FDI & FII in

INDIA & CHINA

Presented By:-
Ravi Agarwal
Ram Dayal
Ashish Soni
Nitin Purohit
Anshul Modi
Portfolio investment
Investment that does not involve obtaining a degree of control
in a company

Foreign Direct Investment

Purchase of physical assets or a significant amount of the ownership
(stock) of a company in another country to gain a measure of
management control
Investing in India – Entry Routes

Investing in India

Prior
Prior
PriorPermission
Permission
Permission
Automatic
Automatic Route
Automatic Route
Route (FIPB)
(FIPB)
(FIPB)

General
General Rule
General Rule
Rule By
By Exception
Exception
No
No prior
No prior permission
prior permission
permission Prior
Prior Government
Government
required
required
required Approval
Approval needed.
needed.
Inform
Inform Reserve
Inform Reserve Bank
Reserve Bank
Bank Decision
Decision generally
generally
within
within 30
within 30days
30 daysof
days of
of within
within 4-6
4-6 weeks
weeks
inflow/issue
inflow/issue of
inflow/issue of shares
of shares
shares
 Advantages of FDI
 Increase investment level and thereby
income & employment
 Increase tax revenue of government
 Facilitates transfer of technology
 Encourage managerial revolution through
professional management
 Increase exports and reduce import
requirements
 Increase competition and break domestic
monopolies
 Improves quality and reduces cost of inputs
 Limitations and Dangers of FDI
 Flow to high profit areas rather than main
concern areas
 Through their power and flexibility, MNC
can undermine economic autonomy and
control
 Sometimes interferes in the national politics
 Sometimes engage in unfair and unethical
trade practices
 Sometimes result in minimizing /
eliminating competition and create
monopolies or oligopolistic structures
FDI (2001-07) Amount US $ Billion

Year China India

2001 46.9 4.02

2002 15.1 6.13

2003 53.5 5.03

2004 60.6 4.32

2005 60.3 6.05

2006 63 8.961

2007* 61.7 17.59

*Jan.- Nov.
Source- 1. http://siteresources.worldbank.org/CHINAEXTN/Resources/chinaei.pdf
2. www.rbi.org.in
 Cont…

FDI of China v/s India

70
60
US $ Billion

50
40 China
30 India
20
10
0
2001 2002 2003 2004 2005 2006 2007*
Year
STATEMENT ON RBI’S REGIONAL OFFICE-WISE (WITH STATE COVERED)
FDI EQUITY INFLOWS (from April 2000 to November 2007)

Rank City Percentage

1 MUMBAI 25.14%
2 NEW DELHI 22.68%
3 BANGALORE 7.03%
4 CHENNAI 6.69%
5 HYDERABAD 4.12%
6 AHMEDABAD 2.84%
7 KOLKATA 1.63%
8 CHANDIGARH 0.91%
9 PANAJI 0.43%
10 KOCHI 0.24%
11 BHOPAL 0.23%
12 BHUBANESHWAR 0.21%
13 JAIPUR 0.15%
14 KANPUR 0.04%
15 GUWAHATI 0.03%
16 PATNA 0.00%
17 RBI’S REGIONS NOT INDICATED 27.63%
GRAND TOTAL 49070.1 US $
(from April 2000 to November 2007)88 (in million)

Source:-RBI's - Region-wise inflows, furni

shed by RBI, Mumbai
Cont…
INFLOW IN CITY

RBI’S REGIONS NOT INDICATED 27.63%

0.00%
GUWAHATI 0.03%
0.04%
JAIPUR 0.15%
0.21%
BHOPAL 0.23%
0.24%
PANAJI 0.43% Series1
0.91%
KOLKATA 1.63%
2.84%
HYDERABAD 4.12%
6.69%
BANGALORE 7.03%
22.68%
MUMBAI 25.14%

0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00%

Main Sectors with FDI Equity/Route Limit in
India (Year 2007)
FDI equity limit-Automatic FDI requiring prior
route approval
 Insurance – 26%  Defense production – 26%
 Domestic airlines – 49%  FM Broadcasting - 20%
 News and current affairs-
 Telecom services- Foreign 26%
equity 74%  Broadcasting- cable, up-
 Private sector banks- 74% linking – 49%
 Trading- wholesale cash
 Mining of diamonds and and carry, export trading,
precious stones- 74% etc., 100%
 Exploration and mining of  Tea plantation – 100%
coal and lignite for captive
 Development of airports-
100%
consumption- 74%  Courier services- 100%
 100% FDI permitted in India

