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Investment
By:
Jatin Mittal
NRO0327240
What is Foreign
Investment?
It is the flow of
capital from one
nation to another in
exchange for
significant
ownership stakes in
domestic
companies or other
domestic assets.
Foreign Direct
Investment
FDI is direct investment
into production or business in a country
by an individual or company of another
country
either by buying a company in the
target country or;
by expanding operations of an existing
business into that country.
Types of FDI
Horizontal FDI: It arises when a firm
Advantages of FDI
Infrastructure and technology
Employment
Consumer benefits
Profits generated by FDI contribute to
Disadvantages of FDI
Displacement of small unorganized
shopkeepers
Threat of monopoly
More investment in intellectual property
than in wages of local people
Benefits of FPI
Increase liquidity of domestic capital
markets
Help in funding foreign exchange
reserves of the country
Provides non-debt creating source of
foreign investment
Disadvantages of FPI
Very volatile in nature
From investor point of view, it may lead
Investment
It is purchases
made into a
country where
foreigners make
purchases in the
countrys stock &
bond markets,
sometimes for
speculation.
Investment
Portfolio
It means collection
of investments held
by an investment
company or even an
individual.
Share prices
up
Liquidity up
More
supply,
Liquidity,
Demand
Cost of issuing
down
More Equity
Issued
Automatic Route
General rule
Inform RBI within 30 days of
inflow
Cap of Rs. 600 Crore
Prior Permission
By exception
Approval of Foreign
Investment Promotion
Board needed.
Decision generally
within 4-6 weeks
Aftermath of Reforms
Foreign exchange reserves started
piling up
India became the market for the
various foreign countries
National income started rising
FDI in Retail
Retailing is one of the pillars of Indias
go to foreigners
Walmart will lower the prices and could
create a monopoly
Walmart could enter India as trader and
then take over politically
in 2001
9th in 2009
Rank among developing countries:
13th
in 2005
4th in 2009
Indias share of world FDI inflows:
0.78%
in 2005
3.11% in 2009
- UNCTAD Data
Why Companies go
Global?
When Domestic market becomes
saturated
Companies depending on mines always
look for these resources overseas to
ensure long term security
For taking benefit of cheap labour
policies & Govt. incentives
economy of scale
Demand of the product in abroad
Trends In FDI
60
50
US $
Millions
40
30
20
10
0
Approv
ed FDI
Actual
FDI
Trends In FPI
n
a
h
T ou
Y
k