, acquisitions, and portfolio investments. Benefits of foreign investment are described such as job creation, technological advancement, and economic growth. Factors affecting foreign investment in India and growth trends over time are also examined. The document focuses on FDI in India's retail sector and the potential advantages it may provide.
This document provides an overview of foreign direct investment (FDI) and foreign institutional investors (FII) in India. It defines FDI and FII, describes their key features and differences. FDI refers to investment by a company from one country into business interests located in another country, while FII involves investment in a country's financial assets and secondary markets. The document outlines the advantages and disadvantages of both, their permitted sectors in India, impact on the economy, and concludes that while both help an economy grow, FDI proves more effective long-term.
Effects of fdi and fii on indian economySwapnil Matte
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.
FDI refers to foreign direct investment, which is an investment made by a company in one country into a company in another country. FDI involves establishing business operations or acquiring business assets in the foreign country. FII refers to foreign institutional investment, which is investment by institutional investors like pension funds, mutual funds and insurance companies in a country other than their home country. While FDI involves direct ownership and management of assets, FII involves purchasing shares and other securities of publicly listed companies on the stock market. The document discusses the types, factors, limitations and impact of both FDI and FII on the Indian economy.
Foreign direct investment by Neeraj Bhandari ( Surkhet.Nepal )Neeraj Bhandari
This document discusses foreign direct investment (FDI) in India, specifically in the retail sector. It begins by defining FDI and describing its structure and trends in India. It then analyzes the impact of allowing FDI in multi-brand retail, noting both threats such as increased consolidation and unemployment, as well as advantages like more competition, choice, and infrastructure development. It acknowledges valid concerns on both sides and concludes by arguing that operational efficiencies and customer benefits should ultimately matter most, and liberalization could fuel further economic growth, as seen in other sectors.
This presentation summarizes the history and current state of foreign direct investment (FDI) in India's banking sector. It notes that FDI in private sector banks is currently permitted up to 74% of equity, with 49% allowed automatically and additional amounts requiring government approval. For public sector banks, FDI is permitted up to 20% of equity. The presentation outlines the benefits of FDI for the Indian banking sector, such as technology transfer, improved risk management, better capitalization, and financial stability. It also reviews recent Reserve Bank of India guidelines regarding FDI limits and regulations in the sector.
This document presents a case study on foreign direct investment (FDI) and economic growth in India. It discusses trends in FDI inflows to India by sector and top investing countries. Regression analyses show positive relationships between FDI and GDP/exports growth. The manufacturing sector is analyzed, showing India's rising global rankings. Challenges to FDI include crowding out domestic investment. The services, insurance, agriculture, retail, and tourism sectors are also examined in terms of attracting more FDI and related policies. A comparison of FDI policies and inflows between India and China is provided.
FDI and FII impact on dollar rupee exchange rate1987jiteshjain
FDI and FII investments and rules can impact the exchange rate of the rupee versus the dollar. FDI brings foreign capital into the country through direct investment, while FII represents short-term foreign investment in the stock market. Large FII inflows can influence stock prices and appreciation of the rupee, impacting exports. Proper regulation of FII limits is important to control inflation and impacts on the economy.
The document discusses foreign direct investment (FDI) in India. It defines FDI and explains that it refers to investment from foreign companies into domestic structures, equipment, and organizations in India. It outlines the types of FDI, factors affecting FDI, and the significance and limitations of FDI for India's economy. Additionally, it provides data on growth trends in FDI in India over time, popular destinations for FDI, and both advantages and limitations of allowing FDI in India's retail sector. Experts are cited discussing both benefits and risks of India's reliance on FDI.
Foreign direct investment (FDI) refers to cross-border investment by a company located in one country into business interests located in another country. Countries seek to attract FDI as it brings capital, jobs, skills and technology while also improving the country's exports, tax revenues and foreign exchange reserves. However, local companies fear losing ownership and control to foreign giants, and small enterprises may be unable to compete. India allows FDI through an automatic route without approval or a government route requiring approval. Major sectors attracting FDI in India include telecommunications, IT, pharmaceuticals and automotive industries.
Analytical study of foreign direct investment in indiasachin gadekar
The document is a dissertation report submitted by Sachin Gadekar to the University of Pune in partial fulfillment of an MBA degree. It analyzes foreign direct investment in India. The report includes an acknowledgment, declaration, index, and introduction section providing background on FDI, definitions, and types of FDI. It discusses India's efforts to liberalize FDI policy and make the country an attractive destination for foreign investment.
This video would describe about two important types of foreign investments- the foreign direct investment and foreign institutional investor.
FDI is when a company makes investment in foreign country by setting up the business over there.
FII 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.
Foreign companies invest in India to take several advantages like relatively lower wages, cheaper production, new potential customers, tax exemptions, tapping growth potential of market, interest rate arbitrage.
It also benefits the host country by providing employment, increasing capital flow, greater investment opportunities, foreign exchange, transfer of new technology, skills & knowledge.
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
A comparison has been made between FDI and FII based on various factors like employment, tax rate, time period etc.
FDIs invests in the real economy while the FIIs invests in stock market only.
FDIs pay higher taxes as compares to the FIIs
FDIs generates mass employment as compared to FIIs that generates no or few employment opportunities
Both these foreign investments highly influence the country's economy and financial system.
It has its own positive and negative impacts. Do watch the video to know all about FDIs and FIIs.
Thank you for watching
Subscribe to DevTech Finance
This document discusses foreign direct investment (FDI) in India across several sectors. It defines FDI and compares it to foreign institutional investment. It outlines India's FDI policies for sectors like retail, telecom, pharmaceuticals, IT, automobiles and others. It discusses the types of FDI, top investing countries, trends over time, key players and investments, and impact of FDI policies on employment, technology, and economic growth in India. Charts and figures are provided on FDI flows and sector-wise cumulative inflows from 2000-2013.
Foreign direct investment (FDI) occurs when a company or individual from one country makes a substantial long-term investment in a business located in another country. FDI brings not only capital but also skills and technology. India allows FDI through both an automatic route that does not require government approval and a government route that does require approval. While FDI is allowed in most sectors and can be up to 100% in some industries, it is prohibited in sectors like atomic energy, gambling, real estate, and tobacco. The advantages of FDI for India include increased employment, economic growth, human resource development, infrastructure development, and access to finance and technology, while potential disadvantages include loss of small businesses and cultural changes.
