Portfolio investment Investment that does not involve obtaining a degree of control in a company Foreign Direct Investment Purchase of physical assets or a significant amount of the ownership (stock) of a company in another country to gain a measure of management control Investing in India Prior Permission Prior Permission Prior Permission Automatic Route Automatic Route Automatic Route (FIPB) (FIPB) (FIPB) General Rule General Rule General Rule By Exception By Exception No prior permission No prior permission No prior permission Prior Government Prior Government required required required Approval needed. Approval needed. Inform Reserve Bank Inform Reserve Bank Inform Reserve Bank Decision generally Decision generally within 30 days of within 30 days of within 30 days of within 4-6 weeks within 4-6 weeks inflow/issue of shares inflow/issue of shares inflow/issue of shares Increase investment level and thereby income & employment Increase tax revenue of government Facilitates transfer of technology Encourage managerial revolution through professional management Increase exports and reduce import requirements Increase competition and break domestic monopolies Improves quality and reduces cost of inputs Flow to high profit areas rather than main concern areas Through their power and flexibility, MNC can undermine economic autonomy and control Sometimes interferes in the national politics Sometimes engage in unfair and unethical trade practices Sometimes result in minimizing / eliminating competition and create monopolies or oligopolistic structures Year India(Amount US $ Billion) 2001 4.02 2002 6.13 2003 5.03 2004 4.32 2005 6.05 2006 8.961 2007* 17.59 *Jan.- Nov. Source- 1. http://siteresources.worldbank.org/CHINAEXTN/Resources/chinaei.pdf 2. www.rbi.org.in FDI equity limit- FDI requiring prior Automatic route approval Insurance – 26% Defense production – 26% Domestic airlines – 49% FM Broadcasting - 20% Telecom services- Foreign News and current affairs- 26% Broadcasting- cable, up- equity 74% linking – 49% Private sector banks- 74% Trading- wholesale cash and Mining of diamonds and carry, export trading, etc., 100% precious stones- 74% Tea plantation – 100% Exploration and mining of coal Development of airports- and lignite for captive 100% Courier services- 100% consumption- 74% Engineering & Manufacturing sectors Roads & Highways, Ports and Harbors Industrial model towns/industrial parks Hotels & Tourism Pollution Control and Management Advertising & Film industry Power generation (hydro-electric, coal/lignite, oil or gas based) Information Technology including E-Commerce Profitability: Attract where return on investment is higher Costs of production: Encouraged by lower costs of production like raw materials, labor . Economic Conditions: Market potential, infrastructure, size of population, income level etc Government policies: Policies like foreign investment, foreign collaboration, remittances, profits, taxation, foreign exchange control, tariffs etc. Political factors: Political stability, nature of important political parties and relations with other countries. Foreign Institutional Investors (FIIs) are allowed to invest in the primary and secondary capital markets in India through the portfolio investment scheme (PIS). Under this scheme, FIIs/NRIs can acquire shares/debentures of Indian companies through the stock exchanges in India List of companies in which FII investment is allowed upto limits fixed by companies as indicated against their names 1 Amtek Auto Ltd (74%) 2 Advanta India Limited 49% 3 Amtek India Ltd (74%) 4 Ahmednagar Forgings Ltd (74%) 5 Anant Raj Industries Ltd. (40%) 6 ANG Auto Ltd (49%) 7 Apollo Hospitals (74%) 8 Aptech Ltd (74%) 9 Arshiya International Limited (49%) 10 Bombay Rayon Fashions Ltd (40%) Foreign Institutional Investors(FIIs) in India Year 1995-96 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07(P) FIIs* 2009 1926 979 -390 2,135 1847 1505 377 10,918 8,686 9,926 3,225 (US $ Milloin) *Represents inflow of funds (net) by Foreign Institutional Investors (FIIs). Source:-RBI Bulletin of 13th Feb 2008. Net inflows by foreign institutional investors (FIIs) aggregated to US $ 26.8 billion during the current financial year so far (up to January 11, 2008). The number of FIIs registered with the SEBI increased from 997 at end-March 2007 to 1,219 at end-December 2007. The main objective of the study is to know about in which sector the industries are invest our money FDI or FII. To identify factors which inhibit higher FDI or FII flows and suggest remedial steps. To examine policy reforms towards mergers and acquisition for attracting FDI or FII To suggest changes in institutional apparatus and organizations, both in Centre and States, for attracting the FDI or FII flows. The result of all these efforts are encouraging: the inflow of foreign capital has been steadily rising year to year so that FDI is better then FII Investors based in many countries have taken advantage of the India-Mauritius bilateral tax treaty to set up holding companies in Mauritius which subsequently invest in India, thus reducing their tax obligations. By industry, the largest destinations for FDI are electrical equipment (including computer software and electronics), services, telecommunication & transportation.
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