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.

ANY

QUESTIONS?

THANK

YOU