Presented by:
Ekta (32) Neha (137)
Anita (181) Ashish (182)
Avirup (183) Banani (184)
Saumya (239)April 10, 2023 1FDI & FPI
CONTENTS
FDIDefinition & ConceptsConsiderations of Govt.Types Advantages & DisadvantagesRecent changesRecent data
FPIDefinitionStarting upFactors affecting FPIsFPIs benefit to societyRegulations for
FIIsNRIs / PIOsFVCs
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• FDI stands for Foreign Direct Investment.
Foreign direct investment (FDI) is the movement of capital across national frontiers in a manner that grants the investor control over the acquired asset. Thus it is distinct from portfolio investment which may cross borders, but does not offer such control
Consistent economic growth, de-regulation, liberal investment rules, and operational flexibility are all the factors that help increase the inflow of Foreign Direct Investment or FDI
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Requires relationship between foreign country & subsidiary
Brings out the concept of MNCs
Minimum stake of 10% of ordinary shares
Termed generally as FPI if less than stipulated 10%
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• To explore the untapped potential market.
• Cheap labour availability
• To make profits: they sign MOU with the local partner. MOUs have to be carefully crafted and must be approved by the Govt.
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• Whether the investments are for the priority projects
• These MNCs are very powerful so Govt. must take care that they don’t repeat the history of East India Company.
• Transfer of technology must be specified in MOU
• Commodities produced must have export potential
• Profit sharing should be properly scrutinized
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FDI
InwardOutwar
d
Foreign direct investment, which is inward, is a typical form of what is termed as 'inward investment'. Here, investment of foreign capital occurs in local resources.
The factors propelling the growth of Inward FDI comprises tax breaks, relaxation of existent regulations, loans on low rates of interest and specific grants. The idea behind this is that, the long run gains from such a funding far outweighs the disadvantage of the income loss incurred in the short run. Flow of Inward FDI may face restrictions from factors like restraint on ownership and disparity in the performance standard
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Foreign direct investment, which is outward, is also referred to as “direct investment abroad”. In this case it is the local capital, which is being invested in some foreign resource. Outward FDI may also find use in the import and export dealings with a foreign country. Outward FDI flourishes under government backed insurance at risk coverage
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Horizontal FDI : FDI in the same industry abroad as that in which a firm operates at home
Vertical FDI: When a multinational operates in some other related fields
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Bringing infrastructure into the country
Bring advanced technology into the country which can be used later on in the economy
Infrastructure created will be a permanent asset of the economy
Creates more employment in the economyApril 10, 2023 11FDI & FPI
• Inflation may increase slightly
• Domestic firms may suffer if they are relatively uncompetitive
• Too much dependency may arise and cause problems
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5th largest economy in the world
3rd largest GDP in ASIA & 2nd largest among emerging nations
Huge untapped markets
Large populace and cheap labour
Liberalized economy
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FDI & FPI
Main Sectors with FDI Equity/Route Limit
FDI equity limit-Automatic Route
• Insurance – 49%• Domestic airlines – 49%
(74%)• Telecom services- Foreign
equity 74%• Private sector banks- 74%• Mining of diamonds and
precious stones (certain cases)- 74% (100%)
• Exploration and mining of coal and lignite for captive consumption- 74%
FDI requiring prior approval
• Defense production – 26%• FM Broadcasting - foreign
equity 20%• News and current affairs-
26%• Broadcasting- cable, DTH,
up-linking – foreign equity 49%
• Trading- wholesale cash and carry, export trading, etc., 100%
• Tea plantation – 100%• Development of airports-
100%
Relaxations of norms for various sectors Commodity exchanges, credit information
and aircraft maintenance are opened for overseas investors
100% investment in MRO in aviation training units
100% - Titanium bearing minerals49% - Credit information companiesHiking FDIs in public sector refineries
from 26% to 49%
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Relaxations in norms like minimum capitalization, 3 yrs. lock - in – period
Civil Aviation sectorDomestic scheduled passenger airline sector
49% - in automatic route100% - NRIs
Non scheduled sector74% - in automatic route100% - NRIs
Real estate sector
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FDI EQUITY INFLOWS DURING CALENDAR YEAR 2008
SECTORS ATTRACTING HIGHEST FDI EQUITY INFLOWS
SECTORS-WISE FOREIGN TECHNOLOGY TRANSFER APPROVALS
522
362
STATE-WISE FOREIGN TECHNOLOGY TRANSFER APPROVALS
It is the passive holding of securities such as foreign stocks,
bonds, or other financial assets ,none of which entails
active management or control of the securities issues by the
investor,
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In 1992, India opened up its economy and allowed foreign portfolio investment in its domestic stock market
Since then ,FPI has emerged as a major source of private capital inflow in this country
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Tax rates on interest or dividends
Interest rates
Exchange rates
P.I is the part of capital account on BOP
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RBI has granted permission to SEBI registered (FIIs) invest in India under Portfolio investment scheme.
All FIIs and their sub-accounts taken together cannot acquire more than24% of the paid up capital of an Indian economy
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NRIs/PIOs can purchase/ sell shares / convertible debentures of Indian companies on stock exchanges.
An NRI or PIO can purchase shares upto5% of the paid up capital of Indian company.
All NRIs/PIOs taken together cannot purchase more than 10% of the paid up value of the company.
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A foreign venture capital investor may make investment in a venture capital fund for an Indian venture capital undertaking as per the terms and condition of SEBI.
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