 Engineering & Manufacturing sectors

 Roads & Highways, Ports and Harbors

 Industrial model towns/industrial parks

 Hotels & Tourism

 Pollution Control and Management

 Advertising & Film industry

 Power generation (hydro-electric, coal/lignite, oil or gas based)

 Information Technology including E-Commerce

 Sectors attracting highest FDI inflow
in India % of
Sectors Total Inflow

Service Sector 19.86%

Computer Software and hardware 15.98%
Telecommunication 8.11%
Construction Activity 5.19%
Automobile Industry 4.34%
Real Estate 3.93%
Power 3.09%
Chemical (other than Fertilizer) 3.09%
Metallurgical Industries 2.37%
Sector attracting higest FDI inflow

25.00%
20.00%
15.00%
Series1
10.00%
5.00%
T elec om m unic ati

Pharm ac eutic al
C hem ic al (other
0.00%
S erv ic e Sec tor

M etallurg ic al
C ons truc tion

R eal Es tate

than F ertiliz er)

Auto m obile
Softw are and

Pow er

Indus tries
C om puter

Indus try
ha rdw are

Ac tiv ity

D rugs &
on

Sorce:- Department of industrial Policy &

Promotion Ministry of Commerce and Indu
stry
 STATEMENT ON COUNTRY-WISE FDI INFLOWS
in India From APRIL 2000 to NOVEMBER 2007

(Amount in million)

Name of the Amount of Foreign Direct

Investment Inflows %age
S. No. TOP 10
to total
Countries (In Rupees) (In US$)
1 Mauritius 851,775.00 19,305.54 44.24
2 U.S.A. 180,396.89 4,049.80 9.37
3 U.K. 153,625.93 3,431.69 7.98
4 Netherlands 111,774.98 2,518.67 5.81
5 Singapore 97,424.02 2,264.90 5.06
6 Japan 85,779.23 1,935.32 4.46
7 Germany 58,132.98 1,311.61 3.02
8 France 31,082.06 691.66 1.61
9 Switzerland 27,877.03 632.49 1.45

10 Cyprus 27,479.65 652.93 1.43

Sorce:- Department of industrial Policy &

Promotion Ministry of Commerce and Indu
stry
Cont…

Country wise FDI inflows from April 2000 to Novemer 2007

50
40
Percentage

30
20
10
0

Country
Investment in India & China

Why ?
 Factors affecting FDI

 Profitability: Attract where return on

investment is higher
 Costs of production: Encouraged by lower
costs of production like raw materials,
labour
 Economic Conditions: Market potential,
infrastructure, size of population, income
level etc
 Cont…
 Government policies: Policies like
foreign investment, foreign
collaboration, remittances, profits,
taxation, foreign exchange control,
tariffs etc
 Political factors: Political stability,
nature of important political parties
and relations with other countries
 Factors attracting to FDI
India China

  1990-99 2000-07 1990-99 2000-07

GDP GrowthRate 6% 8.3% 10.60% 9.60%

Sector Agriculture 3% 5.80% 8% 6.90%

Wise Manufacturing 7% 10.10% 12.70% 11.10%
Growth
Service 8.10% 10.90% 10.20% 10%

14%
12%
10%
8%
6%
4%
2%
0%
1990-99 2000-06 1990-99 2000-06

India China

Source:- Outlook Survey 2007

 Investment in infrastructure project
with private participation
In $ million

India China
1990-99 2000-06 1990-99 2000-06
Telecommunication 7,457 20,642 5,970 8,548
Main Sectors

Inrastructure

Energy 7,183 8,882 17,167 6,366

in

Transport 1,275 3941 10,852 7,948

Water & Senitation 0.3 2.1 986 3,131

Source:- Outlook Survey 2007

 Goods & Services
(average annual % Growth)

India China
1990-99 2000-07 1990-99 2000-07
Exports 11 15 13 24.8
Patterns
Trade

Imports 12.8 18.4 14.3 20.8

Source:- Outlook Survey 2007

Is the difference of FDI’s of both
countries seems to be very high ?

