FDI & FII in
INDIA & CHINA
Presented By:-
Ravi Agarwal
Ram Dayal
Ashish Soni
Nitin Purohit
Anshul Modi
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 – Entry Routes
Investing in India
Prior
Prior
PriorPermission
Permission
Permission
Automatic
Automatic Route
Automatic Route
Route (FIPB)
(FIPB)
(FIPB)
General
General Rule
General Rule
Rule By
By Exception
Exception
No
No prior
No prior permission
prior permission
permission Prior
Prior Government
Government
required
required
required Approval
Approval needed.
needed.
Inform
Inform Reserve
Inform Reserve Bank
Reserve Bank
Bank Decision
Decision generally
generally
within
within 30
within 30days
30 daysof
days of
of within
within 4-6
4-6 weeks
weeks
inflow/issue
inflow/issue of
inflow/issue of shares
of shares
shares
Advantages of FDI
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
Limitations and Dangers of FDI
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
FDI (2001-07) Amount US $ Billion
Year China India
2001 46.9 4.02
2002 15.1 6.13
2003 53.5 5.03
2004 60.6 4.32
2005 60.3 6.05
2006 63 8.961
2007* 61.7 17.59
*Jan.- Nov.
Source- 1. [Link]
2. [Link]
Cont…
FDI of China v/s India
70
60
US $ Billion
50
40 China
30 India
20
10
0
2001 2002 2003 2004 2005 2006 2007*
Year
STATEMENT ON RBI’S REGIONAL OFFICE-WISE (WITH STATE COVERED)
FDI EQUITY INFLOWS (from April 2000 to November 2007)
Rank City Percentage
1 MUMBAI 25.14%
2 NEW DELHI 22.68%
3 BANGALORE 7.03%
4 CHENNAI 6.69%
5 HYDERABAD 4.12%
6 AHMEDABAD 2.84%
7 KOLKATA 1.63%
8 CHANDIGARH 0.91%
9 PANAJI 0.43%
10 KOCHI 0.24%
11 BHOPAL 0.23%
12 BHUBANESHWAR 0.21%
13 JAIPUR 0.15%
14 KANPUR 0.04%
15 GUWAHATI 0.03%
16 PATNA 0.00%
17 RBI’S REGIONS NOT INDICATED 27.63%
GRAND TOTAL 49070.1 US $
(from April 2000 to November 2007)88 (in million)
Source:-RBI's - Region-wise inflows, furni
shed by RBI, Mumbai
Cont…
INFLOW IN CITY
RBI’S REGIONS NOT INDICATED 27.63%
0.00%
GUWAHATI 0.03%
0.04%
JAIPUR 0.15%
0.21%
BHOPAL 0.23%
0.24%
PANAJI 0.43% Series1
0.91%
KOLKATA 1.63%
2.84%
HYDERABAD 4.12%
6.69%
BANGALORE 7.03%
22.68%
MUMBAI 25.14%
0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00%
Main Sectors with FDI Equity/Route Limit in
India (Year 2007)
FDI equity limit-Automatic FDI requiring prior
route approval
Insurance – 26% Defense production – 26%
Domestic airlines – 49% FM Broadcasting - 20%
News and current affairs-
Telecom services- Foreign 26%
equity 74% Broadcasting- cable, up-
Private sector banks- 74% linking – 49%
Trading- wholesale cash
Mining of diamonds and and carry, export trading,
precious stones- 74% etc., 100%
Exploration and mining of Tea plantation – 100%
coal and lignite for captive
Development of airports-
100%
consumption- 74% Courier services- 100%
100% FDI permitted in India
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
Sectors attracting highest FDI inflow
in India % of
Sectors Total Inflow
Service Sector 19.86%
Computer Software and hardware 15.98%
Telecommunication 8.11%
Construction Activity 5.19%
Automobile Industry 4.34%
Real Estate 3.93%
Power 3.09%
Chemical (other than Fertilizer) 3.09%
Metallurgical Industries 2.37%
Sector attracting higest FDI inflow
25.00%
20.00%
15.00%
Series1
10.00%
5.00%
T elec om m unic ati
Pharm ac eutic al
C hem ic al (other
0.00%
S erv ic e Sec tor
M etallurg ic al
C ons truc tion
R eal Es tate
than F ertiliz er)
Auto m obile
Softw are and
Pow er
Indus tries
C om puter
Indus try
ha rdw are
Ac tiv ity
D rugs &
on
Sorce:- Department of industrial Policy &
Promotion Ministry of Commerce and Indu
stry
STATEMENT ON COUNTRY-WISE FDI INFLOWS
in India From APRIL 2000 to NOVEMBER 2007
(Amount in million)
Name of the Amount of Foreign Direct
Investment Inflows %age
S. No. TOP 10
to total
Countries (In Rupees) (In US$)
1 Mauritius 851,775.00 19,305.54 44.24
2 U.S.A. 180,396.89 4,049.80 9.37
3 U.K. 153,625.93 3,431.69 7.98
4 Netherlands 111,774.98 2,518.67 5.81
5 Singapore 97,424.02 2,264.90 5.06
6 Japan 85,779.23 1,935.32 4.46
7 Germany 58,132.98 1,311.61 3.02
8 France 31,082.06 691.66 1.61
9 Switzerland 27,877.03 632.49 1.45
10 Cyprus 27,479.65 652.93 1.43
Sorce:- Department of industrial Policy &
Promotion Ministry of Commerce and Indu
stry
Cont…
Country wise FDI inflows from April 2000 to Novemer 2007
50
40
Percentage
30
20
10
0
Country
Investment in India & China
Why ?