FDI refers to foreign direct investment where an investor from one country makes a physical investment into building or expanding a business in another country. FII refers to foreign institutional investors who make short-term investments in a country's financial assets and securities markets. Some key differences are that FDI involves long-term physical investments while FII are short-term financial investments, FDI leads to technology transfer and skills development while FII only results in capital inflows, and FDI has a more direct impact on jobs and wages while FII does not. Both FDI and FII are important sources of foreign capital for India that can boost economic growth but also need to be regulated to avoid volatility and other potential issues.
This document discusses the roles of foreign direct investment (FDI) and foreign institutional investment (FII) in India. It notes that FDI provides benefits like filling savings gaps, promoting infrastructure development, and facilitating technology transfers, while also outlining some risks like corporations extracting resources. FII refers to outside companies investing in India's financial markets, with the first investments starting in 1992. Advantages of FII include increasing foreign capital and domestic investments, while disadvantages include potential inflation and capital being withdrawn quickly. In conclusion, while both FDI and FII have costs and benefits, their pros generally outweigh the cons for India's economic development.
Foreign direct investment (FDI) refers to investment by a company located in one country into business interests located in another country. FDI can occur by buying an existing company in the target country or expanding operations of a business already located there. Major benefits of FDI include improving a country's foreign exchange reserves, generating employment, facilitating technology and skills transfers, and increasing tax revenues. However, local companies may fear losing ownership while small businesses worry about competing with large multinational corporations.
This document provides an overview of foreign direct investment (FDI) in India. It defines FDI and outlines the government's strategies toward FDI over time from being anti-FDI in the 1960s-1970s to becoming more pro-FDI after 1991. The document discusses the types of FDI and factors influencing FDI inflows into India. It also notes regional inequality issues and does a SWOT analysis of FDI in India's retail sector. Case studies on POSCO and comparisons of FDI between India and China are presented. In conclusion, the document analyzes the impact of FDI on the Indian economy.
foreign direct investment in India from 1990-2014,fdi analysis in different sectors,fdi routes, fdi approval board in india, advantages and disadvantages of fdi,analysis of fdi in india from 1990-2014,state wise fdi data,top country investors in india
This document discusses foreign direct investment (FDI) in India. It defines FDI as foreign ownership of companies in other countries, bringing financial, technical and other resources. FDI provides benefits like employment, technology transfers and capital. However, some sectors like railways and coal are not open to FDI. The document outlines the steps to invest in India and factors affecting FDI like instability. It analyzes FDI in sectors such as automobile, infrastructure, agriculture, food processing and banking. The conclusion states that FDI is important for India's economic development as it creates jobs and profits, though skills and technology challenges remain.
India FDI-Current Status, Issues and Policy RecommendationsAnkur Pandey
This document provides an overview of foreign direct investment (FDI) in India. It discusses the current status of FDI in India, key issues, and policy recommendations. Some of the main points covered include:
- India has emerged as an attractive FDI destination, particularly in services, but needs to develop more as a manufacturing hub.
- The largest sources of FDI for India are Mauritius, Singapore, the US, and the UK. However, FDI flows to India are still lower than China.
- Key sectors receiving FDI are services, software/hardware, telecom, real estate, and power. However, FDI is concentrated in a few states and regions like Mumbai and Delhi.
Foreign direct investment (FDI) refers to long-term cross-border investment made by a firm in business activities located in another economy. FDI can take several forms including mergers and acquisitions, joint ventures, and wholly owned subsidiaries. India allows FDI through various modes and sectors to promote economic growth. While FDI has benefits like job creation and technology transfers, it also poses risks such as inflation and loss of policy flexibility. Overall, FDI has played an important role in India's development but more can still be done to spread its benefits across sectors and regions.
The document discusses foreign direct investment (FDI) in India. It defines FDI and describes the types of FDI including inward and outward FDI. It discusses the different methods of entering the Indian market for foreign companies, including forming a joint venture with an Indian partner or establishing a wholly owned subsidiary. It also outlines the various modes of entry like a liaison office or branch office. FDI plays an important role in the Indian economy by supplementing domestic capital and skills.
Most countries depend on foreign capital for economic development. Foreign investment has contributed to industrialization and economic growth in recipient economies. There are two main types of foreign capital: foreign direct investment (FDI), which is controlling ownership of a business in another country; and foreign institutional investment (FII), which is investment from institutional investors like funds registered outside the country where they are investing. India initially had policies against foreign investment but began reforms in 1991 to liberalize FDI and FII, with the goal of attracting more foreign capital to support development.
The document discusses India's general anti-avoidance rule (GAAR) and its key characteristics. It notes that GAAR can be classified as either general anti-avoidance rules or specific anti-avoidance rules. India has moved from relying on general principles in law to adopting GAAR. GAAR applies if an arrangement lacks commercial substance and its main purpose is to obtain a tax benefit. Characteristics of GAAR include lack of commercial substance, round-trip financing transactions, and arrangements with offsetting or cancelling elements.
FDI refers to foreign direct investment, which is an investment made by a company in one country into a company in another country. FDI involves establishing business operations or acquiring business assets in the foreign country. FII refers to foreign institutional investment, which is investment by institutional investors like pension funds, mutual funds and insurance companies in a country other than their home country. While FDI involves direct ownership and management of assets, FII involves purchasing shares and other securities of publicly listed companies on the stock market. The document discusses the types, factors, limitations and impact of both FDI and FII on the Indian economy.
Foreign direct investment by Neeraj Bhandari ( Surkhet.Nepal )Neeraj Bhandari
This document discusses foreign direct investment (FDI) in India, specifically in the retail sector. It begins by defining FDI and describing its structure and trends in India. It then analyzes the impact of allowing FDI in multi-brand retail, noting both threats such as increased consolidation and unemployment, as well as advantages like more competition, choice, and infrastructure development. It acknowledges valid concerns on both sides and concludes by arguing that operational efficiencies and customer benefits should ultimately matter most, and liberalization could fuel further economic growth, as seen in other sectors.
This presentation summarizes the history and current state of foreign direct investment (FDI) in India's banking sector. It notes that FDI in private sector banks is currently permitted up to 74% of equity, with 49% allowed automatically and additional amounts requiring government approval. For public sector banks, FDI is permitted up to 20% of equity. The presentation outlines the benefits of FDI for the Indian banking sector, such as technology transfer, improved risk management, better capitalization, and financial stability. It also reviews recent Reserve Bank of India guidelines regarding FDI limits and regulations in the sector.
