Fdi

FDI & FII
CHAPTER 1:-INTRODUCTION
Foreign investment refers to investments made by the residents of a country in the

financial assets and production processes of another country. The effect of foreign
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. It can come in two forms: FDI and foreign institutional investment
(FII). Foreign direct investment involves in direct production activities and is also of
a medium- to long-term nature. But foreign institutional investment is a short-term
investment, mostly in the financial markets. FII, given its short-term nature, can have
bidirectional causation with the returns of other domestic financial markets such as
money markets, stock markets, and foreign exchange markets. Hence, understanding
the determinants of FII is very important for any emerging economy as FII exerts a
larger impaction the domestic financial markets in the short run and a real impact in
the long run. India, being a capital scarce country, has taken many measures to attract
foreign investment since the beginning of reforms in 1991.
India is the second largest country in the world, with a population of over 1 billion
people. As a developing country, Indias economy is characterized by wage rates that
are significantly lower than those in most developed countries. These two traits
combine to make India a natural destination for FDI and foreign institutional
investment (FII). Until recently, however, India has attracted only a small share of
global FDI and FII primarily due to government restrictions on foreign involvement
in the economy. But beginning in 1991 and accelerating rapidly since 2000, India has
1
B.M COLLEGE OF BUSINESS ADM.
FDI & FII
liberalized its investment regulations and actively encouraged new foreign

investment, a sharp reversal from decades of discouraging economic integration with
the global economy.
The world is increasingly becoming interdependent. Goods and services followed by

the financial transaction are moving across the borders. In fact, the world has become
a border less world. With the globalization of the various markets, international
financial flow shaves so far been in excess for the goods and services among the
trading countries of the world. Of the different types of financial inflows, the FDI and
foreign institutional investment (FII)) has played an important role in the process of
development of many economies. Further many developing countries consider FDI
and FII as an important element in their development strategy among the various
forms of foreign assistance.
The FDI and FII flows are usually preferred over the other form of external finance,
because they are not debt creating, nonvolatile in nature and their returns depend
upon the projects financed by the investor. The FDI and FII would also facilitate
international trade and transfer of knowledge, skills and technology.
The FDI and FII is the process by which the resident of one country (the source
country)acquire the ownership of assets for the purpose of controlling the production,
distribution and other productive activities of a firm in another country(the host
country).
2
FDI & FII
According to the international monetary fund (IMF), FDI and FII is defined as an
investment that is made to acquire a lasting interest in an enterprise operating in an
economy other than that of investor.
The government of India (GOI) has also recognized the key role of the FDI and FII in
its process of economic development, not only as an addition to its own domestic
capital but also as an important source of technology and other global trade practices.
In order to attract the required amount of FDI and FII it has bought about a number of
changes in its economic policies and has put in its practice a liberal and more
transparent FDI and FII policy with a view to attract more FDI and FII inflows into
its economy. These changes have heralded the liberalization era of the FDI and FII
policy regime into India and have brought about a structural breakthrough in the
volume of FDI and FII inflows in the economy. In this context, this report is going to
analyze the trends and patterns of FDI and FII flows into India during the post
liberalization period that is 2006 to 2009 year.
3
FDI & FII
CHAPTER 2:-THEORETICAL FRAMEWORK
2.1 FDI (FOREIGN DIRECT INVESTMENT)

FDI means Foreign Direct Investment. India Foreign Direct Investment includes
investments in the infrastructure development projects including construction of
bridges and flyovers, finance sector including banking and insurance services, real
estate development, retail sector etc. The foreign direct investment definition says the
direct investment in any productive assets in a country by any foreign company is
called foreign direct investment.
2.1.1 ABOUT FDI

Is the process whereby residents of one country (the source country) acquire
ownership of assets for the purpose of controlling the production, distribution, and
other activities of a firm in another country (the host country). The international
monetary funds balance of payment manual defines FDI as an investment that is
made to acquire a lasting interest in an enterprise operating in an economy other than
that of the investor. The investors purpose being to have an effective voice in the
management of the enterprise. The united nations 1999 world investment report
defines FDI as an investment involving a long term relationship and reflecting a
lasting interest and control of a resident entity in one economy (foreign direct
4
FDI & FII
investor or parent enterprise) in an enterprise resident in an economy other than that

of the foreign direct investor ( FDI enterprise, affiliate enterprise or foreign affiliate).
2.1.2 Automatic Route

(A) New Ventures
All items/activities for FDI/NRI/OCB investment up to 100% fall under the
Automatic Route.
Whenever any investor chooses to make an application to the FIPB and not to avail
of the automatic route, he or she may do so.
Investment in public sector units as also for EOU/EPZ/EHTP/STP units would also
qualify for the Automatic Route.
Investment under the Automatic Route shall
continue to be governed by the notified sectoral policy and equity caps and RBI will
ensure compliance of the same.
The National Industrial Classification (NIC) 1987 shall remain applicable for
description of activities and classification for all matters relating to FDI/NRI/OCB
investment:
Areas/sectors/activities hitherto not open to FDI/NRI/OCB investment shall
continue to be so unless otherwise decided and notified by Government.
5
FDI & FII
Any change in sectoral policy/sectoral equity cap shall be notified by the

Secretariat for Industrial Assistance (SIA) in the Department of Industrial
Policy & Promotion.
(B) Existing Companies

Besides new companies, automatic route for FDI/NRI/OCB investment is also
available to the existing companies proposing to induct foreign equity. For existing
companies with an expansion programme, the additional requirements are that (i) the
increase in equity level must result from the expansion of the equity base of the
existing company without the acquisition of existing shares by NRI/OCB/foreign
investors, (ii) the money to be remitted should be in foreign currency and (iii)
proposed expansion programme should be in the sector(s) under automatic 11 route.
Otherwise, the proposal would need Government approval through the FIPB. For this
the proposal must be supported by a Board Resolution of the existing Indian
company.
For existing companies without an expansion programme, the additional
requirements for eligibility for automatic approval are (i) that they are engaged in the
industries under automatic route, (ii) the increase in equity level must be from
expansion of the equity base and (iii) the foreign equity must be in foreign currency.
The earlier SEBI requirement, applicable to public limited companies, that shares
allotted on preferential basis shall not be transferable in any manner for a period of 5
6
FDI & FII
years from the date of their allotment has now been modified to the extent that not
more than 20 per cent of the entire contribution brought in by promoter cumulatively
in public or preferential issue shall be locked-in.
The automatic route for FDI and/or technology collaboration would not be available
to those who have or had any previous joint venture or technology transfer/trade
mark agreement in the same or allied field in India.
Equity participation by international financial institutions such as ADB, IFC, CDC,
DEG, etc. in domestic companies is permitted through automatic route subject to
SEBI/RBI regulations and sector specific cap on FDI.
In a major drive to simplify procedures for foreign direct investment under the
automatic route, RBI has given permission to Indian Companies to accept
investment under this route without obtaining prior approval from RBI. Investors are
required to notify the Regional Office concerned of the RBI of receipt of inward
remittances within 30 days of such receipt and file required documentation within 30
days of issue of shares to Foreign Investors. This facility is available to NRI/OCB
investment also.
2.1.3 Government Approval

