FOREIGN
INVESTMENT
FOREIGN INVESTMENTS FORM A PART OF ‘EXTERNAL
RESOURCES’ IN THE PROCESS OF ECONOMIC DEVELOPMENT
OF A COUNTRY WHICH SUPPLEMENT DOMESTIC RESOURCES
TO FINANCE ITS PLAN AND PROJECTS.
EXTERNAL RESOURCES HAVE PLAYED AN IMPORTANT ROLE IN
THE ECONOMIC DEVELOPMENT OF MANY LDCS INCLUDING
INDIA. EXTERNAL BORROWINGS ARE OBTAINED FROM
FOREIGN GOVERNMENTS AND/OR FOREIGN FINANCIAL
INSTITUTIONS AND THE RECIPIENT COUNTRY IS SUPPOSED TO
RETURN THESE LOANS ALONGWITH INTEREST AT THE EXPIRY OF
THE SPECIFIED TIME PERIODS OR AT THE COMPLETION OF THE
PROJECT.
International
Types of Foreign Investments can
Investments : be categorised in
five categories :-
Commercial Foreign Direct Foreign Portforlio Qualified Foreign
Official Flows
Loans Investment (FDI) Investment (FPI) Investment (QFI)
1)Commercial Loans
Commercial Loans are normal loans given
to foreign business firms and foreign
governments.
2)Official Flows
Official Flows are actually financial
assistance given to developing nations by
developed nations. Developed nations also
provide them higher grade technology and
facilitate economic management.
3)Foreign Direct Investment (FDI)
Foreign Direct Investment is the investment made in
an enterprise incorporated in another country with
the objective of establishing a lasting interest in the
investee country. Such investments aim at acquiring
ownership and management of productive units in
the native country. In this case foreign investors are
responsible for profit or loss and undertake the
business decisions. This is also termed as ‘Direct
Foreign Investment’. An investor’s earnings on FDI
take the form of profits such as dividends, retained
earnings, management fees and royalty payment.
4)Foreign Portfolio Investment (FPI)
This is also known as ‘Foreign Indirect Investment’. It
involves investment made by corporations, financial
institution and private investors in foreign companies that
are registered in foreign stock exchange. When foreign
industrialists purchase shares and debentures of
companies in the recipient countries, this means transfer
of financial claims only. It is different from FDI in the
sense that it does not contribute to capital formation of
the native country. Investments in Foreign Portfolio
Investment that are made for less than one year are
known as Short Term Portfolio Investments.
5)Qualified Foreign Investment (QFI)
A Qualified Foreign Investor (QFI) means a
non-resident investor (other than SEBI
registered FII and SEBI registered FVCI) who
meets the KYC requirements of SEBI for the
purpose of making investments in
accordance with the regulations.
VENTURE
CAPITAL
1.Indian venture capital undertakings
2.Venture capital funds
Venture capital is the way of financing the
fastest growing private companies. These private
companies have got innovative ideas and good
growth prospects. But these are in need of
finances and corporate advice.
The developed companies can provide such
financial support and corporate advice to these
private companies and these companies have
generally well established market and they are
known as VENTURE CAPITAL.
FOREIGN VENTURE CAPITAL
INVESTMENT
FVCI that has got registered with SEBI and
has been permitted by RBI to make
investments in India can make investment in
either IVCU or VCF or both.
FVCI can make investment by-
Purchasing equity or equity linked instruments
Debt instruments
Debentures of an IVCU
INDIAN VENTURE CAPITAL
UNDERTAKINGS
1.Private company
2.Need of financial assistance
and corporate advice
3.Not listed on any recognized
stock exchange in india
4.Not engaged in any negative
activity prescribed by SEBI.
VENTURE CAPITAL FUND
1.Established by SEBI,registered with
SEBI under SEBI regulations 1996.
2.Established by collecting funds as
per the rules and regulations.
3.Can invest in venture capital
undertakings as per the rules of
SEBI.
4.For FVCI to be listed with SEBI,it
has to satisfy certain eligibility
criteria of SEBI Regulations 2000
NATIONAL INVESTMENT
DOMESTIC CONTENT
EXPROPRIATION
FREE TRANSFER OF FUNDS
DISPUTE SETTLEMENT
MOST FAVORED NATION TREATMENT
THIS IS THE CORE ELEMENT OF INTERNATIONAL TRADE
IN GOODS AND SERVICES AS WELL AS FOREIGN
INVESTMENT. THUS COUNTRIES MAY TREAT FOREIGN
CORPORATIONS AND NATIONALS WITH BETTER AND
MORE FAVOURABLE REGULATIONS,BUT NOT POORER
ONCE.
