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 year: April - March)

Financial YEAR

(APRIL - MARCH)

IN RUPEES CRORES

IN US $ MILLION

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

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

• 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

FOREIGN DIRECT INVESTMENT

SHARE OF TOP INVESTING COUNTRIES FDI EQUITY INFLOWS (FINANCIAL YEAR)

RANK COUNTRY 2006 – 07 (APRIL - MARCH)

2007 – 08 (APRIL - MARCH)

2008 – 09 (APRIL - MARCH)

2009 – 10 (APRIL –

JULY ‘ 09)

CUMULATIVE INFLOWS

(APRIL’00 TO JULY’09)

1 MAURITIUS 28,759(6363)

44,483(11,096)

50,794(11,208)

22,257(4555)

1,83,529(41,419)

2 SINGAPORE 2662(578)

12,319(3073)

15,727(3454)

3692(759)

37,544(7221)

3 U.S.A 3861(856)

4377(1089)

8002(1802)

4261(886)

32,220(7221)

4 U.K 8389(1878)

4690(1176)

3840(864)

542(112)

23,446(5338)

5 NETHARLANDS 2905(644)

2780(695)

3922(883)

1334(278)

17,187(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 (APRIL - MARCH)

2007 – 08 (APRIL - MARCH)

2008 – 09 (APRIL - MARCH)

2009 – 10 (APRIL –

JULY ‘ 09)

CUMULATIVE INFLOWS

(APRIL’00 TO JULY’09)

1 SERVICE SECTOR (financial & non

financial)

21,047(4664)

26,589(6615)

28,411(6116)

10,432(2141)

94,885(21,390)

2 COMPUTER SOFTWARE & HARDWARE

11,786(2614)

5623(1410)

7329(1677)

1361(280)

40,857(9234)

3 TELECOMMUNICATION

(radio, paging, cellular mobile, basic telephone

services)

2155(478)

5103(1261)

11,727(2558)

4897(993)

33,264(7369)

4 HOUSING & REAL ESTATE

2121(467)

8749(2179)

12,621(2801)

6892(1419)

30,675(6931)

5 CONSTRUCTION ACTIVITIES

(including roads & highways)

4424(985)

6989(1743)

8792(2028)

3781(777)

25,958(5968)

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 INFOREIGN 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 INFOREIGN 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

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