For the following categories, Government approval for FDI/NRI/OCB through the
FIPB shall be necessary: All proposals that require an Industrial License which includes (1) the item
requiring an Industrial License under the Industries (Development &
Regulation) Act, 1951; (2) foreign investment being more than 24 per cent in
the equity capital of units manufacturing items reserved for small scale
7
FDI & FII
industries; and (3) all items which require an Industrial Licence in terms of the
locational policy notified by Government under the New Industrial Policy of
1991.
All proposals in which the foreign collaborator has a previous venture/tie up in
India. The modalities prescribed in Press Note No. 18 dated 14.12.1998 of
1998 Series, shall apply to 12 such cases. However, this shall not apply to
investment made by multilateral financial institutions such as ADB, IFC, CDC,
DEG, etc. as also investment made in IT sector.
All proposals relating to acquisition of shares in an existing Indian company in
favour of a foreign/NRI/OCB investor.
All proposals falling outside notified sectoral policy/caps or under sectors in
which FDI is not permitted.
Areas/sectors/activities hitherto not open to FDI/NRI/OCB investment shall continue
to be so unless otherwise decided and notified by Government.
Any change in sectoral policy/sectoral equity cap shall be notified by the Secretariat
for Industrial Assistance (SIA) in the Department of Industrial Policy & Promotion.
RBI has granted general permission under Foreign Exchange Management Act
(FEMA) in respect of proposals approved by the Government. Indian companies
getting foreign investment approval through FIPB route do not require any further
clearance from RBI for the purpose of receiving inward remittance and issue of
shares to the foreign investors. Such companies are, however, required to notify the
Regional Office concerned of the RBI of receipt of inward remittances within 30
days of such receipt and to file the required documents with the concerned Regional
Offices of the RBI within 30 days after issue of shares to the foreign investors.
Allotment of shares on preferential basis shall be as per the requirements of the
Companies Act, 1956, which will require special resolution in case of a public limited
company.
8
FDI & FII
In case of listed companies, valuation shall be as per the RBI/SEBI guidelines as

follows:
The issue price shall be either at:
The average of the weekly high and low of the closing prices of the related
shares quoted on the Stock Exchange during the six months preceding the
relevant date or
The average of the weekly high and low of the closing prices of the related
shares quoted on the Stock Exchange during the two weeks preceding the
relevant date.
The stock exchange referred to is the one at which the highest trading volume in
respect of the share of the company has been recorded during the preceding six
months prior to the relevant date.
The relevant date is the date thirty days prior to the date on which the meeting of the
General Body of the shareholder is convened.
In all other cases a company may issue shares as per the RBI regulation in
accordance with the guidelines issued by the erstwhile Controller of Capital Issues.
Other relevant guidelines of Securities and Exchange Board of India (SEBI)/(RBI)
including the SEBI (Substantial Acquisition of Shares and Takeover) Regulations,
1997, wherever applicable, would need to be followed.
9
FDI & FII
2.1.4 Other Modes of Foreign Direct Investments

Global Depository Receipts (GDR)/American Deposit Receipts (ADR)/Foreign
Currency Convertible Bonds (FCCB): Foreign Investment through GDRs/ADRs,
Foreign Currency Convertible Bonds (FCCBs) is treated as Foreign Direct
Investment. Indian companies are allowed to raise equity capital in the international
market through the issue of GDR/ADRs/FCCBs.
These are not subject to any ceilings on investment. An applicant company seeking
Governments approval in this regard should have a consistent track record for good
performance (financial or otherwise) for a minimum period of 3 years. This condition
can
be
relaxed
for
infrastructure
projects
such
as
power
generation,
telecommunication, petroleum exploration and refining, ports, airports and roads.

There is no restriction on the number of GDRs/ADRs/FCCBs to be floated by a
company or a group of companies in a financial year. A company engaged in the
manufacture of items covered under Automatic Route, whose direct foreign
investment after a proposed 14 GDR/ADR/FCCBs issue is likely to exceed the
percentage limits under the automatic route, or which is implementing a project
falling under Government approval route, would need to obtain prior Government
clearance through FIPB before seeking final approval from the Ministry of Finance.
There are no end-use restrictions on GDR/ADR issue proceeds, except for an

express ban on investment in real estate and stock markets. The FCCB issue
proceeds need to conform to external commercial borrowing end use requirements;
10
FDI & FII
in addition, 25 per cent of the FCCB proceeds can be used for general corporate
restructuring.
2.1.5 FDI POLICY IN INDIA

The Foreign direct investment scheme and strategy depends on the respective FDI
norms and policies in India. The FDI policy of India has imposed certain foreign
direct investment regulations as per the FDI theory of the Government of India.
These include FDI limits in India for example:
Foreign direct investment in India in infrastructure development projects
excluding arms and ammunitions, atomic energy sector, railways, extraction
of coal and lignite and mining industry is allowed up to 100% equity
participation with the capping amount as Rs. 1500 crores.
FDI figures in equity contribution in the finance sector cannot exceed more
than 40% in banking services including credit card operations and in
insurance sector only in joint ventures with local insurance companies.
FDI limit of maximum 49% in telecom industry especially in the GSM
services
A recent UNCTAD survey projected India as the second most important FDI
destination (after China) for transnational corporations during 2010-2012. As
per the data, the sectors which attracted higher inflows were services,
telecommunication, construction activities and computer software and
hardware. Mauritius, Singapore, the US and the UK were among the leading
sources of FDI. FDI for 2009-10 at USD 25.88 billion was lower by five per
cent from USD 27.33 billion in the previous fiscal. Foreign direct investment
in August dipped by about 60 per cent to USD 1.33 billion, the lowest in 2010
11
FDI & FII
fiscal, industry department data released showed.

Foreign direct investment (FDI) in India has played an important role in the
development of the Indian economy. FDI in India has - in a lot of ways enabled India to achieve a certain degree of financial stability, growth and
development. This money has allowed India to focus on the areas that may
have needed economic attention, and address the various problems that
continue to challenge the country.
India has continually sought to attract FDI from the worlds major investors.
In 1998 and 1999, the Indian national government announced a number of
reforms designed to encourage FDI and present a favorable scenario for
investors.
FDI investments
are
permitted
through
financial
collaborations,
through private equity or preferential allotments, by way of capital markets

through Euro issues, and in joint ventures. FDI is not permitted in the arms,
nuclear, railway, coal & lignite or mining industries.
A number of projects have been announced in areas such as electricity
generation, distribution and transmission, as well as the development of roads
and highways, with opportunities for foreign investors.
The Indian national government also provided permission to FDIs to provide
up to 100% of the financing required for the construction of bridges and
tunnels, but with a limit on foreign equity of INR 1,500 crores, approximately
$352.5m.
Currently, FDI is allowed in financial services, including the growing credit
card business. These services include the non-banking financial services
sector. Foreign investors can buy up to 40% of the equity in private banks,
although there is condition that stipulates that these banks must be multilateral
financial organizations. Up to 45% of the shares of companies in the global
mobile personal communication by satellite services (GMPCSS) sector can
also be purchased.
By 2004, India received $5.3 billion in FDI, big growth compared to previous
12
FDI & FII
years, but less than 10% of the $60.6 billion that flowed into China. Why does
India, with a stable democracy and a smoother approval process, lag so far
behind China in FDI amounts?
Although the Chinese approval process is complex, it includes both national
and regional approval in the same process.

