FOREIGN CAPITAL

AND ECONOMIC
GROWTH OF INDIAN
ECONOMY

By : Keyur, Nikita, Jimmy, Mitesh, Digvijay, Akash

 ☼ Report outline
• INTRODUCTION OF FOREIGN CAPITAL
• Definition
• Need in India

• FORMS OF FOREIGN CAPITAL

• Types of FC forms
• Sector Limitation

• DETAILS OF FDI

• GOVERNMENT INITIATIVE FOR FDI

• CONCLUSION

• REFERENCES
 FOREIGN CAPITAL

“THE CAPITAL AVAILABLE FOR ANY COUNTRY OTHER

THAN THE DOMESTIC CAPITAL IN ORDER TO FINANCCE
ANY CAPITAL NEED FOR DOMESTIC PURPUSE IS CALLED
AS FOREIGN CAPITAL.”

¤ It may be
• Temporary
• Permanent
Needs of Foreign Capital

• Domestic capital is inadequate

• Economic development
• Mobilize domestic saving
• Transfer of Technology
• New job opportunities
• Increasing Income level
 FOREIGN DIRECT INVESTMENT

• Investment made by a foreign individual or company in

productive capacity of another country

FORMS OF FOREIGN CAPITAL IN INDIA

• Foreign Direct Investment

• Foreign Technical Collaboration
• Foreign Portfolio Investment
• Investment in Government Securities and Corporate
debt
• Foreign Venture Capital Investment
FOREIGN DIRECT INVESTMENT

TYPES OF FOREIGN INVESTMENT

• Greenfield investment
• Mergers and Acquisition
 FOREIGN DIRECT INVESTMENT

FORBIDDEN TERRITORIES FOR FDI

• Arms and ammunition

• Atomic Energy
• Railway Transport
• Coal and lignite
• Mining of iron, manganese, chrome, gypsum, sulphur, gold,
diamonds, copper, zinc.
• Gambling and betting
• Lottery Business
• Agricultural or plantation activities of Agriculture
 DETAILS ON FDI EQUITY INFLOWS IN INDIA

CUMULATIVE FDI EQUITY INFLOWS

• FROM AUGUST 1991 TO JULY 2009

– Rs. 5,04,793 CRORE
– MEANS US$ 1,17,032 MILLION
• (HERE 1 US $ = 43.132 Rs)
 FINANCIAL YEAR-WISE FDI EQUITY FLOW IN
INDIA
Financial IN RUPEES IN US $
YEAR CRORES MILLION
(APRIL -
MARCH)

2000 – 2001 12,646 2908

2001 – 2002 19,361 4222

2002 – 2003 14,932 3134

2003 – 2004 12,117 2634

2004 – 2005 17,138 3759

2005 – 2006 24,613 5546

2006 – 2007 70,630 15,726

2007 – 2008 98,664 24,579

2008 – 2009 1,22,919 27,309

(Financial year: April - March)
SOURCE: RBI’S BULLETIN-SEPTEMBER 2009 Dt: 10-09-2009 (Table No. 46-FOREIGN INVESTMENT INFLOWS)
 FOREIGN DIRECT INVESTMENT

• In Financial year 2009 – 2010, it is expected that FDI

equity inflows reach to around
– Rs 1,60,500 crores

• While around Rs 51,256 crores FDI equity inflows is

achieved during April 2009 to July 2009
 SHARE OF TOP INVESTING COUNTRIES FDI
EQUITY INFLOWS (FINANCIAL YEAR)
RANK COUNTRY 2006 – 07 2007 – 08 2008 – 09 2009 – 10 CUMULATIVE
(APRIL - (APRIL - (APRIL - (APRIL – INFLOWS
MARCH) MARCH) MARCH) JULY ‘ 09) (APRIL’00 TO
JULY’09)

1 MAURITIUS 28,759 44,483 50,794 22,257 1,83,529

(6363) (11,096) (11,208) (4555) (41,419)

2 SINGAPORE 2662 12,319 15,727 3692 37,544

(578) (3073) (3454) (759) (7221)

3 U.S.A 3861 4377 8002 4261 32,220

(856) (1089) (1802) (886) (7221)

4 U.K 8389 4690 3840 542 23,446

(1878) (1176) (864) (112) (5338)

5 NETHARLANDS 2905 2780 3922 1334 17,187

(644) (695) (883) (278) (3866)

Amount Rupees in crores (US $ in million)

SHARE OF TOP TEN INVESTING COUNTRIES
FDI EQUITY INFLOWS (APRIL’00 TO JULY’09)
 SECTORS ATTRACTING HIGHEST FDI EQUITY
INFLOWS

RANK SECTOR 2006 – 07 2007 – 08 2008 – 09 2009 – 10 CUMULATIVE

(APRIL - (APRIL - (APRIL - (APRIL – INFLOWS
MARCH) MARCH) MARCH) JULY ‘ 09) (APRIL’00 TO
JULY’09)
1 SERVICE SECTOR 21,047 26,589 28,411 10,432 94,885
(financial & non (4664) (6615) (6116) (2141) (21,390)
financial)
2 COMPUTER 11,786 5623 7329 1361 40,857
SOFTWARE & (2614) (1410) (1677) (280) (9234)
HARDWARE
3 TELECOMMUNICATI 2155 5103 11,727 4897 33,264
ON (478) (1261) (2558) (993) (7369)
(radio, paging, cellular
mobile, basic telephone
services)
4 HOUSING & REAL 2121 8749 12,621 6892 30,675
ESTATE (467) (2179) (2801) (1419) (6931)
5 CONSTRUCTION 4424 6989 8792 3781 25,958
ACTIVITIES (985) (1743) (2028) (777) (5968)
(including roads &
highways)
TOP TEN SECTORS ATTRACTING HIGHEST
FDI EQUITY INFLOWS (USD IN MILLION)
 GOVERNMENT’S INITIATIVES FOR FOREIGN
CAPITAL

• Foreign Investment Policy

• Facilitating foreign investment

 
• Number of policy changes reduced the discriminatory
bias against foreign firms
 WHY INDIA’S FALLING BEHIND IN
FOREIGN INVESTMENT?

• Needs to focus on the real barriers

• Infrastructural bottlenecks
• Case backlogs

• 'Bandwagon effect'
GOVERNMENT’S INITIATIVES FOR FOREIGN
CAPITAL

• Foreign Investment Policy

• Facilitating foreign investment

 
• No. of policy changes reduced the discriminatory
bias against foreign firms.
 WHY INDIA’S FALLING BEHIND IN
FOREIGN INVESTMENT?

• Needs to focus on the real barriers

• Case backlogs
 CONCLUSION

• Foreign capital has a key role in economic

development
• Economic reforms for more foreign investment
• Management of capital inflow is a complex process
• Sound macroeconomics policies and well
functioning add to the benefits foreign capital inflow
• Precious role of government in foreign investment
policy
 “FOREIGN INVESTMENT RESULTS FROM
GROWTH AND CONTRIBUTES TO GROWTH”
☺ REFERENCES
• business.mapsofindia.com
• mpra.ub.uni-muenchen
• finmin.nic.in
• www.rbi.org
• www.southasiaanalysis.org
• dipp.nic.in
• www.ems.bbk.ac.
• www.indianindustry.com/
• www.altiusdirectory.com/B
• www.indiajuris.com/
Thank You
 elements
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