This document presents a case study on foreign direct investment (FDI) and economic growth in India. It discusses trends in FDI inflows to India by sector and top investing countries. Regression analyses show positive relationships between FDI and GDP/exports growth. The manufacturing sector is analyzed, showing India's rising global rankings. Challenges to FDI include crowding out domestic investment. The services, insurance, agriculture, retail, and tourism sectors are also examined in terms of attracting more FDI and related policies. A comparison of FDI policies and inflows between India and China is provided.
FDI and FII impact on dollar rupee exchange rate1987jiteshjain
FDI and FII investments and rules can impact the exchange rate of the rupee versus the dollar. FDI brings foreign capital into the country through direct investment, while FII represents short-term foreign investment in the stock market. Large FII inflows can influence stock prices and appreciation of the rupee, impacting exports. Proper regulation of FII limits is important to control inflation and impacts on the economy.
The document discusses foreign direct investment (FDI) in India. It defines FDI and explains that it refers to investment from foreign companies into domestic structures, equipment, and organizations in India. It outlines the types of FDI, factors affecting FDI, and the significance and limitations of FDI for India's economy. Additionally, it provides data on growth trends in FDI in India over time, popular destinations for FDI, and both advantages and limitations of allowing FDI in India's retail sector. Experts are cited discussing both benefits and risks of India's reliance on FDI.
Foreign direct investment (FDI) refers to cross-border investment by a company located in one country into business interests located in another country. Countries seek to attract FDI as it brings capital, jobs, skills and technology while also improving the country's exports, tax revenues and foreign exchange reserves. However, local companies fear losing ownership and control to foreign giants, and small enterprises may be unable to compete. India allows FDI through an automatic route without approval or a government route requiring approval. Major sectors attracting FDI in India include telecommunications, IT, pharmaceuticals and automotive industries.
Analytical study of foreign direct investment in indiasachin gadekar
The document is a dissertation report submitted by Sachin Gadekar to the University of Pune in partial fulfillment of an MBA degree. It analyzes foreign direct investment in India. The report includes an acknowledgment, declaration, index, and introduction section providing background on FDI, definitions, and types of FDI. It discusses India's efforts to liberalize FDI policy and make the country an attractive destination for foreign investment.
This video would describe about two important types of foreign investments- the foreign direct investment and foreign institutional investor.
FDI is when a company makes investment in foreign country by setting up the business over there.
FII 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.
Foreign companies invest in India to take several advantages like relatively lower wages, cheaper production, new potential customers, tax exemptions, tapping growth potential of market, interest rate arbitrage.
It also benefits the host country by providing employment, increasing capital flow, greater investment opportunities, foreign exchange, transfer of new technology, skills & knowledge.
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
A comparison has been made between FDI and FII based on various factors like employment, tax rate, time period etc.
FDIs invests in the real economy while the FIIs invests in stock market only.
FDIs pay higher taxes as compares to the FIIs
FDIs generates mass employment as compared to FIIs that generates no or few employment opportunities
Both these foreign investments highly influence the country's economy and financial system.
It has its own positive and negative impacts. Do watch the video to know all about FDIs and FIIs.
Thank you for watching
Subscribe to DevTech Finance
This document discusses foreign direct investment (FDI) in India across several sectors. It defines FDI and compares it to foreign institutional investment. It outlines India's FDI policies for sectors like retail, telecom, pharmaceuticals, IT, automobiles and others. It discusses the types of FDI, top investing countries, trends over time, key players and investments, and impact of FDI policies on employment, technology, and economic growth in India. Charts and figures are provided on FDI flows and sector-wise cumulative inflows from 2000-2013.
Foreign direct investment (FDI) occurs when a company or individual from one country makes a substantial long-term investment in a business located in another country. FDI brings not only capital but also skills and technology. India allows FDI through both an automatic route that does not require government approval and a government route that does require approval. While FDI is allowed in most sectors and can be up to 100% in some industries, it is prohibited in sectors like atomic energy, gambling, real estate, and tobacco. The advantages of FDI for India include increased employment, economic growth, human resource development, infrastructure development, and access to finance and technology, while potential disadvantages include loss of small businesses and cultural changes.
FDI refers to foreign direct investment where an investor from one country makes a physical investment into building or expanding a business in another country. FII refers to foreign institutional investors who make short-term investments in a country's financial assets and securities markets. Some key differences are that FDI involves long-term physical investments while FII are short-term financial investments, FDI leads to technology transfer and skills development while FII only results in capital inflows, and FDI has a more direct impact on jobs and wages while FII does not. Both FDI and FII are important sources of foreign capital for India that can boost economic growth but also need to be regulated to avoid volatility and other potential issues.
This document discusses the roles of foreign direct investment (FDI) and foreign institutional investment (FII) in India. It notes that FDI provides benefits like filling savings gaps, promoting infrastructure development, and facilitating technology transfers, while also outlining some risks like corporations extracting resources. FII refers to outside companies investing in India's financial markets, with the first investments starting in 1992. Advantages of FII include increasing foreign capital and domestic investments, while disadvantages include potential inflation and capital being withdrawn quickly. In conclusion, while both FDI and FII have costs and benefits, their pros generally outweigh the cons for India's economic development.
Foreign direct investment (FDI) refers to investment by a company located in one country into business interests located in another country. FDI can occur by buying an existing company in the target country or expanding operations of a business already located there. Major benefits of FDI include improving a country's foreign exchange reserves, generating employment, facilitating technology and skills transfers, and increasing tax revenues. However, local companies may fear losing ownership while small businesses worry about competing with large multinational corporations.
This document provides an overview of foreign direct investment (FDI) in India. It defines FDI and outlines the government's strategies toward FDI over time from being anti-FDI in the 1960s-1970s to becoming more pro-FDI after 1991. The document discusses the types of FDI and factors influencing FDI inflows into India. It also notes regional inequality issues and does a SWOT analysis of FDI in India's retail sector. Case studies on POSCO and comparisons of FDI between India and China are presented. In conclusion, the document analyzes the impact of FDI on the Indian economy.
foreign direct investment in India from 1990-2014,fdi analysis in different sectors,fdi routes, fdi approval board in india, advantages and disadvantages of fdi,analysis of fdi in india from 1990-2014,state wise fdi data,top country investors in india
This document discusses foreign direct investment (FDI) in India. It defines FDI as foreign ownership of companies in other countries, bringing financial, technical and other resources. FDI provides benefits like employment, technology transfers and capital. However, some sectors like railways and coal are not open to FDI. The document outlines the steps to invest in India and factors affecting FDI like instability. It analyzes FDI in sectors such as automobile, infrastructure, agriculture, food processing and banking. The conclusion states that FDI is important for India's economic development as it creates jobs and profits, though skills and technology challenges remain.