Federal democracy is perversely an impediment for India. Local authorities
are not part of the approvals process and have their own rights, and this often
leads to projects getting bogged down in red tape and bureaucracy. India
actually receives less than half the FDI that the federal government approves.
2.1.6 FOREIGN DIRECT INVESTMENT:INDIAN SCENERIO

Foreign Direct Investment (FDI) is permitted as under the following forms of
investments
Through financial collaborations.

Through joint ventures and technical collaborations.
Through capital markets via Euro issues.
Through private placements or preferential allotments
FDI is not permitted in the following industrial sectors:
Arms and ammunition.

Atomic Energy
Railway Transport
Coal and lignite
Mining of iron, manganese, chrome, gypsum, sulphur, gold, diamonds,
copper, zinc
Retail Trading (except single brand product retailing)
Lottery Business Gambling and Betting
Business of chit fund
13
FDI & FII
2.1.7 TYPES
A foreign direct investor may be classified in any sector of the economy and could
be any one of the following:
An individual;
A group of related individuals;
An incorporated or unincorporated entity;
A public company or private company;
A group of related enterprises;
A government body;
An estate (law), trust or other social institution; or
Any combination of the above.
2.1.8 METHODS
14
FDI & FII
The foreign direct investor may acquire voting power of an enterprise in an economy
through any of the following methods:
By incorporating a wholly owned subsidiary or company

By acquiring shares in an associated enterprise
Through a merger or an acquisition of an unrelated enterprise
Participating in an equity joint venture with another investor or enterprise
Foreign direct investment incentives may take the following forms:
Low corporate tax and income tax rates

Tax holidays
Other types of tax concessions
Preferential tariffs
Special economic zones
Epz - export processing zones
Bonded warehouses
Maquiladoras
Investment financial subsidies
Soft loan or loan guarantees
Free land or land subsidies
Relocation & expatriation subsidies
Job training & employment subsidies
Infrastructure subsidies
R&d support
Derogation from regulations (usually for very large projects)
2.1.9 FORBIDDEN TERRITORIES

FDI is not permitted in the following industrial sectors:
Arms and ammunition.
Atomic Energy.
15
FDI & FII
Railway Transport.
Coal and lignite.
Mining of iron, manganese, chrome, gypsum, sulphur, gold, diamonds,
copper, zinc.
Retail Trading (except single brand product retailing).
Lottery Business
Gambling and Betting
Business of chit fund
Trading in Transferable Development Rights (TDRs).
2.1.9 FDI ADVANTAGES
Global exposure
Foreign revenues
High quality human resources
Employment will increase.
Causes a flow of money into the economy which stimulates economic activity.
Long run aggregate supply will shift outwards.
Aggregate demand will also shift outwards as investment is a component of
aggregate demand.
It may give domestic producers an incentive to become more efficient.
The government of the country experiencing increasing levels of FDI will have
a greater voice at international summits as their country will have more
stakeholders in it.
2.1.10 FDI DISADVANTAGES

Twining programmes
Unaccredited and unrecognized courses
Top Universities interested in collaborating with Indias outstanding
institutions
High fee structure
Raising Inequality
Profit not the sole objective
No raise in fees without Approval
16
FDI & FII
Inflation may increase slightly

Domestic firms may suffer if they are relatively uncompetitive
If there is a lot of FDI into one industry e.g. the automotive

industry then a country can become too dependent on it and it may turn into a
risk
that
is
why
countries
like
the
Czech
Republic
are seeking to attract high value- added services such as research

and development (e.g. :biotechnology)
2.2 FII (FOREIGN INSTITUTIONAL INVESTORS)

FII means an entity/fund established or incorporated outside India which proposes to
make investment in securities. FIIs are those investors that indirectly invest into the
companies through the stock market.
2.2.1 History
Ancient Rome and medieval Islam
Roman law ignored the concept of juristic person, yet at the time the practice of
private evergetism sometimes lead to the creation of revenues-producing capital
which may be interpreted as an early form of charitable institution. In some African
colonies in particular, part of the citys entertainment was financed by the revenue
generated by shops and baking-ovens originally offered by a wealthy benefactor. In
the South of Gaul, aqueducts were sometimes financed in a similar fashion.
The legal principle of juristic person might have appeared with the rise of
17
FDI & FII
monasteries in the early centuries of Christianity. The concept then might have been
adopted by the emerging Islamic law. The waqf (charitable institution) became a
cornerstone of the financing of education, waterworks, welfare and even the
construction of monuments. Alongside some Christian monasteries the waqfs created
in the 10th century CE are amongst the longest standing charities in the world (see for
instance the Imam Reza shrine).
Pre-industrial Europe
Following the spread of monasteries, almshouses and other hospitals, donating
sometimes large sums of money to institutions became a common practice in
medieval Western Europe. In the process, over the centuries those institutions
acquired sizable estates and large fortunes in bullion. Following the collapse of the
agrarian revenues, many of these institutions moved away from rural real estate to
concentrate on bonds emitted by the local sovereign (the shift dates back to the
15th century for Venice, and the 17th century for France and the Dutch Republic). The
importance of lay and religious institutional ownership in the pre-industrial European
economy cannot be overstated, they commonly possessed 10 to 30% of a given
region arable land. In the 18th century, private investors pool their resources to pursue
lottery tickets and tontine shares allowing them to spread risk and become some of
the earliest speculative institutions known in the West.
18
FDI & FII
Before 1980
Following several waves of dissolution (mostly during the Reformation and the
Revolutionary period) the weight of the traditional charities in the economy
collapsed; by 1800, institutions solely owned 2% of the arable land in England and
Wales. New types of institutions emerged (banks, insurance companies), yet despite
some success stories, they failed to attract a large share of the publics savings and,
for instance, by 1950, they owned only 7% of US equities and certainly even less in
other countries.
Overview
Because of their sophistication, institutional investors may often participate in private
placements of securities, in which certain aspects of the securities laws may be
inapplicable. For example, in the United States, a private placement under Rule 506
of Regulation D may be made to an "accredited investor" without registering the
offering of securities with the Securities and Exchange Commission. In essence
institutional investor, an accredited investor is defined in the rule as:
A bank, insurance company, registered investment company (generally
speaking, a mutual fund), business development company, or small business
investment company;
An employee benefit plan, within the meaning of the Employee Retirement
Income Security Act, if a bank, insurance company, or registered investment
adviser makes the investment decisions, or if the plan has total assets in excess
19
FDI & FII
of $5 million;
A charitable organization, corporation, or partnership with assets exceeding $5
million;
A director, executive officer, or general partner of the company selling the
securities;
A business in which all the equity owners are accredited investors;
A natural person who has individual net worth, or joint net worth with the
persons spouse, that exceeds $1 million at the time of the purchase;
A natural person with income exceeding $200,000 in each of the two most
recent years or joint income with a spouse exceeding $300,000 for those years
and a reasonable expectation of the same income level in the current year; or
A trust with assets in excess of $5 million, not formed to acquire the securities
offered whose purchases a sophisticated person makes.
2.2.2 Globalization of financial markets

