FDI and FII in India
A
TERM PAPER
ON
FDI AND FII IN INDIA
SUBMITTED TO: DR. SAMPADA KAPSE
SUBMITTED BY: LEENA KANJANI (08080)
SULABH MAHETA (08084)
ANITA PARYANI (08096)
AMIN PATTANI (08100)
MEHUL RAKHOLIYA (08101)
KRISHNA VYAS (08118)
INTRODUCTION
Foreign investment refers to investments made by the residents of a country in the financial assets and production processes of another country. The effect of foreign investment, however, varies from country to country. It can affect the factor productivity of the recipient country and can also affect the balance of payments. Foreign investment provides a channel through which countries can gain access to foreign capital. It can come in two forms: FDI and foreign institutional investment (FII). Foreign direct investment involves in direct production activities and is also of a medium- to long-term nature. But foreign institutional investment is a short-term investment, mostly in the financial markets. FII, given its short-term nature, can have bidirectional causation with the returns of other domestic financial markets such as money markets, stock markets, and foreign exchange markets. Hence, understanding the determinants of FII is very important for any emerging economy as FII exerts a larger impact on the domestic financial markets in the short run and a real impact in the long run. India, being a capital scarce country, has taken many measures to attract foreign investment since the beginning of reforms in 1991.
India is the second largest country in the world, with a population of over 1 billion people. As a developing country, India’s economy is characterized by wage rates that are significantly lower than those in most developed countries. These two traits combine to make India a natural destination for FDI and foreign institutional investment (FII). Until recently, however, India has attracted only a small share of global FDI and FII primarily due to government restrictions on foreign involvement in
TERM PAPER
ON
FDI AND FII IN INDIA
SUBMITTED TO: DR. SAMPADA KAPSE
SUBMITTED BY: LEENA KANJANI (08080)
SULABH MAHETA (08084)
ANITA PARYANI (08096)
AMIN PATTANI (08100)
MEHUL RAKHOLIYA (08101)
KRISHNA VYAS (08118)
INTRODUCTION
Foreign investment refers to investments made by the residents of a country in the financial assets and production processes of another country. The effect of foreign investment, however, varies from country to country. It can affect the factor productivity of the recipient country and can also affect the balance of payments. Foreign investment provides a channel through which countries can gain access to foreign capital. It can come in two forms: FDI and foreign institutional investment (FII). Foreign direct investment involves in direct production activities and is also of a medium- to long-term nature. But foreign institutional investment is a short-term investment, mostly in the financial markets. FII, given its short-term nature, can have bidirectional causation with the returns of other domestic financial markets such as money markets, stock markets, and foreign exchange markets. Hence, understanding the determinants of FII is very important for any emerging economy as FII exerts a larger impact on the domestic financial markets in the short run and a real impact in the long run. India, being a capital scarce country, has taken many measures to attract foreign investment since the beginning of reforms in 1991.
India is the second largest country in the world, with a population of over 1 billion people. As a developing country, India’s economy is characterized by wage rates that are significantly lower than those in most developed countries. These two traits combine to make India a natural destination for FDI and foreign institutional investment (FII). Until recently, however, India has attracted only a small share of global FDI and FII primarily due to government restrictions on foreign involvement in
Bibliography: Sites http://dipp.nic.in www.bseindia.com www.financeexpress.com www.tradechakra.com www.madaan.com www.indianembassy.com www.sebi.gov.in