India FDI-Current Status, Issues and Policy RecommendationsAnkur Pandey
This document provides an overview of foreign direct investment (FDI) in India. It discusses the current status of FDI in India, key issues, and policy recommendations. Some of the main points covered include:
- India has emerged as an attractive FDI destination, particularly in services, but needs to develop more as a manufacturing hub.
- The largest sources of FDI for India are Mauritius, Singapore, the US, and the UK. However, FDI flows to India are still lower than China.
- Key sectors receiving FDI are services, software/hardware, telecom, real estate, and power. However, FDI is concentrated in a few states and regions like Mumbai and Delhi.
Foreign direct investment (FDI) refers to long-term cross-border investment made by a firm in business activities located in another economy. FDI can take several forms including mergers and acquisitions, joint ventures, and wholly owned subsidiaries. India allows FDI through various modes and sectors to promote economic growth. While FDI has benefits like job creation and technology transfers, it also poses risks such as inflation and loss of policy flexibility. Overall, FDI has played an important role in India's development but more can still be done to spread its benefits across sectors and regions.
The document discusses foreign direct investment (FDI) in India. It defines FDI and describes the types of FDI including inward and outward FDI. It discusses the different methods of entering the Indian market for foreign companies, including forming a joint venture with an Indian partner or establishing a wholly owned subsidiary. It also outlines the various modes of entry like a liaison office or branch office. FDI plays an important role in the Indian economy by supplementing domestic capital and skills.
Most countries depend on foreign capital for economic development. Foreign investment has contributed to industrialization and economic growth in recipient economies. There are two main types of foreign capital: foreign direct investment (FDI), which is controlling ownership of a business in another country; and foreign institutional investment (FII), which is investment from institutional investors like funds registered outside the country where they are investing. India initially had policies against foreign investment but began reforms in 1991 to liberalize FDI and FII, with the goal of attracting more foreign capital to support development.
The document discusses India's general anti-avoidance rule (GAAR) and its key characteristics. It notes that GAAR can be classified as either general anti-avoidance rules or specific anti-avoidance rules. India has moved from relying on general principles in law to adopting GAAR. GAAR applies if an arrangement lacks commercial substance and its main purpose is to obtain a tax benefit. Characteristics of GAAR include lack of commercial substance, round-trip financing transactions, and arrangements with offsetting or cancelling elements.
The document discusses India's General Anti-Avoidance Rules (GAAR). It summarizes that GAAR allows Indian tax authorities to levy tax on "impermissible avoidance arrangements" where companies avoid taxes by citing exemptions not intended for them. However, GAAR implementation has been postponed until 2016-2017 due to concerns about lack of clarity negatively impacting investor sentiment. A committee recommended further postponing GAAR and increasing the tax benefit threshold to address these concerns.
Currency convertibility refers to the ability to exchange domestic currency for foreign currency without limit. There are three types: fully convertible where there are no restrictions, partially convertible where some restrictions exist, and non-convertible where no exchanges are allowed. India has full convertibility for current account transactions like trade but partial convertibility for capital account transactions like foreign direct investment. While greater capital account convertibility could bring benefits like risk diversification and foreign investment, it also poses risks like volatility from hot money flows.
This document defines what a trademark is and explains the importance and advantages of trademark registration. It states that a trademark is a distinctive sign that identifies certain goods or services from different sources. While registration is not legally required, it provides protections against infringement and helps establish ownership of the mark. The document outlines the registration process and requirements in India, including submitting an application to the Registrar of Trademarks along with the required forms and fees. It also describes what constitutes trademark infringement and the protections registration provides against such unauthorized use of a mark.
Currency convertibility refers to the ability to freely exchange one currency for another. It encourages international trade but a government may restrict it if they do not have sufficient foreign currency reserves. India has moved towards partial convertibility by allowing residents to freely convert currency for current account transactions like trade but maintains some restrictions on capital account transactions like investments.
The document discusses devaluation of currency, which is when a country's currency decreases in value compared to other currencies. It provides reasons for devaluation, such as improving trade balance and competitiveness. There are two types of devaluation: planned devaluation initiated by governments and market-driven devaluation caused by currency crises. Effects of devaluation include boosting exports, reducing imports, expanding output and employment, and alleviating balance of payments difficulties. Two examples of India's devaluations are provided in 1966 due to a current account deficit and inflation, and in 1991 due to a trade deficit, current account deficit, and depleting foreign reserves.
A trademark or trade mark is a distinctive sign or indicator of some kind which is used by an individual, business organization or other legal entity to uniquely identify the source of its products and/or services to consumers, and to distinguish its products or services from those of other entities....
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1. The document provides an overview of Foreign Direct Investment (FDI) and Foreign Institutional Investment (FII) in India. It defines FDI as long-term investment in physical assets of a company, while FII is generally short-term investment in financial assets.
2. It summarizes the liberalization of India's FDI policy over time, with caps increasing from 40% to 100% in most sectors. Recent developments include consolidation of various FDI rules and further liberalization of certain policies.
3. Sector-specific guidelines prohibit FDI in certain sectors like retail, gambling, but allow up to 74% in telecommunications depending on activities. Procedural aspects for compliance with FDI rules
1. The document provides an overview of Foreign Direct Investment (FDI) and Foreign Institutional Investment (FII) in India. It defines FDI as long-term investment in physical assets of a company, while FII is generally short-term investment in financial assets.
2. It summarizes the key differences between FDI and FII, and outlines India's FDI policy guidelines, sectors, and procedures. Recent developments including the consolidated FDI policy issued in 2010 aimed to promote FDI through a framework that is transparent, predictable, and reduces regulatory burden.
3. Sector-specific guidelines prohibit FDI in certain sectors like retail trading, gambling, and real estate construction, while it is allowed in
Foreign Direct Investment (FDI) in India has grown significantly in recent years. The government's consolidated FDI policy aims to promote FDI through a transparent and predictable framework. Key factors that attract foreign investors to India include its large and growing market, availability of skilled labor, and stable democratic environment. While cases like UBS fraud and the Vodafone tax dispute have increased uncertainty, India remains an attractive destination for FDI due to its strong economic fundamentals and future growth prospects. Recommendations to further encourage FDI include liberalizing caps, streamlining approvals, and maintaining a balance between domestic and foreign companies.
