effects of fdi and fii on indian economy
DESCRIPTION
All the major effects of fdi and fii are discussed in this presentation.TRANSCRIPT
EFFECTS OF FDI & FII IN INDIAN ECONOMY
PRESENTED BY:
SUPRIYA PATWARI (161)
SURESH S (162)
SURYA PRATAP (163)
SWAPNIL MATTE (164)
SWETA GHOSH (165)
CONTENTS
1. INTRODUCTION OF FDI & FII
2. TYPES OF FDI
3. IMPACTS OF FDI
4. ADVANTAGES OF FDI
5. DISADVANTAGES OF FDI
6. IMPACTS OF FII
7. ADVANTAGES OF FII
8. DISADVANTAGES OF FII
9. GROWTH OF FDI & FII IN INDIAN ECONOMY
10.CONCLUSION
INTRODUCTION OF FDI & FII
• FDI – Foreign Direct Investment
• FII – Foreign
Institutional
Investors
TYPES OF FDI
Direct Investment (FDI)
Horizontal FDI
Vertical FDI
Platform FDI
BACKGROUND: INDIA
TRANSFORMED !!
…Yesterday
Slow rate of growth
Bureaucratic
Protected and slow
Small consumer markets
Weak infrastructure
…Today
Strong Macro Economic
Fundamentals
Encouraging Foreign Investment
Outsourcing Destination
Growing Consumerism
Impetus On Infrastructure
Development
IMPACT OF FDI
• Financial Transfer
In Foreign
Exchange
• Production
Technology
• Management Skills
• Physical Resources
Like Machinery
Tools Equipment
Etc.
• Institutional System
• Information &
Database
• Worldwide Contacts
• Research &
Development
• Training Resources
• Trade Channels
ADVANTAGES OF FDI
• Inflow of equipment & technology
• Competitive advantage & innovation
• Financial resources for expansion
• Employment generation
• Contribution to exports growth
• Access to low cost resources for investor
• Access to new market/distribution channel for
products
• Improved consumer welfare through reduced costs,
wider choice and improved quality
• Crowding of local industry
• Loss of control
• Repatriation of profits/dividends by investor
• Conflicts of codes/laws
• Possible exploitation of resources- material/wages
• Effect on local culture/sentiments – socio cultural
effect
• Effect on natural environment
DISADVANTAGES OF FDI
FII: IMPACT ON INDIAN ECONOMY
• FII leads to appreciation of Currency: FII Need to
maintain an account with RBI For all transactions
• FII and Exports: If our Indian currency appreciates
just because of FII then there will be adverse effect
on exports
• FII and Stock Market: When FII cap is on high they
can bring in lot of funds in stock market
• FII and Inflation: The huge amount of FII flow
creates The huge demands for Indian rupees so
excess liquidity leads to inflation
ADVANTAGES OF FII
• Enhanced flows of equity capital
• Economic Development
• Improved Corporate Governance
DISADVANTAGES OF FII
• Problems for Small Investors
• Problems of Inflation
• Adverse Impact on Export
• Hot Money
GROWTH OF FDI & FII IN INDIA
• UNCTAD’s World Investment Report (2014) – India
is the 14th Largest Recipient of FDI
• Factors Affecting FDI & FII:
– Infrastructure
– Labor Laws
– Corruption
– Corporate Taxes
– Geographical Disparities
DIPP’S – FINANCIAL YEAR-WISE FDI EQUITY INFLOWS
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
10
73
3
18
65
4
12
87
1
10
06
4
14
65
3
24
58
4
56
39
0
98
64
2
14
28
29
12
31
20
97
32
0
16
51
46
12
19
07 14
75
18
10
29
0
Amt of FDI Inflows (In ` Crores)
-50000
0
50000
100000
150000
200000
99
33
87
63
26
89
45
76
5
45
88
1
41
46
7
30
84
0
66
17
9
-45
81
1
14
26
58
14
64
38
93
72
6
16
83
67
51
64
9
41
8
FII (Equity+Debt) in ` Crores
FINANCIAL YEAR-WISE FII FLOWS
2008 Financial Crisis
SECTOR-WISE FDI INFLOWS
0.00
50,000.00
100,000.00
150,000.00
200,000.00
250,000.00
300,000.00
350,000.00
400,000.001
87
,87
2.9
8
10
8,9
73
.98
66
,78
2.3
1
59
,94
9.1
7
56
,07
6.0
7
48
,33
2.0
2
45
,54
1.0
8
42
,96
4.0
9
38
,68
2.8
7
36
,86
8.8
4
36
2,1
44
.22
Amount of FDI Inflows (In ` crore)
(18
.17
%)
(10
.66
%)
(6.4
6%
)
(5.8
7%
)
(5.2
9%
)
(4.4
8%
)
(4.4
3%
)
(4.0
8%
)
(3.7
1%
)
(3.3
0%
)
(33
.55
%)
FDI & FII - DIFFERENCE
• It is long-term investment
• Investment in physical
assets
• Aim is to increase
enterprise capacity or
productivity or change
management control
• Leads to technology
transfer access to markets
and management inputs
• FDI flows into the primary
market
• It is generally short-term
investment
• Investment in financial
assets
• Aim is to increase capital
availability
• FII results in only capital
inflows
• FII flows into the
secondary market
FDI & FII - DIFFERENCE
• Entry and exist is
relatively easy
• FII is eligible for capital
gain
• Tends to be speculative
• No direct impact on
employment of labour
and wages
• Fleeting interest in
Management
• Entry and exit is relatively
difficult
• FDI is eligible for profits
of the company
• Does not tend be
speculative
• Direct impact on
employment of labour
and wages
• Abiding interest in
Management
WHAT IS THE NEED OF THE
HOUR FOR INDIA?
FDI
CONCLUSION
• FDI has played an important role in the development
of Indian economy.
• It has helped achieved a certain level of financial
stability and productivity growth.
• It being a long term investment has also improved
the balance of payment and employment generation
REFERENCES (WEB)
• http://en.wikipedia.org/wiki/Foreign_direct_investment
• http://en.wikipedia.org/wiki/Foreign_Institutional_Investor
• http://dipp.nic.in/
• http://www.sebi.gov.in/
• http://www.nseindia.com/
• http://unctad.org/en/PublicationsLibrary/wir2014_overview_en.pdf
• http://www.equitymaster.com/5MinWrapUp/detail.asp?date=03/23/2
010&story=3&title=We-are-advising-our-clients-to-buy-India-long-
term
REFERENCES (ARTICLES)
• Anitha R, “Foreign Direct Investment And Economic Growth In
India”, International Journal of Marketing, Financial Services &
Management Research, Volume 1, Issue 8, August 2012, pp. 108-
125.
• Dr.N.K.Sathya Pal Sharma, Guruprasad B G, “Role Of Foreign
Institutional Investors In Indian Investment Arcade Growth”,
International Journal of Advancements in Research & Technology,
Volume 2, Issue4, April-2013, pp. 272-280.
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QUESTIONS?
THANK
YOU