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  • Fdi and Fii: Differences and Impact On Indian Economy

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    Shivam Gupta
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    This document discusses the differences between foreign direct investment (FDI) and foreign institutional investment (FII) and their impacts on the Indian economy. FDI involves controlling ownership of an entity in another country, while FII represents more liquid and potentially shorter-term investments like stocks and bonds without ownership control. FII can lead to currency appreciation, impact export competitiveness and stock markets, and cause inflation if large inflows increase money supply. FDI creates jobs, transfers technology, and allows Indian companies access to global markets, while also generating tax revenue for the government. The key differences are time period of investment, level of control, source of funds, entry route, and regulatory bodies.

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    Differences between FDI and FII and its effect on Indian economy.

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    FII and FDI

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    This document discusses the differences between foreign direct investment (FDI) and foreign institutional investment (FII) and their impacts on the Indian economy. FDI involves controlling ownership of an entity in another country, while FII represents more liquid and potentially shorter-term investments like stocks and bonds without ownership control. FII can lead to currency appreciation, impact export competitiveness and stock markets, and cause inflation if large inflows increase money supply. FDI creates jobs, transfers technology, and allows Indian companies access to global markets, while also generating tax revenue for the government. The key differences are time period of investment, level of control, source of funds, entry route, and regulatory bodies.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
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    12 views7 pages

    Fdi and Fii: Differences and Impact On Indian Economy

    Uploaded by

    Shivam Gupta
    This document discusses the differences between foreign direct investment (FDI) and foreign institutional investment (FII) and their impacts on the Indian economy. FDI involves controlling ownership of an entity in another country, while FII represents more liquid and potentially shorter-term investments like stocks and bonds without ownership control. FII can lead to currency appreciation, impact export competitiveness and stock markets, and cause inflation if large inflows increase money supply. FDI creates jobs, transfers technology, and allows Indian companies access to global markets, while also generating tax revenue for the government. The key differences are time period of investment, level of control, source of funds, entry route, and regulatory bodies.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 7

    FDI and FII

    Differences and Impact on Indian economy


    By:Shivam

    Definition
    FDI: FDI occurs when an entity or investor from one

    country (home country e.g. India) obtain or acquires the controlling interest in an entity in another country (host country e.g. USA) and then operates and manages the entity and its assets as part of the multinational business of the investing entity. FII: its category of investment instrument that are more easily traded , may be less permanent , and do not represent a controlling stake in an enterprise , these include investment via equity instrument ( stocks) or debt ( bonds) of a foreign enterprise which does not necessarily represents a long term interest.

    How FII impacts the economy


    Leads to appreciation of currency- . In 2008 our

    forex rate over the US dollar was USD = 39 INR because of FII inflow was more in Indian market. Export industry- . Our export industry will become uncompetitive due to appreciation of rupees. Stock market Inflation- the huge amount of FII fund flow creates the huge demand for Indian rupees. In that situation RBI print more money in the market. this situation could lead to excess liquidity therby leading to inflation. So theres a cap on FII.

    Capital formation- India is developing country and its

    domestic saving is low compared to developed countries. So here is need for FII inflow. Hot money

    Factors affecting FII

    Interest rate of the country


    Money supply and inflation rate Exchange rate BOP/ FD/ CAD Economic growth

    Impact of FDI on economy


    Creates employment opportunity for domestic country. Good relation between two countries

    Modern technology
    Indian company get chance to work with world market

    Leader Company Government earns in the form of licenses fees, registration fees, taxes which is spend for public expenditure.

    Points of difference
    Time Period Controlling interest Supplier of funds- MNC for FII and investors, mutual

    fund companies, portfolio mgmt and corporate for FII Route of incoming money- FDI comes as JV or subsidiary company and FII through stoock market. Regulatory body- SEBI for FII and ( RBI+MoF+FIPB) for FDI Purpose- diversification + expansion for FDI and fains on investment for FII

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