This document provides an overview of foreign direct investment (FDI) in India. It defines FDI and describes the different types including horizontal, vertical, and conglomerate investments. It outlines the FDI policy in India, including the sectors that allow 100% FDI through the automatic route versus those that require government approval. The document discusses the advantages and disadvantages of FDI for host countries. It also summarizes the major reforms to India's FDI policy since the 1990s that have liberalized and encouraged more foreign investment.
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This document discusses foreign direct investment (FDI) in India. It defines FDI as cross-border investment made by a company in one country into business operations in another country, with the goal of establishing a long-term stake. FDI brings capital, technical skills, and management expertise to the host country. India has pursued policies to liberalize and promote FDI since the 1990s across many sectors like telecom, IT, pharmaceuticals, and automobiles. FDI is regulated through the automatic route or government approval route depending on the sector. Major sources of FDI for India include Mauritius, Singapore, the US, and the UK.
Foreign direct investment (FDI) refers to direct investment into production or business operations in a country by a company located in another country, such as by establishing subsidiaries or acquiring domestic firms. Foreign portfolio investment (FPI) involves passive investment in a country's financial assets rather than management control. While both FDI and FPI bring capital into a country, FDI is generally considered longer-term and brings additional benefits like job creation, technology transfer, and infrastructure development. The document outlines the definitions, advantages, and differences between FDI and FPI.
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- The product life cycle theory states that firms invest abroad in the maturity phase to export products and maintain monopoly power.
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This document provides an overview of foreign direct investment (FDI) and foreign portfolio investment (FPI) in India. It defines FDI and FPI, discusses their advantages and disadvantages, and compares the key differences between them. FDI refers to direct investment in facilities and assets in a foreign country, while FPI is the purchase of stocks and bonds on foreign exchanges. The document outlines India's policies and limits on FDI in different industries, as well as factors influencing FDI inflows into India.
This document discusses foreign direct investment (FDI) in India. It provides background on FDI, including its introduction in India in 1991. The key advantages of FDI for India are listed as economic growth, increased employment, superior products, and investment. Some sectors that attract significant FDI are infrastructure, automotive, retail, and technology. While there are also some disadvantages like limited jobs and loss of control, the document concludes that FDI provides more benefits to India given its developing economy through job creation, revenue growth, and higher quality goods.
This document discusses foreign direct investment (FDI) in India, including what FDI is, reasons for FDI, India's history with FDI, sectors that allow FDI and in what amounts, issues and challenges with FDI in India, recent policy measures to increase FDI, and how FDI relates to India's "Make in India" campaign. It provides statistics on top investing countries in India and sectors that allow FDI from 0-100%. The conclusion states that India must address FDI issues with priority to liberalize policies and attract investment to support growth.
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Foreign direct investment (FDI) plays an important role in India's economy. The document discusses various forms and determinants of FDI, as well as how it benefits both host and home countries. It provides details on India's FDI policies from the pre-liberalization era to recent reforms, and sectors that allow varying levels of FDI, from prohibited to up to 100% under automatic or government route. In 2023, total FDI inflows to India decreased from the previous year, with Singapore and Mauritius being the largest investors and Maharashtra the top recipient state.
The document discusses foreign direct investment (FDI) in India before and after economic reforms in 1991. It provides details on:
- FDI inflows were low pre-reform due to distrust of foreign capital and complex regulations. Top source countries were Germany, US, UK, Japan. Top sectors were industrial machinery, chemicals, electronics.
- Post-1991 reforms liberalized FDI policies and increased inflows. Top source countries are now Mauritius, Singapore, US. Top sectors switched to services, software, telecom.
- FDI can enter India through various routes, and sectors like defense, media require government approval while others allow automatic approval. Key hurdles to increasing FDI
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2. 2
Road Map for Presentation
What is FDI & FII
FII Guidelines
Distinction between FDI & FII
Case Studies
FDI Guidelines
Background
3. 3
Background: India Transformed !!India Transformed !!
India -- the largest Democracy - one of the fastest growing economies in the World!
Slow rate of growth
Bureaucratic
Protected and slow
Small consumer markets
Weak infrastructure
…Yesterday
…Today
Strong macro economic fundamentals
Encouraging foreign investment
Outsourcing destination
Growing consumerism
Impetus on infrastructure development
4. ADVANTAGES INDIA HAS TO OFFER
• Stable democratic environment over 60
years of independence
• Large and growing market
• World class scientific, technical and
managerial manpower
• Cost-effective and skilled labour
• Abundance of natural resources
• Large English speaking population
• Well-established legal system with
independent judiciary
• Developed banking system and vibrant
capital market
• Well developed accountancy, legal,
actuarial and consultancy profession
4
5. 5
What is FDI & FII
Foreign Direct Investment (FDI):
1. FDI stands for Foreign Direct Investment, a component of a country's national financial
accounts.
2. Foreign direct investment is investment of foreign assets into domestic structures,
equipment, and organizations.
3. It does not include foreign investment into the stock markets.
4. FDI is thought to be more useful to a country than investments in the equity of its
companies because equity investments are potentially "hot money" which can leave at
the first sign of trouble, whereas FDI is durable and generally useful whether things go
well or badly.
Foreign Institutional Investment (FII):
1. FII denotes all those investors or investment companies that are not located within the
territory of the country in which they are investing.
2. “SEBI’s definition of FIIs presently includes foreign pension funds, mutual funds,
charitable/endowment/university funds etc. as well as asset management companies
and other money managers operating on their behalf.”
6. 6
Distinction between FDI and FII
FDI
1. It is long-term investment
2. Investment in physical assets
3. Aim is to increase enterprise capacity or
productivity or change management
control
4. Leads to technology transfer, access to
markets and management inputs
5. FDI flows into the primary market
6. Entry and exit is relatively difficult
7. FDI is eligible for profits of the company
8. Does not tend be speculative
9. Direct impact on employment of labour
and wages
10.Abiding interest in mgt.
FII
1. It is generally short-term investment
2. Investment in financial assets
3. Aim is to increase capital availability
4. FII results in only capital inflows
5. FII flows into the secondary market
6. Entry and exist is relatively easy
7. FII is eligible for capital gain
8. Tends to be speculative
9. No direct impact on employment of labour
and wages
10.Fleeting interest in mgt. 6
8. 8
Foreign Direct Investment Policy…
• Foreign Direct Investment (‘FDI’) – cross border investment with an objective to
establish ‘lasting interest’
• Objective - to encourage FDI to promote industrial & socio-economic development;
supplement domestic capital/ technology
• Foreign investment in India is regulated by Government of India’s FDI policy. The FDI
guidelines administered by the Ministry of Commerce and Industry.