Institutional investors have played a major role in the emergence of truly
global
money flows, notably through their large-scale cross-border investments, channeling

the excess liquidities of pension funds of G8 and OPEC countries towards both
Western bourses and emerging markets, contributing to the development of a truly
integrated and thus more efficient global financial sphere.
When considered from a strictly local standpoint, institutional investors are

sometimes called Foreign Institutional Investors (FIIs). This expression is mostly
used in emerging markets such as Malaysia and India.
In countries like India, statutory agencies like SEBI have prescribed norms to register
FIIs and also to regulate such investments flowing in through FIIs. In 2008, FIIs
20
FDI & FII
represented the largest institution investment category, with an estimated US$ 751.14
billion. Since the mid-1970s, it has been argued that geographic diversification would
generate superior risk-adjusted returns for long-term global investors by reducing
overall portfolio risk while capturing some of the higher rates of returns offered by
the emerging markets of Asia and Latin America.
2.2.3 REGIONAL
In various countries different types of institutional investors may be more important.

In oil-exporting countries sovereign wealth funds are very important, while
in developed countries, pension funds may be more important.
Canada
In Canada, both pension funds and government funds are powerful investors in the
market with hundreds of billions of dollars in assets in an economy of only around
one trillion dollars- some think-tanks such as the CEE Council have argued that this
constitutes a long-term competitive advantage for the Canadian economy. The most
important Canadian institutional investors are: Caisse de depot et placement du
Quebec (C$237.3 billion [2007])
Canada Pension Plan (C$116.6 Billion [2007])
21
FDI & FII
Ontario Teachers' Pension Plan (C$106 billion [2006])

British Columbia Investment Management (C$83.4 billion [2007])
Alberta Investment Management (C$73.3 billion [2007])
United Kingdom
In the UK, institutional investors may play a major role in economic affairs, and are
highly concentrated in the City of London's square mile. Their wealth accounts for
around two thirds of the equity in public listed companies. For any given company,
the largest 25 investors would have be able to muster over half of the votes. The
major investor associations are:
Investment Management Association

Association of British Insurers
National Association of Pension Funds
The Association of Investment Trust Companies
The IMA, ABI, NAPF, and AITC, plus the British Merchant Banking and Securities
House Association are also represented by the Institutional Shareholder Committee.
22
FDI & FII
2.2.4 FII IN INDIA

Foreign Institutional Investors means an institution established or incorporated
outside India which proposes to make investment in Indian securities.
A Working Group for Streamlining of the Procedures relating to FIIs, constituted in
April, 2003, inter alia, recommended streamlining of SEBI registration procedure,
and suggested that dual approval process of SEBI and RBI be changed to a single
approval process of SEBI. This recommendation was implemented in December
2003.
23
FDI & FII
Currently, entities eligible to invest under the FII route are as follows:
As FII: Overseas pension funds, mutual funds, investment trust, asset
management company, nominee company, bank, institutional portfolio
manager, university funds, endowments, foundations, charitable trusts,
charitable societies, a trustee or power of attorney holder incorporated or
established outside India proposing to make proprietary investments or with no
single investor holding more than 10 per cent of the shares or units of the
fund).
As Sub-accounts: The sub account is generally the underlying fund on whose
behalf the FII invests. The following entities are eligible to be registered as
sub-accounts, viz. partnership firms, private company, public company,
pension fund, investment trust, and individuals.
FIIs registered with SEBI fall under the following categories:
Regular FIIs- those who are required to invest not less than 70 % of their
investment in quity-related instruments and 30 % in non-equity instruments.
100 % debt-fund FIIs- those who are permitted to invest only in debt
instruments.
The Government guidelines for FII of 1992 allowed, inter-alia, entities such as asset
management companies, nominee companies and incorporated/institutional portfolio
managers or their power of attorney holders (Providing discretionary and nondiscretionary portfolio management services) to be registered as FIIs. While the
guidelines did not have a specific provision regarding clients, in the application form
the details of clients on whose behalf investments were being made were sought.
While granting registration to the FII, permission was also granted for making
investments in the names of such clients. Asset management companies/portfolio
managers are basically in the business of managing funds and investing them on
24
FDI & FII
behalf of their funds/clients. Hence, the intention of the guidelines was to allow these
categories of investors to invest funds in India on behalf of their 'clients'. These
'clients' later came to be known as sub-accounts. The broad strategy consisted of
having a wide variety of clients, including individuals, intermediated through
institutional investors, who would be registered as FIIs in India. FIIs are eligible to
purchase shares and convertible debentures issued by Indian companies under the
Portfolio Investment Scheme.
2.2.5 TYPES
Pension fund
Mutual fund
Investment trust
Unit trust and Unit Investment Trust
Investment banking
Hedge fund
Sovereign wealth fund
Private equity firms
Insurance companies
2.2.6 FII ADVANTAGES

FIIs have a greater appetite for equity than debt in their asset structure. The
opening up the economy to FIIs has been in line with the accepted preference
for non-debt creating foreign inflows over foreign debt. Enhanced flow of
equity capital helps improve capital structures and contributes towards building
the investment gap.
FII inflows help in financial innovation and development of hedging
instruments. Also, it not only enhances competition in financial markets, but
also improves the alignment of asset prices to fundamentals.
25
FDI & FII
FIIs as professional bodies of asset managers and financial analysts enhance

competition and efficiency of financial markets.
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.
FIIs constitute professional bodies of asset managers and financial analysts,
who, by contributing to better understanding of firms operations, improve
corporate governance. Bad corporate governance makes equity finance a costly
option. Also, institutionalization increases dividend payouts, and enhances
productivity growth.
Enhanced flows of equity capital
Managing uncertainty and controlling risks
Improving capital markets
Equity market development aids economic development
Improved corporate governance
2.2.7 FII DISADVANTAGES
Anytime withdrawal
Outflow of money
Short term opportunities
Easy route without identity
Indian market more sensitive
Problems of Inflation: Huge amounts of FII fund inflow into the country
creates a lot of demand for rupee, and the RBI pumps the amount of Rupee in
the market as a result of demand created
Problems for small investor: The FIIs profit from investing in emerging
financial stock markets. If the cap on FII is high then they can bring in huge
amounts of funds in the countrys stock markets and thus have great influence
26
FDI & FII
on the way the stock markets behaves, going up or down. The FII buying
pushes the stocks up and their selling shows the stock market the downward
path. This creates problems for the small retail investor, whose fortunes get
driven by the actions of the large FIIs.
Adverse impact on Exports: FII flows leading to appreciation of the currency
may lead to the exports industry becoming uncompetitive due to the
appreciation of the rupee.
Hot Money: "Hot money" refers to funds that are controlled by investors who
actively seek short-term returns. These investors scan the market for shortterm, high interest rate investment opportunities. "Hot money" can have
economic and financial repercussions on countries and banks. When money is
injected into a country, the exchange rate for the country gaining the money
strengthens, while the exchange rate for the country losing the money weakens.
If money is withdrawn on short notice, the banking institution will experience
a shortage of funds.
2.3 FDI v/s FII