Factors affecting FDI
Profitability: Attract where return on
investment is higher
Costs of production: Encouraged by lower
costs of production like raw materials,
labour
Economic Conditions: Market potential,
infrastructure, size of population, income
level etc
Cont…
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
Factors attracting to FDI
India China
1990-99 2000-07 1990-99 2000-07
GDP GrowthRate 6% 8.3% 10.60% 9.60%
Sector Agriculture 3% 5.80% 8% 6.90%
Wise Manufacturing 7% 10.10% 12.70% 11.10%
Growth
Service 8.10% 10.90% 10.20% 10%
14%
12%
10%
8%
6%
4%
2%
0%
1990-99 2000-06 1990-99 2000-06
India China
Source:- Outlook Survey 2007
Investment in infrastructure project
with private participation
In $ million
India China
1990-99 2000-06 1990-99 2000-06
Telecommunication 7,457 20,642 5,970 8,548
Main Sectors
Inrastructure
Energy 7,183 8,882 17,167 6,366
in
Transport 1,275 3941 10,852 7,948
Water & Senitation 0.3 2.1 986 3,131
Source:- Outlook Survey 2007
Goods & Services
(average annual % Growth)
India China
1990-99 2000-07 1990-99 2000-07
Exports 11 15 13 24.8
Patterns
Trade
Imports 12.8 18.4 14.3 20.8
Source:- Outlook Survey 2007
Is the difference of FDI’s of both
countries seems to be very high ?
Is India’s FDI is much lesser than that
of China’s ?
By seeing the following definitions,
gap of FDI’s of both countries
seems not to be very large
Round-tripping
Reinvested earnings by foreign
companies
Proceeds of foreign equity listings
and foreign subordinated loans to
domestic subsidiaries as part of
inter-company (short and long-term)
debt transactions
Cont…
Overseas commercial borrowings
(financial leasing, trade credits,
grants, bonds) by foreign direct
investors in foreign invested firms
Example
• Citigroup has reinvested significant
earnings in its Indian business over a
sustained period - funds that are not
captured in the FDI reporting. Citibank unit
in India has retained earnings of about $350
million but this was not captured in FDI
reporting. The recent reinvestment of more
than $ 400 million in India by Citibank alone
was also not captured in FDI reporting.
• Similarly, the purchase of around $300
million in non-equity form of direct
investment capital by Fiat to recompense
the losses sustained by its Indian subsidiary
was also not reflected in Indian FDI figures.
FII
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
The registration process for FII
Source:- SEBI (FII) Regulations, 1995
LIST OF COMPANIES
List of companies in which FII investment is
allowed upto 30% of their paid up capital
under PIS
1 Asian Paints (India) Ltd
2 Capital Trust Ltd
3 Container Corporation of India
4 Divi’s Laboratories Ltd
5 Ferro Alloys Corporation Ltd
6 Garware Polyester Ltd
7 GIVO Ltd (formerly KB & T Ltd)
8 Infotech Enterprises Ltd
9 Mahindra Gesco Developers Ltd
10 Orchid Chemicals and Pharmaceuticals Ltd
List of companies in which FII investment is allowed upto
40% of their paid up capital under PIS
1 Adlabs Films Ltd.
2 Aftek Infosys Ltd.
3 Balaji Telefilms Ltd.
4 Bharat Forge Ltd
5 Burr Brown (India )Ltd
6 Cipla Ltd.
7 Elbee Services Ltd
8 Glenmark Pharmaceuticals Ltd
9 Gujarat Ambuja Cements Ltd
10 HEG Ltd
List of companies in which FII investment is allowed
upto 49% of their paid up capital under PIS
1 Alok Industries
2 Auribindo Pharma Ltd.
3 Arvind Mills Ltd
4 Bajaj Hindustan Ltd
5 Balakrishna Industries Ltd
6 Blue Dart Express Ltd
7 Core Projects & Tech Ltd
8 CRISIL
9 Digital GlobalSoft Ltd.
10 Dr. Reddy’s Laboratories Ltd.
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%)
FIIs in India
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.
Cont…
FIIs*
(US $ Million)
12000
10000
8000
6000
US 4$ Million
FIIs*
4000 (US $ Million)
2000
0
-2000 1995-96 1996-97 1997-98 1998-99 1999- 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-
2000 07(P)
Year
Thanks