• Department of Industrial Policy & Promotion (‘DIPP’), Foreign Investment Promotion
Board (‘FIPB’) and Secretariat of Industrial Assistance (‘SIA’) regulate the FDI Policy
• 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
• Administrative and compliance aspects of FDI monitored by RBI
• Since 1991, policy has been liberalized substantially to facilitate foreign investment
10. 10
India's Hottest FDI Destinations
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 2010
11. 11
The Roadmap so far…
Allowed selectively
up to 40%
Up to 51%
under ‘Automatic
Route’ for
35 Priority Sectors
Up to 74/51/50%
in 111 Sectors under
‘Automatic Route’
100% in some sectors
Up to 100% under
‘Automatic Route’ in
all sectors except
a small negative list
Sectoral caps raised;
Conditions relaxed;
Pre 1991 1991 1997 2000 Post 2000
12. 12
…Foreign Direct Investment Policy…
Only for cases other than Automatic Route
and those mentioned in sectoral policy
Applies to cases with existing venture/ tie up
in ‘same filed’
Applies to investment over 24% in SSI
reserved items
Government Route
Allowed for Most sectors
Limits : Sectoral caps/ stipulated sector
specific guidelines
Inward remittances through proper banking
channels
Pricing valuations prescribed
Post facto filing with 30 days of fund receipt
Filings within 30 days of share allotment
Includes Technical Collaboration/ Brand
Name/ Royalty
Automatic Route
FDI Guidelines for Investing in Indian Wholly Owned Subsidiary / Joint
Venture
Foreign Investment Promotion Board (FIPB)No Prior Regulatory Approval but
only Post Facto Filings to RBI, through AD
13. 13
…Foreign Direct Investment Policy
Existing Airports 100%
Asset Reconstruction
Companies 49%
Titanium Minerals 100%
Broadcasting (a)
Cigars & Cigarettes 100%
Courier 100%
Print Media (a)
26%
Single brand retailing 51%
Agriculture (b)
Atomic energy
Retail trading (except single
brand up to 51%)
Lottery, betting and gambling
Chit fund, Nidhi company
Trading in Transferable
Development Rights
Negative List
(Illustrative)
Prior Approval
(Illustrative)
NBFC (minimum capitalization
norms)
IT / ITes
Financial services(a)
Telecom Sector (74% cap)(a)
Insurance (26 % cap)(a)
Real Estate(a)
Special Economic Zones
Infrastructure
Shipping
Manufacturing sector
Hotels and tourism
Automatic Route
(Illustrative)
Note: (a) Sector specific guidelines
(b) Subject to certain exceptions
FDI limits – Illustrative list
15. 15
Setting the context…
• Contribution of FDI in India’s economic development is an acknowledged
fact.
• From inception policy subject to extensive amendments from time to time
through Press Notes, circulars and clarifications
• Press Note 2,3 and 4 of 2009 issued to provide clarity on indirect FDI and
downstream investment
• FM stressed the need for a consolidated FDI policy in Budget 2010-11
• Draft consolidated policy issued in late 2009 for public comments
• Consolidated FDI policy issued effective from 1 April, 2010
16. 16
Consolidated FDI Policy –
Salient Features
• Consolidated document of all foreign investment policies /regulations under
FEMA, Press Notes, Press Releases and Clarifications issued by DIPP
• Underlying rationale to promote FDI through a policy framework that is
transparent, predictable, simple and clear and which reduces regulatory burden
• As an investor friendly measure, a new Circular is proposed to be issued every
six months
• Press Notes/Press Releases/Clarifications on FDI in force as of 31 March 2010 will
stand rescinded. Savings for actions taken under earlier press notes
• Use of chapters, headings and definitions
• Two kinds of foreign investment – (i) FDI and (ii) Foreign Portfolio Investment
(FPI)
FDI – strategic long term relationship and establish a lasting interest
FPI – no intention to influence the management of the investee entity
17. 17
FDI Policy – Principles
• Capital defined as Equity, Compulsorily Fully Convertible Preference Shares and
Compulsorily Fully Convertible Debentures
• Warrants, partly paid up shares other hybrid instruments not permitted for FDI
• Investment in other instruments such as:
− Non Convertible Preference Shares/ Debenture (‘NCP’)
− Optionally Convertible Preference Shares/ Debentures (‘OCP’)
− Partially Convertible Preference Shares/ Debentures (‘PCP’)
treated as External Commercial Borrowings (‘ECB’) - subject to ECB guidelines
• Existing NCP/ OCP/ PCP on cut off date outside sectoral cap till current maturity
18. 18
FDI Policy – Principles …contd.
• FDI permitted in:
− Indian companies including micro & small enterprise
− Partnership firm/ proprietorship concern – only by NRI/PIOs
− Trust only in the form of VCFs
• Not permitted in LLPs or any other entities – under consideration
• Investment by FIIs permitted upto 10% for individual FII and 24% in aggregate
• Pricing of capital instruments (including conversion price for convertible
instruments) is now required to be decided upfront at the time of issue of
instruments
• Investment by FVCI in DVCF set up as trust would now require specific
Government approval; FVCI can directly invest subject to FDI policy
19. 19
Royalty/ Foreign Technology
Agreement
Brand name/ trade mark royalty
• Payment of royalty upto 1% of
domestic sales and 2% of exports
permitted (without technology
transfer)
• Where royalty for brand name/
trademark and technology, then
overall limits of 5% of domestic
sales and 8% of exports
All payments
covered under
Automatic
route, subject
to limits
Foreign Technology Agreements
• Lumpsum payments not to exceed
USD 2 mn (per technology)
• Royalty upto 5% of domestic sales
and 8% of exports
The Government has liberalized the aforesaid limits by permitting, under the
automatic route, and without any restrictions:
− All payments for royalty
− Lump sum fee for transfer of technology
− Payments for use of trademark/ brand name
Earlier
Now
20. 20
Calculation of Indirect FDI…
Foreign Co.
I Co1
Overseas
India
I Co1
Overseas
India
I Co2
Foreign Co.
Direct FI
Indirect FI
Direct Foreign Investment Indirect Foreign Investment
21. 21
Calculation of Indirect FDI…
Earlier
Different methods of computing Indirect FI prescribed for different sectors. E.g.
- Telecom/ Broadcasting: Proportionate method
- Investing companies in Infrastructure/ Services sector: Management + Ownership
Test
Foreign Co.
Co1
Overseas
India
Telecom sector
Co2
90%
60%
FI in Co2 is 54% (90*60%)
Co1*
Overseas
India
Infrastructure sector
Co2
49%
100%
FI in Co2 is NIL
Foreign Co.