Sr. No.
1
FDI
FII
FDI is when a foreign FII is when a foreign

company brings capital into company buys equity in
a country to set up a the company through stock
production or other facility markets

FDI involves in direct Does not involve direct
production activity and also activity as is for short team
of medium to long term
nature
Enables degree of control in Does
the company
not
involve
any
degree of control in the

27
FDI & FII
4
5
company
Brings long term capital
Brings short term capital
It increases production, It only widens and deepens
brings in more and better the stock exchanges and
products
besides
and
increasing
employment
and
services provides a better price
opportunities scripts.
revenue
government
the discovery process for the
by
for
way
the
of
taxes.
2.4 Role of FDI

The importance of FDI extends beyond the financial capital that flows into the
country. In addition, FDI inflows can be a tool for bringing knowledge, managerial
skills and capability, product design, quality characteristics, brand names, channels
for international marketing of products, etc. And consequent integration into global
production chains, which are the foundation of a successful exports strategy
(BlomStrom, Kokko and Zejan, 1994; Borensztein, De Gregorio and Lee, 1998; De
Mello, 1999; United Nations Conference on Trade and Development (UNCTAD)
1999; Lall, 2000;
Organization for Economic Cooperation and Development (OECD) 2002, Lipsey,
1999).
FDI could benefit both the domestic industry as well as the consumer, by providing
opportunities for technological transfer and up gradation, access to global managerial
28
FDI & FII
skills and practices, optimal utilization of human capabilities and natural resources,
making industry internationally competitive, opening up export markets, providing
backward and forward linkages and access to international quality goods and services
and augmenting employment opportunities. For all these reasons, FDI is regarded as
an important vehicle for economic development particularly for developing
economies. FDI flows are usually preferred over other forms of external finance
because they are non debt creating, non-volatile19 and their returns depend on the
performance of the projects financed by the investors. In a world of increased
competition and rapid technological change, their complimentary and catalytic role
can be very valuable.
2.5 Guiding Principles for Policies toward Attracting FDI

A predictable and non-discriminatory regulatory environment and an
Absence of undue administrative impediments to business more generally.
A stable macroeconomic environment, including access to engaging in
International trade.
Sufficient and accessible resources, including the presence of relevant
infrastructure and human capital.
The conditions sought by foreign enterprises are largely equivalent to those
that constitute a heal thy business environment more generally.However,
internationally mobile investors may be more rapidly responsive to changes in
business conditions. The most effective action by host country authorities to
meet investors expectations is:
Safeguarding public sector transparency, including an impartial system of
courts and law enforcement.
29
FDI & FII
Ensuring that rules and their implementation rest on the principle of non
discrimination between foreign and domestic enterprises and are in accordance
with international law.
Providing the right of free transfers related to an investment and protecting
against arbitrary expropriation.
Putting in place adequate frameworks for a healthy competitive environment in
the domestic business sector.
Removing obstacles to international trade.
Redress those aspects of the tax system that constitute barriers to FDI.
First comes trade, and then comes foreign direct investment. But what do commercial
investors look for when judging potential recipients? Economic advisors for several
international organizations listed some of their investment criteria at the IDRC
development forum on emerging markets:
Countries where residents are saving and investing locally receive high marks.
Countries where residents are moving their financial assets out rate poorly.
Existing investment in assets that cannot be liquidated easily indicate that
people have faith in a country's economic future, and in its financial and
banking system.
A reasonable record of national policy stability, backed by a competent
national bureaucracy that applies its policies in a consistent manner, indicates
the presence of a strong and honest government infrastructure.
Established legal framework, including property rights.
Domestic and regional sales markets reaching a critical mass promote the
construction of local production and distribution facilities.
Good export market access (aided by tariff reductions), combined with lowercost production costs, may justify building factories for regional or global
markets.
30
FDI & FII
The ability to successfully apply new technologies and the availability of

relevant skills attracts investment. With today's production methods, fewer
industries require cheap, unskilled labor.
A local natural resource base is no longer a prerequisite for economic
development, as shown by success stories such as Taiwan and Korea.
2.5.1 Make in India

Is an initiative of the Government of India, to encourage companies to manufacture
their products in India. It was launched by Prime Minister, Narendra Modi on 25
September 2014.
The major objective behind the initiative is to focus on 25 sectors of the economy for
job creation and skill enhancement. Some of these sectors are:
automobiles,
chemicals,
IT,
pharmaceuticals,
textiles,
ports,
aviation,
leather,
tourism and hospitality,
wellness,
railways,
auto components,
design manufacturing,
31
FDI & FII
renewable energy,
mining,
bio-technology, and
Electronics.
The initiative hopes to increase GDP growth and tax revenue. The initiative also aims
at high quality standards and minimizing the impact on the environment. The
initiative hopes to attract capital and technological investment in India.
Under the initiative, brochures on the 25 sectors and a web portal were released.
Before the initiative was launched, foreign equity caps in various sectors had been
relaxed or removed. The application for licenses was made available online. The
validity of licenses was increased to 3 years. Various other norms and procedures
were also relaxed.
In August 2014, the Cabinet of India allowed 49% foreign direct investment (FDI) in
the defense sector and 100% in railways infrastructure. The defense sector previously
allowed 26% FDI and FDI was not allowed in railways. This was in hope of bringing
down the military imports of India. Earlier, one Indian company would have held the
51% stake, this was changed so that multiple companies could hold the 51%.
Responses
In October 2014, Lava Mobiles CMD Hari Om Rai said Lava will start
manufacturing from a Noida plant from April 2015. In November 2014, Lava
was in talks with Nokia to buy its Chennai plant.
In January 2015, the Spice Group said it would start a mobile phone
manufacturing unit in Uttar Pradesh with an investment of 500 crore. A
memorandum of understanding was signed between the Spice Group and the
Government of Uttar Pradesh.
32
FDI & FII
In January 2015, HyunChil Hong, the President & CEO of Samrsung South
West Asia, met with Kalraj Mishra, Union Minister for Micro, Small and
Medium Enterprises (MSME), to discuss a joint initiative under which 10
"MSME-Samsung Technical Schools" will established in India. In February,
Samsung said that will manufacture the Samsung Z1 in its plant in Noida.
2.6 How FII started in India?

