fdi-fii - 1
TRANSCRIPT
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Foreign Direct Investment (FDI)
What is FDI
Why we need FDI
Process of the Inflow of FDI
Benefits
Types Advantages and disadvantages
FII
Diff between FII and FDI
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Modes of FDI1)By Direction
* Inward
*Outward
2)By Target* Mergers and Acquisitions* Horizontal FDI
* Vertical FDI
(a) Backward Vertical FDI
(b) Forward Vertical FDI
3)By Motive* Resource-Seeking
* Market-Seeking
* Efficiency-Seeking
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Factors Affecting FDI Financial incentives (Funds from local
Government)
Fiscal incentives (Exemption from import duties)
Indirect incentives (Provides land and
Political stability
Market potential & accessibility Large economy
Market size
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WhyIndia? Liberal, largest democracy, Political Stability
Second largest emerging market (US$2.4trillion)
Skilled and competitive labors force
highest rates of return on investment
one hundred of the Fortune 500 have R & D
facilities in India Second largest group of software developers
after the U.S.
lists 6,500 companies on the Bombay Stock
Exchange (only the NYSE has more)
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WhyIndia (cont.)
World's fourth largest economy & second largestpharmaceutical industry
growth over the past few years averaging 8%
has a middle class estimated at 300 million out of a totalpopulation of1 billion
Destination for business process outsourcing,Knowledge processing etc.
Second largest English-speaking, scientific, technicaland executive manpower
Low costs & Tax exemptions in SEZ Tax incentives for IT , business process outsourcing and
KPO companies
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Government policies
Automatic Route
Prior Permission (FIPB)
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Investing in India Entry Routes
Investing in India
Automatic RoutePrior Permission
(FIPB)
General rule
No prior permission
requiredOnly information to the
Reserve Bank of India
within 30 days of inflow/Issue of shares
By exception
Prior Government
Approval needed
Decision generally
Within 4-6 weeks
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FDI Investment Sectors
Prohibited activities
Atomic energy
Arms and ammunition Lottery business
Betting and Gambling
Aircraft and warships
Coal lignite
Fully permitted Activities
Cigar and cigarettes oftobacco
Coal, Roads & Highways Diamond, Gold, Silver ,
Minerals
Atomic minerals
Electricity
Hotel, hospitals
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Retail
I.T
Oil & Energy
Power sector
Pharmaceuticals &C
hemicals
Real state
Mining
Mobile Sector
Automobile
Telecommunication
FDI inflows In real estate US$5 Billion
FDI inflows Retail US$20 Billion by 2010
FDI inflows in Mining US$2,5 Billion per N.M.
FDI inflows in Telecommunication US$24 Billion
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Major InvestmentsCompanies Sector Investment
Wal mart,Marks Retail US$10 Billion
Intel Corp. I.T US$40 Billion
British & cairn Oil & Energy US$2 Billion
Essar power Power sector US$2 Billion
Toyota Automobile US$10.51 Billion
Panasonic Telecommunicatio
n
US$200 million
Source:
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What is an FII??
An institution established outside India, which investsin securities traded on the markets in India e.g.
Pension Funds Mutual Funds
Investment Trust
Insurance companies
Endowment Funds
University Funds
Foundations or Charitable Trusts Asset Management Companies
Power of Attorney Holders
Bank
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FII Vs FDI
FII is Foreign Institutional Investment: It is
investment made by foreign Mutual Funds in the
Indian Market.FDI is Foreign Direct Investment: It is the
investment made by Foreign Multinational
comapnies in India.
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Foreign Institutional Investors (FII)
Foreign investment banks are not permitted
to directly invest in shares on the Indianstock exchange
Makes investments on behalf of foreign
investors, referred to as sub-accounts
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Foreign Institutional Investors (FII)
FIIs may invest in:
securities in the primary and secondary markets
(shares, debentures, warrants of listed and
unlisted companies) units issued by domestic mutual funds
dated Government securities
derivatives traded on a recognized stock
exchange commercial paper
debt instruments provided a 70/30 equity/debtratio is maintained
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Foreign Institutional Investors (FII) Limits on the type and amount of investments
apply to FIIs
no more than 10% of the equity in any onecompany
no more than 10% in the equity in any onecompany on behalf of a fund sub-account
no more than 5% in the equity in any onecompany on behalf of a corporate/individual sub-account
no more than 24% in the aggregate of the totalissued capital of a company to be held by FIIs
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ThankYou