*Management of
Co1 with Indians
22. 22
…Calculation of Indirect FDI*
Now
• Total FI is sum of Direct FI and Indirect FI
• FI to include all types of foreign investments
• For RIC own and control are cumulative conditions; for NRE these are non-cumulative
• The methodology to apply to every stage of investment at Indian company
Direct FI in Co2 = 39%
Indirect FI in Co2 = Nil
Total FI in Co2 = 39%
Non Resident Entity
(‘NRE’)
Co1 (Owned and
Controlled by RIC)
Co2 (Owned and
Controlled by RIC)
Overseas
India
40%
10%
39%
Direct FI in Co2 = 51%
Indirect FI in Co2 = 49%
Total FI in Co2 = 100%
NRE
Co1 (Owned or
Controlled by NRE)
Co2 (Owned and
Controlled by NRE)
Overseas
India
51%
49%
51%
24. 24
Transfer of securities
– basic rules
Type of transfer Window Key conditions
NR to NR or
NRI to NRI
Automatic Subject to prior venture/ tie up condition
R to NR Automatic
- Min. valuation and compliances
- Activities not under approval route
NR to R Automatic Max. valuation and compliances
R to NR in financial
services
RBI
approval
--
Control or ownership
from R to NR pursuant to
M&A
Govt.
approval
Only for sectors with sectoral caps
Gift by R to NR
RBI
approval
-Gift not to exceed 5% of paid-up capital
-Subject to sectoral caps
- Cap of USD 25,000 per calendar year
26. 26
FDI Policy – Procedural Aspects
• Intimation of receipt of share application money – within 30 days
• Purpose of inward remittance clearly stated on FIRC
• Allotment of shares within 180 days of receipt of funds
• Funds against which shares not allotted to be refunded
• Reporting in Form FC GPR within 30 days of allotment
• In case of Approval route, application to FIPB along with supporting documents
• All applications to be placed before FIPB within 15 days
• FIPB empowered to prioritise applications based on sector, export potential etc.
• Violations of regulations attract penal provisions under FEMA
28. 28
Sector Specific Guidelines
Prohibited sectors
• FDI not allowed in the following:
− Retail trading (except single brand)
− Atomic Energy
− Lottery business
− Gambling & Betting
− Chit fund and Nidhi company
− Trading in Transferable Development Rights
− Real Estate business or construction of Farm Houses
− Sectors not opened for private sector investments
• Prohibition extended to foreign technology collaboration including licensing for franchisee,
trademark, brand name or management contract for lottery, betting and gambling business
29. 29
Sector Specific Guidelines
Telecommunication
• FDI allowed in the following (illustrative):
− Basic and cellular
− Unified Access Services
− National/ International Long Distance
− Global Mobile Personal Communications Services
(GMPCS)
− Other value added telecom services
• FDI in ISPs without gateways now capped at 74% in line
with DoT guidelines of 2007
• Subject to guidelines issued DOT
• FDI Limits:
Automatic Route Approval Route
Upto 49% Upto 74%
30. 30
Sector Specific Guidelines
Private sector banks/ Civil Aviation
• No change in existing conditions
• FDI permitted under automatic route upto 49% and thereafter upto 74% under Approval Route
Banks
Civil Aviation
• No change in existing conditions
• FDI in Non-scheduled air transport services/ non-schedule airlines, Chartered and Cargo airlines
permitted under automatic route upto 49% and thereafter upto 74% under Approval Route
31. 31
Sector Specific Guidelines
Broadcasting
• In the Broadcasting sector, all FDI are under the Approval
route
• For reckoning the FDI limits, FII investment also to be
considered
• Subject to guidelines issued by I&B ministry
• FDI permitted in broadcasting sector:
Activity Limit
Radio 20%
Cable Networks 49%
Direct to Home* 49%
Uplinking news/ current affair TV channel** 26%
Uplinking non news/ current affair TV channel 100%
* FDI component not to exceed 20%
** May be raised to 49% as per recent press reports
32. 32
Sector Specific Guidelines
Print Media
• FDI is permitted under Approval route based on
nature of publication
• Investment subject to sectoral policy issued by
Ministry of Information and Broadcasting
• FDI limits on publications:
Activity Limit
Newspapers/ periodicals dealing with news
and current affairs*
26%
Scientific magazines/ specialty journals/
periodicals
100%
* May be raised to 49% as per recent press reports
33. 33
INSURANCE
• FDI upto 26% allowed on the automatic route
• However, license from the IRDA has to be obtained & There is a proposal to increase this
limit to 49%.
• FDI upto 100% is permitted under the automatic route for manufacture of drugs and
pharmaceuticals (The following is the current position)
• i. FDI upto 74% in the case of bulk drugs, their intermediates Pharmaceuticals and
formulations (except those produced by the use of recombinant DNA technology) would be
covered under automatic route.
• ii. FDI above 74% for manufacture of bulk drugs will be considered on case to case basis.
• Foreign Investment up to 100% is allowed in green field projects under automatic route
• Foreign Direct Investment is allowed in existing projects
• - up to 74% under automatic route
• - beyond 74% and up to 100% subject to Government approval
DRUGS & PHARMACEUTICALS
AIRPORTS
34. INFRASTRUCTURE
100% FDI is permitted for the following activities:
Electricity Generation (except Atomic energy)
Electricity Transmission
Electricity Distribution
Mass Rapid Transport System
Roads & Highways
Toll Roads
Vehicular Bridges
Ports & Harbors
Hotel & Tourism
FDI in Investing companies in infrastructure/service sector (except telecom sector) will not
be counted towards sectoral cap provided:
- Such investment is up to 49% &
- The management of the company is in Indian hands.
FDI in such companies will be through the FIPB route
34
36. What are Foreign Investors
looking for?
• Good projects
• Demand Potential
• Revenue Potential
• Stable Policy
Environment/Political
Commitment
• Optimal Risk Allocation
Framework
•Rate of interest
•Speculation
•Profitability
•Costs of production
•Economic conditions
•Government policies
•Political factors
Factors affecting foreign
investment
36
37. Foreign Institutional Investors
• FIIs can individually purchase upto 10% and collectively upto 24% of the paid-up share
capital of an Indian company
• This limit of 24% can be increased to sectoral cap/ statutory limit applicable to the Indian
company by passing a board resolution/shareholder resolution
• FIIs can purchase shares through open offers/private placement/stock exchange
• Shares purchased by FII through stock exchange cannot be sold through a private
arrangement
• Proprietary funds, foreign individuals and foreign corporates can register as a sub- account
and invest through the FII. Separate limits of 10% / 5% is available for the sub-accounts
• FIIs can raise money through participatory notes or offshore derivative instruments for
investment in the underlying Indian securities
• FIIs in addition to investment under the FII route can invest under FDI route
37
38. Investment limits on Equity &
Debt investments by FII
FII, on its own behalf, shall not invest in equity more than 10% of total issued capital of an
Indian company.