India opened its stock market to foreign investors in September 1992
Since 1993, received portfolio investment from foreigners in the form of
foreign institutional investment in equities.
This has become one of the main channels of FII in India for foreigners.
In order to trade in Indian equity market foreign corporations need to register
with SEBI as Foreign Institutional Investor (FII).
2.7 The eligibility criteria for applicant seeking FII registration

As per Regulation 6 of SEBI (FII) Regulations1995, Foreign Institutional Investors
are required to fulfill the following conditions to qualify for grant of registration:
Applicant should have track record, professional competence, financial

soundness, experience, general reputation of fairness and integrity;
The applicant should be regulated by an appropriate foreign regulatory

authority in the same capacity/category where registration is sought from
SEBI. Registration with authorities, which are responsible for incorporation, is
not adequate to qualify as Foreign Institutional Investor.
The applicant is required to have the permission under the provisions of the
Foreign Exchange Management Act, 1999 from the Reserve Bank of India.
33
FDI & FII
Applicant must be legally permitted to invest in securities outside the country

or its in-corporation / establishment.
The applicant must be a "fit and proper" person.
The applicant has to appoint a local custodian and enter into an agreement with
the custodian. Besides it also has to appoint a designated bank to route its
transactions.
Payment of registration fee of US $ 5,000.00
2.8 SEBI ANNOUNCES NEW REGULATIONS FOR FII'S

Market regulator Security Exchange Board of India recently announced new
rules for foreign investments through financial instruments such as
participatory notes, asking FIIs to wind up P-Notes for investing in derivatives
within 18 months.
SEBI also imposing curbs on P-Notes for investing in spot market.
In derivatives, foreign institutional investors (FIIs) and their sub-accounts
cannot issue fresh P-Notes and will have to wind up their current position in 18
months.
In spot market, FIIs will not be allowed to issue P-Notes more than 40 per cent
of their assets under custody. The reference date for calculating such assets will
be September 30.
Those FIIs who have issued P-Notes of more than 40 per cent of their assets
could issue such instruments only if they cancel, redeem, or close their existing
PNs. Those FIIs who have issued P-Notes less than 40 per cent of their assets
under custody can issue additional instruments at the rate of 5 per cent of their
assets.
34
FDI & FII
3.9 Trends of Foreign Institutional Investments in India.

Portfolio investments in India include investments in American Depository Receipts
(ADRs)/ Global Depository Receipts (GDRs), Foreign Institutional Investments and
investments in offshore funds. Before 1992, only Non-Resident Indians (NRIs) and
Overseas Corporate Bodies were allowed to undertake portfolio investments in India.
Thereafter, the Indian stock markets were opened up for direct participation by FIIs.
They were allowed to invest in all the securities traded on the primary and the
secondary market including the equity and other securities/instruments of companies
listed/to be listed on stock exchanges in India. It can be observed from the table
below that India is one of the preferred investment destinations for FIIs over the
years. As of March 2014, there were 1396 FIIs registered with SEBI.
35
FDI & FII
CHAPTER 4:-RESEARCH METHODOLOGY
4.1 RESEARCH NEED

Scope of the study is very broader and covers the sectors related to Foreign
Institutional Investors and Foreign Direct Investment.
The study will provide a very clear picture of the comparison of Foreign Direct
Investment and Foreign Institutional Investors in India. It will also describe the
market trends due to FDIs and FIIs inflows and outflows.
4.2 RESEARCH OBJECTIVE

Objective 1 pertaining to FDI: examines the trends and patterns in the foreign
direct investment (FDI) across different sectors and from different countries in
India during 1991-2014 period means during post liberalization period.
Objective 2 pertaining to FII: influence of FII on movement of Indian stock
exchange during the post liberalization period that is 1991 to 2014.
4.3 RESEARCH DESIGN

4.3.1 TYPES OF RESEARCH: Exploratory
Research-
Exploratory
research
is
research
conducted for a problem that has not been clearly defined.

36
FDI & FII
Exploratory research helps determine the best research design, data

collection method and selection of subjects. When the purpose of
research is to gain familiarity with a phenomenon or acquire new
insight into it in order to formulate a more precise problem or
develop hypothesis, the exploratory studies come in handy
4.3.2 SAMPLING: The study is limited to a sample of top 10 investing countries e.g.
Mauritius, USA etc. and top 10 sectors e.g. electrical instruments,
telecommunications etc. which had attracted larger inflow of FDI and
data of NSE stock exchange will be taken to know the impact of FII.
4.3.3 DATA COLLECTION METHOD
The research will be done with the help Secondary data (from
internet site and journals).
The data is collected mainly from websites, annual reports, World
Bank reports, research reports, already conducted survey analysis,
database available etc.
4.3.4 TOOLS USED
Appropriate Statistical tools like average, the liner trend mode will be
used to analyze the data like to analyze the growth and patterns of the
FDI and FII flows in India during the post liberalization period. Further
the percentage analysis will be used to measure the share of each
investing countries and the share of each sectors in the overall flow of
FDI and FII into India.
4.4 LIMITATION OF THE STUDY

There is time limitation for project report.
There is cost limitation for project report.
37
FDI & FII
The study has limited itself to a sample of top ten investing countries and top
ten level sectors which have attracted higher inflow of FDI.
The data for analysis of impact of FII on stock exchange is limited to National
stock exchange (NSE) only.
CHAPTER 5:-DATA ANALYSIS

1. Analysis of share of top ten investing countries FDI
equity in flows
Ranks
1
2
3
4
5
6
7
8
9
10
Country
Mauritius
U.S.A.
U.K
Netherlands
Japan
Germany
Singapore
France
South Korea
Switzerland
Cumulative inflows
%age with total
(from Aug. 1991 to march
inflows (in terms of
2014)
rupees)
79162
24536
16660
11402
9313
7060
7050
3803
3234
2879
34.11
10.57
7.17
4.91
4.01
3.04
3.03
1.63
1.39
1.24
38
FDI & FII
% of total FDI
Mauritius
U.S.A.
U.K
Netherlands
Japan
Germany
Singapore
France
South Korea
Switzerland
other
Foreign investors have begun to take a more active role in the Indian economy in
recent years. By country, the largest direct investor in India is Mauritius; largely
because of the India-Mauritius double-taxation treaty. Firms based in Mauritius
invested 79162 crores in India between Aug. 1991 and March 2014, equal to 34.11
percent of total FDI inflows. The second largest investor in India is the United States,
with total capital flows of 24536 crore during the 19912014 periods, followed by the
United Kingdom, the Netherlands, and Japan.
Mauritius
According to Indian government statistics, Mauritius accounts for the largest share of
cumulative FDI inflows to India from 1991 to 2014, nearly 34.11 percent. Many
companies based outside of India utilize Mauritian holding companies to take
advantage of the India- Mauritius Double Taxation Avoidance Agreement (DTAA).
The DTAA allows foreign firms to bypass Indian capital gains taxes, and may allow
some India-based firms to avoid paying certain taxes through a process known as
round tripping. The extent of round tripping by Indian companies through
39
FDI & FII
Mauritius is unknown. However, the Indian government is concerned enough about

