Role of FDI & FII in Indias

development and its impact

on Exchange Rate
Arijit Ganguly

 Economic Liberalization

Contents

What is FDI
Govt. of Indias policies on FDI
FDI pattern in India
The Growth Story
Advantages & Disadvantages of FDI
What is FII
Govt. of Indias policies on FII
FII pattern in India
Impact on Exchange Rate

Economic Liberalization
1991
High Fiscal Deficit, External
Borrowings, Rising Debt
Rising Inflation & Inadequate
Exchange Rate
51% of foreign investment
NRIs were allowed to invest 100%
FIPB was established

What is FDI
As per Ministry of Commerce and Industry
Government of India:
FDI means investment by non-resident
entity/person resident outside India in the capital of
an Indian company under Schedule 1 of Foreign
Exchange Management

Govt. of Indias
policies on FDI
Eligible investors
Eligible Investee Entities
Instruments of Investments
Entry Routes for Investment
Caps on Investment
Entry Caps on Investment

FDI Trend in India

The Growth
Story
Financial
Stability and Economic
Growth

Employment
Revenues
Infrastructure
Technology and Innovation

Advantages and Disadvantages of FDI

Advantages

Disadvantages

Equipment & Technology

Crowding of local industry

Financial Resources for

Expansion

Loss of Control

Employment Generation
Contribution to Exports Growth
Consumer Welfare

Conflict of codes/laws
Possible exploitation of
resources
Effect on local sentiments and
culture

What is FII
As per Ministry of Commerce and Industry
Government of India:
Foreign Institutional Investor(FII) means an entity
established or incorporated outside India which
proposes to make investment in India and which is
registered as a FII in accordance with the Securities
and Exchange Board of India (SEBI) (Foreign
Institutional Investor) Regulations 1995.

Govt. of Indias
policies on FII
Eligible investors
Eligible Investee Entities
Instruments of Investments
Entry Routes for Investment
Caps on Investment
Entry Caps on Investment

Impact of FII on Exchange Rate

Advantages and Disadvantages of FII

Advantages

Disadvantages

Enhanced flow of Equity Capital

Problems of Inflation

Managing uncertainty, Risk

control

Problems for small investor

Financial Innovation
Improving Capital Market
Efficiency of Financial Market

Adverse impacts on Exports

Hot Money

FDI or FII for India

FDI usually is associated with export growth.
FDI generates employment
FDI permanent in nature
FII chases the stock market
Once this money leaves, it leaves ruined economy and
ruined lives behind.
Economic crisis of 2008
FII to be allowed with strict regulations

Thank You

References
http://dipp.gov.in/English/Policies/FDI_Circular_2016.pdf
http://www.livemint.com/Money/BrUlS1waAYxSgQ9aBxUFZM/Net-FII-inflows-set-to-hit-a-recordhigh-in-FY15.html
http://www.mbaknol.com/investment-management/advantages-and-disadvantages-of-fii-flowsinto-a-country/
http://www.psalegal.com/upload/publication/assocFile/ENewslineAugust2014.pdf
http://www.sebi.gov.in/
http://x-rates.com
http://www.fps.ndsl.co.in