Investment on behalf of each sub-account shall not exceed 10% of total issued capital of an
India company.
For the sub-account registered under Foreign Companies/Individual category, the investment
limit is fixed at 5% of issued capital.
These limits are within overall limit of 24% / 49 % / or the sectoral caps a prescribed by
Government of India / Reserve Bank of India.
investment limits on debt investments by FII
For FII investments in Government debt, currently following
limits are applicable:
• 100 % Debt Route US $ 1.55 billion
• 70 : 30 Route US $ 200 million
• Total Limit S $ 1.75 billion
For corporate debt the investment limit is fixed at US $ 500 million.
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39. PARTICIPATORY NOTES
What is P-Note:
PNs are instruments issued by registered FIIs to overseas investors, who wish to invest in the
Indian stock markets without registering themselves with SEBI.
Why is P-Note:
More than 30% of foreign institutional money coming into India is from hedge funds. Hedge
funds, which thrive on arbitrage opportunities, rarely hold a stock for a long time.
P-Notes are issued to the real investors on the basis of stocks purchased by the FII.
To monitoring investments through P Notes, Sebi decided that FIIs must report P-Notes details.
Reporting by FIIs
P-Notes issued - 7th day of the following month.
The FII merely investing for themselves through P-Notes – Quarterly basis
FIIs who do not issue PNs but have trades – File 'Nil' undertaking on a quarterly basis.
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40. Importance of FII Inflow - FM’s View October 26, 2010
• No controls on FII inflows
• RBI may check rupee appreciation
• The upward movement of the rupee against the dollar was sharp in recent weeks as the
Indian currency has climbed about 5.6% since the beginning of September due to sustained
capital inflows.
The FM believes that with FII inflows and forex reserves, the current account deficit should
be contained at around 3% of the gross domestic product (GDP) (this fiscal).
The current account deficit is the gap between the amount the country pays to the external
world against what it receives from abroad, barring capital movement. It was around 3.6% of
GDP in the first quarter of 2010-11.
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41. Advantages of FII
• Enhanced flows of equity capital
• FIIs have a greater appetite for equity than debt in their asset structure. It improve capital
structures.
• Managing uncertainty and controlling risks.
• 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.
• By increasing the availability of riskier long term capital for projects, and increasing firms’
incentives to provide more information about their operations, FIIs can help in the process of
economic development.
• Improved corporate governance.
• FIIs constitute professional bodies, improve corporate governance.
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42. Disadvantages of FII
• Problems of Inflation
• Problems for small investor
• Adverse impact on Exports
• Hot Money
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43. FII Investments & Market Reaction
While strong inflow of funds from foreign
institutional investors (FIIs) has been a
reason to cheer, it could turn into a
nightmare and if the global investors make
a sudden exit can send the bourses
crashing.
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44. FII Inflows Vs Sensex
FII Investment from 2005 - 2010 BSE Sensex
FII Investment Vs Sensex FII average holding in BSE 500
44
46. UBS Fraud case
• - The funds held in the accounts of the two companies (ADAG Group )opened
in UBS with the approval of RBI were transferred to another account without
RBI’s approval, by obtaining overdrafts against cash collateral security
provided through the funds.
• - Thereafter, substantial amounts were transferred to certain accounts
belonging to 8-10 diamond dealers based in India and Belgium..
• - The funds were then passed on from the accounts of the diamond merchants
to two funds that in turn invested them in the Indian stock market through FIIs.
• - Swiss bank UBS has been fined £8 million by UK's Financial Services
Authority (FSA)
• - ED is probing the matter because the transactions may amount to violation
of Indian foreign exchange and anti-money laundering laws.
47. The Prudential Assurance Company vs. DIT (Bombay High Court)
• - The Court has held that earnings of FIIs registered in India are in the nature of
business income.
• - Such income is not taxable in India if the FII does not have a permanent
establishment in India.
• - The judgement benefits FIIs investing in India from countries such as UK, USA.
• - Those from Mauritius that already enjoy capital gains tax exemption under a tax
treaty India has with the island nation.
• - This is not likely to settle the debate over taxation of capital gains made by FIIs
in India
• - Only a Supreme Court decision can provide a binding certainty on the issue. Th
48. Will the Vodafone case hit FDI?
• Case : Show cause notice to Vodafone was issued by Indian Revenue Authorities
arguing that they had failed to discharge withholding tax obligation with respect to tax
on gains made by Hutch on sale of shares to Vodafone
• The Bombay High court said Vodafone Group Plc is liable for an estimated $2.6 billion
in taxes for its 2007 acquisition of one of India's largest mobile phone companies.
• Decision as well as the tax department’s approach creates tremendous uncertainty on
what aspects of an offshore transaction may fall within the Indian tax net.
• Tax practitioners see inherent bottlenecks while computing tax liability on such deals.
• The Vodafone judgement will definitely impact foreign investments into India.
• This is bound to affect FDI/M&A/PE deals as companies would ascribe a higher tax
weightage risk while entering India. Offshore deals may also start drying up.
• But due to growing image and future prospectus of country, we are developing as a
prominent nation and FDI would get much strong over the years despite any such
issues.
49. Recommendations for India
Do away with too many caps in the overall regulatory regime.
Increase FDI limit for Insurance Sector to 49% from current 26%.
Increase FDI limit for Retail Sector.
Allow FII 100% ownership
Easy access to Foreign Investor by simplifying the approval procedure and industrial license
Liberalize the locking period for FII & FDI
Allow FDI in investment companies
"Better Investment Climate" Need of the Hour.
Liberalise the economic policies further so as to overcome the fiscal deficits faced by Indian
economy
Invite corporate giants from countries like USA, China and south Korea
Maintain a balance between domestic companies and foreign companies so as domestic
companies could survive in front of foreign giants.
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50. 50
"If there is one place on the
face of this Earth where all
the dreams of living men have
found a home when man
began the dream of
existence, it is India".
Romain Rolland,
French philosopher
Editor's Notes
Rated as the fourth preferred destination for US and British investors
Rated as the sixth preferred destination for manufacturing