this problem to have asked the government of Mauritius to set up a joint monitoring
mechanism to study these investment flows. The potential loss of tax revenue is of
particular concern to the Indian government. The existence of the treaty makes it
difficult to clearly understand the pattern of FDI flows, and likely leads to reduced
tax revenues collected by the Indian government.
United States
The United States is the second largest source of FDI in India (10.57 % of the total),
valued at 24536 crore in cumulative inflows between August 1991 and March 2014.
According to the Indian government, the top sectors attracting FDI from the United
States to India during 19912014 (latest available) are fuel (36 percent),
telecommunications (11 percent), electrical equipment (10 percent), food processing
(9 percent), and services (8 percent). According to the available M&A data, the two
top sectors attracting FDI inflows from the United States are computer systems
design and programming and manufacturing. Since 2002, many of the major U.S.
software and computer brands, such as Microsoft, Honeywell, Cisco Systems, Adobe
Systems, McAfee, and Intel have established R&D operations in India, primarily in
Hyderabad or Bangalore. The majority of U.S. electronics companies that have
announced greenfield projects in India are concentrated in the semiconductor sector.
By far the largest such project is AMDs chip manufacturing facility in Hyderabad,
Andhra Pradesh. The largest share (36 percent) was found in the manufacturing
sector, most prominently in the machinery, chemicals, and transportation equipment
manufacturing segments. Other important categories of employment are professional,
scientific, and technical services; and wholesale trade, with 29 percent and 18 percent
of U.S. affiliate employment, respectively.
40
FDI & FII
European Union
Within the European Union, the largest country investors were the United Kingdom
and then Netherlands, with 16660 crore and 11402 crore, respectively, of cumulative
FDI inflows between Aug. 1991 and March 2014. The United Kingdom, the
Netherlands, and Germany together accounted
for almost 75 percent of all FDI flows from the EU to India. All EU countries
together accounted for approximately 25 percent of all FDI inflows to India between
August 1991 and March 2014. FDI from the EU to India is primarily concentrated in
the power/energy, telecommunications, and transportation sectors. The top sectors
attracting FDI from the European Union are similar to FDI from the United States.
Manufacturing; information services; and professional, scientific, and technical
services have attracted the largest shares of FDI inflows from the EU to India since
2000. Unilever, Reuters Group, P&O Ports Ltd, Vodafone, and Barclays are examples
of EU companies investing in India by means of mergers and acquisitions. European
companies accounted for 31 percent of the total number and 43 percent of the total
value for all reported Greenfield FDI projects. The number of EU Greenfield projects
was distributed among four major clusters: ICT (17 percent), heavy industry (16
percent), business and financial services (15 percent), and transport (11 percent).
However, the heavy industry cluster accounted for the majority (68 percent) of the
total value of these projects.
Japan
Japan was the Fifth largest source of cumulative FDI inflows in India between
August 1991 and March 2014, i.e. the cumulative flow is 9313 crore and it is 4.01%
of total inflow. FDI inflows to India from most other principal source countries have
steadily increased since 2000, but inflows from Japan to India have decreased during
this time period. There does not appear to be a single factor that explains the recent
decline in FDI inflows from Japan to India. India is, however, one of the largest
recipients of Japanese Official Development Assistance (ODA), through which Japan
41
FDI & FII
has assisted India in building infrastructure, including electricity generation,

transportation, and water supply. It is possible that this Japanese government
assistance may crowd out some private sector Japanese investment. The top sectors
attracting FDI inflows from Japan to India are transportation (54 percent), electrical
equipment (7 percent), telecommunications, and services (3 percent). The available
M&A data corresponds with the overall FDI trends in sectors attracting inflows from
Japan to India. Companies dealing in the transportation industry, specifically
automobiles, and the auto component/peripheral industries dominate M&A activity
from Japan to India, including Yamaha Motors, Toyota, Kirloskar Auto Parts Ltd.,
and Mitsubishi Heavy Industries Ltd. Japanese companies have also invested in an
estimated 148 Greenfield FDI projects valued at least at $3.7 billion between 2002
and 2006. In April 2014, Japanese and Indian officials announced a major new
collaboration between the two countries to build a new Delhi-Mumbai industrial
corridor, to be funded through a public-private partnership and private-sector FDI,
primarily from Japanese companies. The project was begun in January 2008 with
initial investment of $2 billion from the two countries. The corridor will cross 6 states
and extend for 1,483 km, in an area inhabited by 180 million people. At completion
in 2015, the corridor is expected to include total FDI of $4550 billion. A large share
of that total is destined for infrastructure, including a 4,000 MW power plant, 3 ports,
and 6 airports, along with additional connections to existing ports. Private investment
is expected to fund 10-12 new industrial zones, upgrade 56 existing airports, and set
up 10 logistics parks. The Indian government expects that by 2020, the industrial
corridor will contribute to employment growth of 15 percent in the region, 28 percent
growth in industrial output, and 38 percent growth in exports.
2. Analysis of sectors attracting highest FDI equity inflows

42
FDI & FII
The IT industry is one of the booming sectors in India. At present India is the leading
country pertaining to the IT industry in the Asia -Pacific region. With more
international companies entering the industry, the Foreign Direct Investments in
India has been phenomenon over the year. The rapid development of the
telecommunication sector was due to the FDI inflows in form of international
players entering the market and transfer of advanced technologies. The telecom
industry is one of the fastest growing industries in India. With a growth rate of 45%,
Indian telecom industry has the highest growth rate in the world.
The FDI in Automobile Industry has experienced huge growth in the past few years.
The increase in the demand for cars and other vehicles is powered by the increase in
the levels of disposable income in India. The options have increased with quality
products from foreign car manufacturers. The introduction of tailor made finance
schemes, easy repayment schemes has also helped the growth of the automobile
sector. For the past few years the Indian Pharmaceutical Industry is performing very
well. The varied functions such as contract research and manufacturing, clinical
research, research and development pertaining to vaccines are the strengths of the
Pharma Industry in India. Multinational pharmaceutical corporations outsource these
activities
and
help
the
growth
of
the
sector.
The FDI inflow in the Cement Industry in India has increased with some of the
Indian cement giants merging with major cement manufacturers in the. The FDI in
Semiconductor sector in India were crucial for the development of the IT and the
ITES sector in India. Electronic hardware is the major component of several
industries such as information technology, telecommunication, automobiles,
electronic appliances and special medical equipment.
S.No
Sector
Amount of FDI Inflows

(In Rs
%age with
total FDI
Inflows (+)
(In US$
43
FDI & FII

crore)
million)
SERVICES SECTOR
143878.44
31970.85
19.99
TELECOMMUNICATIONS
57049.95
12546.54
7.84
COMPUTER SOFTWARE & HARDWARE
49626.45
11106.5
6.94
HOUSING & REAL ESTATE (INCLUDING

CINEPLEX,MULTIPLEX, INTEGRATED TOWNSHIPS &
COMMERCIAL COMPLEXES ETC.)
49024.58
10972.67
6.86
CONSTRUCTION ACTIVITIES
49440.18
10867.24
6.79
DRUGS & PHARMACEUTICALS
42745.26
9170.24
5.73
POWER
32798.25
7214.83
4.51
AUTOMOBILE INDUSTRY
29354.31
6469.53
4.04
METALLURGICAL INDUSTRIES
26287.48
5909.42
3.69
10
PETROLEUM & NATURAL GAS
14611.84
3338.75
2.09
11
CHEMICALS (OTHER THAN FERTILIZERS)
14703.35
3244.93
2.03
12
HOTEL & TOURISM
14770.58
3229.48
2.02
13
TRADING
14131.09
3126.53
1.95
14
ELECTRICAL EQUIPMENTS
12902.14
2844.75
1.78
15
INFORMATION & BROADCASTING (INCLUDING PRINT

