Professional Documents
Culture Documents
Agenda
Structure of Foreign Investments
Foreign Direct Investments Foreign Institutional Investments
Govt. Route
NRIs,
FIIS
NRIs,
PIO
NRIs,
Automatic Route
General rule Inform RBI within 30 days of inflow/issue of shares Pricing: FEMA Regulations Unlisted CCI Listed SEBI Cap of Rs. 600 Crore
4
# Revenue for the government # Employment generation # Results in creation of better goods and services at lower prices for the consumers # Encourages local enterprises to setup supporting industries # Advances technology and processes and increases competition # Greater foothold in the world economy
FDI was allowed selectively up to 40% under FERA This period was dominated by the Congress party
1991
35 high priority industry groups were placed on the Automatic Route for FDI up to 51% Minority Congress government: Initiated economic reforms in a big way
1997
Automatic Route expanded to 111 high priority industry groups up to 100%/ 74%/ 51%/50% United Front Government: Inclusive of left parties, was perceived as traditionally opposed to FDI, but continued with the reforms All sectors placed on the Automatic Route for FDI except for a small negative list BJP coalition government:(coalition of Left and Right wing parties) was traditionally seen as opposed to FDI, but continued with economic reforms.
2000
Many new sectors opened to FDI; viz., insurance (26%), integrated townships (100%), mass rapid transit systems (100%), defense industry (26%), tea plantations (100%), print media (26%). Post 2000
Rank 1 2 3 4 5
Number of Projects 2010 1522 1344 941 774 366 2011 1707 1409 1014 932 507
STATEMENT ON COUNTRY-WISE TOP 20 FDI INFLOWS FROM APRIL, 2000 TO FEBRUARY, 2012
Lottery Business
Retail Trading (except single brand product retailing) Agricultural (excluding Floriculture, Horticulture, agro and allied sectors etc) and Plantations activities (other than Tea Plantations) Housing and Real Estate business (except development of townships, construction of residential/commercial premises etc)
Nidhi Company
Foreign company brings capital Foreign company buys equity in into a company or economy to any company through stock set up a production or some market. other facility. FDI gives some Control in operation of the foreign company FDI is involved in direct production activity and is long term in nature FII does not give any control in operation of the foreign company FII is short term investment mostly in financial market
December 2003 Single approval process by SEBI February 2000 Foreign firms and HNIs permitted to invest as subaccounts of FIIs September 1992 FII in primary and secondary market securities and mutual funds
March 2011 - Limit of corporate bonds issues by Infrastructure sector increased to $25b
The relaxation of investment limits for FIIs The relaxation of the eligibility conditions The liberalization of the investment instruments accessible to FIIs
including shares, debentures, and warrants of companies, unlisted, listed, or to be listed on a recognized stock exchange in India Units of schemes floated by domestic mutual funds including the Unit Trust of India, whether listed or not listed on a recognized stock exchange, or units of schemes floated by a Collective Investment Scheme Dated government securities Derivatives traded on a recognized stock exchange Commercial papers Security receipts Indian Depository Receipts
Attractive Markets
Finance
FMCG Information Technology Infrastructure Manufacturing Media & Entertainment Petrochemicals Pharmaceuticals Services Telecommunication Miscellaneous Total stake of FIIs in all the Sectors
18.18
11.91 14.53 7.15 9.57 15.20 5.83 11.17 13.09 11.17 8.19 10.78
17.44
14.07 16.00 8.86 9.46 11.71 4.73 10.69 10.70 9.12 9.30 10.62
13.01
12.72 12.44 7.31 7.28 11.42 4.77 7.88 8.39 6.85 8.39 8.40
16.53
14.09 11.68 8.90 8.79 7.06 6.08 8.78 8.05 8.64 8.10 9.58
23.35
16.34 21.16 7.87 9.41 10.97 6.52 10.19 7.41 8.44 13.65 10.32
19.20
17.00 17.07 7.50 9.60 11.63 6.49 10.13 9.50 8.46 13.37 10.45
Monitoring by RBI
FII - Purchase of Equity Shares Aggregate Yes purchase of Equity Shares<2% below overall limit Ceilings: 24% Paid up capitalIndian Company 20% for Paid up capital Public Sector Banks 10% for NRIs/PIOs Stop Equity Share Purchase No No Cautio n Mail to Banks RBI Approval Yes
Advantages
Increase in Forex Reserves Increase in Domestic Savings and Investments Large Availability of Capital
Disadvantages
Reduces flexibility of Policy makers Problem of inflation Problems for small investors Hot Money which can not be used for long term