Is India’s FDI is much lesser than that

of China’s ?
By seeing the following definitions,
gap of FDI’s of both countries
seems not to be very large
 Round-tripping
 Reinvested earnings by foreign
companies
 Proceeds of foreign equity listings
and foreign subordinated loans to
domestic subsidiaries as part of
inter-company (short and long-term)
debt transactions
 Cont…

 Overseas commercial borrowings

(financial leasing, trade credits,
grants, bonds) by foreign direct
investors in foreign invested firms
 Example
• Citigroup has reinvested significant
earnings in its Indian business over a
sustained period - funds that are not
captured in the FDI reporting. Citibank unit
in India has retained earnings of about $350
million but this was not captured in FDI
reporting. The recent reinvestment of more
than $ 400 million in India by Citibank alone
was also not captured in FDI reporting.
• Similarly, the purchase of around $300
million in non-equity form of direct
investment capital by Fiat to recompense
the losses sustained by its Indian subsidiary
was also not reflected in Indian FDI figures.
FII
 Foreign Institutional Investors (FIIs) are
allowed to invest in the primary and
secondary capital markets in India
through the portfolio investment scheme
(PIS). Under this scheme, FIIs/NRIs can
acquire shares/debentures of Indian
companies through the stock exchanges
in India
 The registration process for FII

Source:- SEBI (FII) Regulations, 1995

 LIST OF COMPANIES
 List of companies in which FII investment is
allowed upto 30% of their paid up capital
under PIS

1 Asian Paints (India) Ltd

2 Capital Trust Ltd
3 Container Corporation of India
4 Divi’s Laboratories Ltd
5 Ferro Alloys Corporation Ltd
6 Garware Polyester Ltd
7 GIVO Ltd (formerly KB & T Ltd)
8 Infotech Enterprises Ltd
9 Mahindra Gesco Developers Ltd
10 Orchid Chemicals and Pharmaceuticals Ltd
List of companies in which FII investment is allowed upto
40% of their paid up capital under PIS
1 Adlabs Films Ltd.

2 Aftek Infosys Ltd.

3 Balaji Telefilms Ltd.

4 Bharat Forge Ltd

5 Burr Brown (India )Ltd

6 Cipla Ltd.

7 Elbee Services Ltd

8 Glenmark Pharmaceuticals Ltd

9 Gujarat Ambuja Cements Ltd

10 HEG Ltd
List of companies in which FII investment is allowed
upto 49% of their paid up capital under PIS
1 Alok Industries

2 Auribindo Pharma Ltd.

3 Arvind Mills Ltd

4 Bajaj Hindustan Ltd

5 Balakrishna Industries Ltd

6 Blue Dart Express Ltd

7 Core Projects & Tech Ltd

8 CRISIL

9 Digital GlobalSoft Ltd.

10 Dr. Reddy’s Laboratories Ltd.

List of companies in which FII investment is allowed
upto limits fixed by companies as indicated against their
names
1 Amtek Auto Ltd (74%)

2 Advanta India Limited 49%

3 Amtek India Ltd (74%)

4 Ahmednagar Forgings Ltd (74%)

5 Anant Raj Industries Ltd. (40%)

6 ANG Auto Ltd (49%)

7 Apollo Hospitals (74%)

8 Aptech Ltd (74%)

9 Arshiya International Limited (49%)

10 Bombay Rayon Fashions Ltd (40%)

 FIIs in India

Foreign Institutional Investors(FIIs) in India

Year 1995-96 1996-97 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07(P)
FIIs*
2009 1926 979 -390 2,135 1847 1505 377 10,918 8,686 9,926 3,225
(US $ Milloin)

*Represents inflow of funds (net) by Foreign Institutional Investors (FIIs).

Source:-RBI Bulletin of 13th Feb 2008.

Net inflows by foreign institutional investors (FIIs) aggregated to US $ 26.8 billion during the current financial year so far (up to
January 11, 2008). The number of FIIs registered with the SEBI increased from 997 at end-March 2007 to 1,219 at end-December
2007.
 Cont…

FIIs*
(US $ Million)

12000
10000
8000
6000
US 4$ Million

FIIs*
4000 (US $ Million)

2000
0
-2000 1995-96 1996-97 1997-98 1998-99 1999- 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-
2000 07(P)
Year
Thanks