MEDIA)
12062.2
2632.88
1.65
16
CEMENT AND GYPSUM PRODUCTS
11324.88
2535.43
1.58
17
MISCELLANEOUS MECHANICAL & ENGINEERING

INDUSTRIES
9787.16
2180.26
1.36
18
CONSULTANCY SERVICES
8772.22
1924.54
1.2
19
INDUSTRIAL MACHINERY
7590.94
1664.26
1.04
20
PORTS
6717.37
1635.08
1.02
21
AGRICULTURE SERVICES
6912.48
1445.37
0.9
22
FOOD PROCESSING INDUSTRIES
6324.11
1376.99
0.86
23
NON-CONVENTIONAL ENERGY
6142.37
1324.22
0.83
24
HOSPITAL & DIAGNOSTIC CENTRES
5252.56
1183.04
0.74
25
ELECTRONICS
5214.6
1151.07
0.72
26
TEXTILES (INCLUDING DYED,PRINTED)
5036.27
1104.54
0.69
27
SEA TRANSPORT
4992.35
1100.78
0.69
28
FERMENTATION INDUSTRIES
4480.65
1022.15
0.64
29
MINING
4042.33
937.9
0.59
44
FDI & FII

30
PAPER AND PULP (INCLUDING PAPER PRODUCTS)
3554.22
764
0.48
31
PRIME MOVER (OTHER THAN ELECTRICAL GENERATORS)
2801.95
599.13
0.37
32
MEDICAL AND SURGICAL APPLIANCES
2421.14
514.08
0.32
33
CERAMICS
2171.84
503.79
0.31
34
EDUCATION
2306.13
491.99
0.31
35
RUBBER GOODS
2124.88
454.47
0.28
36
AIR TRANSPORT (INCLUDING AIR FREIGHT)
1924.46
431.2
0.27
37
MACHINE TOOLS
1950.99
428.94
0.27
38
SOAPS, COSMETICS & TOILET PREPARATIONS
1934
411.34
0.26
39
DIAMOND,GOLD ORNAMENTS
1505.37
334.31
0.21
40
VEGETABLE OILS AND VANASPATI
1300.77
276.56
0.17
41
FERTILIZERS
1196.78
255.35
0.16
42
PRINTING OF BOOKS (INCLUDING LITHO PRINTING

INDUSTRY)
1110.39
244.28
0.15
43
RAILWAY RELATED COMPONENTS
1058.18
234.76
0.15
44
COMMERCIAL, OFFICE & HOUSEHOLD EQUIPMENTS
1026.7
225.85
0.14
45
AGRICULTURAL MACHINERY
903.7
200.32
0.13
46
GLASS
806
176.2
0.11
47
EARTH-MOVING MACHINERY
728.9
167.33
0.1
48
TEA AND COFFEE (PROCESSING & WAREHOUSING

COFFEE & RUBBER)
451.11
100.26
0.06
49
PHOTOGRAPHIC RAW FILM AND PAPER
269.26
66.54
0.04
50
INDUSTRIAL INSTRUMENTS
304.26
65.95
0.04
51
LEATHER,LEATHER GOODS AND PICKERS
267.9
59.6
0.04
52
RETAIL TRADING (SINGLE BRAND)
204.07
44.45
0.03
53
BOILERS AND STEAM GENERATING PLANTS
201.86
41.77
0.03
54
SUGAR
174.64
39.56
0.02
55
TIMBER PRODUCTS
173.56
36.17
0.02
56
COAL PRODUCTION
103.11
24.78
0.02
57
SCIENTIFIC INSTRUMENTS
96.78
21.21
0.01
58
DYE-STUFFS
84.86
19
0.01
59
GLUE AND GELATIN
70.56
14.55
0.01
60
DEFENCE INDUSTRIES
17.68
3.72
45
FDI & FII

61
COIR
9.56
2.02
62
MATHEMATICAL,SURVEYING AND DRAWING

INSTRUMENTS
5.05
1.27
63
MISCELLANEOUS INDUSTRIES
33596.67
7487.61
4.68
722833.7
159973.12
533.06
121.33
723366.76
160094.45
SUB.
TOTAL
64
RBIS- NRI SCHEMES (2000-2002)
GRAND
TOTAL
46
FDI & FII
47

Fdi

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Fdi

Uploaded by

Copyright:

Available Formats

FDI & FII

Foreign investment refers to investments made by the residents of a country in the

FDI & FII

liberalized its investment regulations and actively encouraged new foreign

The world is increasingly becoming interdependent. Goods and services followed by

FDI & FII

FDI & FII

CHAPTER 2:-THEORETICAL FRAMEWORK

2.1 FDI (FOREIGN DIRECT INVESTMENT)

2.1.1 ABOUT FDI

FDI & FII

investor or parent enterprise) in an enterprise resident in an economy other than that

2.1.2 Automatic Route

Investment under the Automatic Route shall

FDI & FII

Any change in sectoral policy/sectoral equity cap shall be notified by the

(B) Existing Companies

FDI & FII

2.1.3 Government Approval

FDI & FII

FDI & FII

In case of listed companies, valuation shall be as per the RBI/SEBI guidelines as

FDI & FII

2.1.4 Other Modes of Foreign Direct Investments

telecommunication, petroleum exploration and refining, ports, airports and roads.

There are no end-use restrictions on GDR/ADR issue proceeds, except for an

FDI & FII

2.1.5 FDI POLICY IN INDIA

FDI & FII

fiscal, industry department data released showed.

through private equity or preferential allotments, by way of capital markets

FDI & FII

and regional approval in the same process.

2.1.6 FOREIGN DIRECT INVESTMENT:INDIAN SCENERIO

Through financial collaborations.

FDI is not permitted in the following industrial sectors:

Arms and ammunition.

FDI & FII

FDI & FII

By incorporating a wholly owned subsidiary or company

Foreign direct investment incentives may take the following forms:

Low corporate tax and income tax rates

2.1.9 FORBIDDEN TERRITORIES

FDI & FII

2.1.9 FDI ADVANTAGES

2.1.10 FDI DISADVANTAGES

B.M COLLEGE OF BUSINESS ADM.

FDI & FII

Inflation may increase slightly

If there is a lot of FDI into one industry e.g. the automotive

are seeking to attract high value- added services such as research

2.2 FII (FOREIGN INSTITUTIONAL INVESTORS)

FDI & FII

FDI & FII

FDI & FII

2.2.2 Globalization of financial markets

money flows, notably through their large-scale cross-border investments, channeling

When considered from a strictly local standpoint, institutional investors are

FDI & FII

In various countries different types of institutional investors may be more important.

FDI & FII

Ontario Teachers' Pension Plan (C$106 billion [2006])

Investment Management Association