Foreign Direct

Investment
Foreign Capital

Foreign capital refers to the investment of capital by a

foreign govt. institution and private individual,
international organization in a country.
 Foreign Capital

Commercial Foreign
Foreign Aid Borrowings Investment

Grants (No Loans given

Repayment NRI Foreign
Foreign Direct Portfolio
by foreign Investment
Obligation) Bank Banks
Investment
govts.,
Deposit
World Bank,
IMF
Foreign Aid
Foreign aid refers to concessional loans and grants
received from abroad.
The rate of interest on these aids is below the market
rate of interest.
The period of repayment is usually long.
Foreign aids are given by foreign govt., IMF and World
Bank
Commercial Borrowings

Commercial Borrowings refers to those loans which

are borrowed from foreign banks at market rate of
interest.
Loan from Foreign Banks
Deposits of NRIs
 Foreign Investment
Foreign Investment refers to investment by foreign
investors in shares, debentures, bonds of Indian
companies.
Foreign Investment includes:-
 Foreign Direct Investment
 Portfolio Investment
Foreign Portfolio Investment
Under Foreign Portfolio Investment, foreign
companies/foreign institutional investors buy equities,
bonds, or other securities abroad.
In FPI, the investor invests his money to get a return
on it, but has no much control over the use of the
capital.

7
Foreign Direct Investment
Foreign Direct Investment in a foreign country where
the investors have control over the investment.
FDI mainly includes:-
 Collaboration between Indian and Foreign private
companies
 Collaboration between Indian Govt. and foreign private
companies.
 Collaborations between Indian Government and Foreign
Government.
FDI can be done through:-

Licensing
Franchisee
Joint Venture
Technical collaborations
Management contracts
Mergers & acquisition
 Objectives of FDI
To develop basic industries in India
To develop infrastructure
To remove the shortage of foreign exchange, because
of deficit balance of payments.
To improve managerial and entrepreneurial ability
To improve Technology
To increase employment opportunities
Top Investing countries of FDI
Country Inflows Inflows (2009- Inflows (2010-
(2008-09) Cr. 10) Cr. 11) Cr. (April-
July)

Mauritius 15794 49633 11541

Singapore 15727 11295 4416
U.S.A. 8002 9230 2713
U.K. 3840 3094 1101
Netherlands 3922 4283 2091
Top Sectors Attracting Highest FDI
Sectors 2008-09 2009-10 2010-11
Service Sector 28411 20958 4948
Computer Software 7329 4350 1882
& Hardware
Telecommunicatio 11727 12338 4692
ns
Housing & Real 12621 13586 1902
Estate
Construction 8792 13544 1183
Activities
FDI Policy for Service Sector…. Largely permitted

• FM Broadcasting (20%)
• Unlinking News and CATV Channel
Up to 26% Print Media – News Papers & Periodical
• Insurance

• Broadcasting - Cable Network, DTH,

Setting up hardware
Upto 49% • Stock Exchanges
• Air Transport Services
FDI Policy for Service Sector…. Largely permitted
 Telecommunication (Beyond 49%)
Upto 74%  Private sector banks

• Development of existing airports (Beyond 74%)

Upto 100% • Publishing scientific magazines
• Courier services
FDI Policy for Agriculture Sector..Largely Restricted

 Floriculture, Horticulture, Development of seeds, Animal

husbandry, Pisciculture, Cultivation of vegetables,
Mushrooms under controlled condition allowed 100%.

 Tea plantation – 100% allowed

 Other activities not allowed.

Thank You