DOMESTIC CONTENT REQUIREMENT IS THE LIMITATION
IMPOSED ON FOREIGN INVESTERS BY THE HOST
COUNTRIES. AS PER THE WTO RULES ON INVESTMENT
AMONG 159 MEMBERS OF WTO THERE IS LIMITED
OPPORTUNITY FOR IMPOSING SUCHREQUIREMENTS.
EXPROPRIATION HAS ALWAYS BEEN A MAJOR
CONCERN FOR THE FOREIGN INVESTORS BECAUSE OF
THE CHANGE IN GOVERNMENT AND CHANGE IN
GOVERNMENT POLICIES. THIS IS THE MAJOR DETERRENT
TO FOREIGN INVESTMENT . ENVIRONMENTAL ACTIVISTS
SHOWED SERIOUS CONCERN ABOUT THIS
INTERPRETATION OF THE TERM EXPROPRIATION.
ANOTHER PRACTISE THAT HAS BEEN OF SERIOUS
CONCERN FOR THE FOREIGN INVESTORS IS THAT
THEHOST COUNTRY GOVERNMENT IMPOSES
RESTRICTIONS ON THE TRANSFER OF FUNDS OUT OF
THE COUNTRY IN THE HOST COUNTRY.
SOME PROVISIONS ARE MADE THAT SHOULD BE
FOLLOWED IN CASE OF DISPUTES BETWEEN INVESTORS
AND HOST GOVERNMENT . THESE PROVISIONS ENSURE
THAT RULESARE FOLLOWED AND ARBITRATION IS
ESTABLISHED BY MUTUAL CONSENT.
THE NATION MUST ENSURE THAT THEY DO NOT HAVE
DISADVANTAGE FROM FOREIGN INVESTMENT FROM
OTHER COUNTRIES . AS PER MOST FAVOURED NATION
THERE SHOULD NOT BE DISCRIMINATION AMONG
INVESTORS FROM DIFFERENT COUNTRIES.
FOREIGN INVESTMENT FLOWS
TOTAL FOREIGN DIRECT INVESTMENT TO INDIA
–DURING INITIAL DECADES OF ECONOMIC
PLANNING ORUP TO THE COMPLETION OF
FOURTH FIVE YEAR PLAN ,FDI TO INDIA WAS
ONLY RS1943 CRORE .
PORT FOLIO INVESTMENT-VOLUME OF
PORTFOLIO INVESTMENT TO INDIA HAS ALSO
BEEN EXPANDING DURING THE TWENTY THREE
YEARS.
DEPOSITS RECEIVED FROM NON-RESIDENTS
INDIANS-NRI DEPOSITS ARE DEBT CREATING
CAPITAL INFLOWS.
EXTERNAL COMMERICAL BORROWINGS –
AMOUNT OF THESE BORROWINGS INCREASED BY
842 PERCENT DURING 1990-91 TO 2000-01.
LATEST DEVELOPMENT IN CAPITAL INFLOWS –
THERE WAS MARKED IMPROVEMENT IN THE NET
CAPITAL FLOWS BOTH IN TERMS OF QUANTUM
AND QUALITY IN THE FIRST HALF OF 2014 – 2015.
Foreign investment in Indian
prospective
PURCHASE OF OTHER SECURITIES BY NRIS
A. ON NON-REPATRIATION:
AN NRI MAY ACQUIRE, ON NON- REPATRIATION BASIS, ANY
SECURITY ISSUED BY A COMPANY WITHOUT ANY LIMIT EITHER ON THE STOCK
EXCHANGE OR OUTSIDE IT. AN NRI MAY INVEST, ONNON-REPARTITION BASIS, IN
UNITS ISSUED BY AN INVESTMENT VEHICLE WITHOUT ANY LIMIT, EITHER ON THE
STOCK EXCHANGE OR OUTSIDE IT
B. ON PARTITION BASIS:
THE NRI ARE ALLOWED TO PURCHASE GOVT. SECURITIES, TREASURY
BILL, LISTED NON CONVERTIBLE DEBENTURES. WITHOUT ANY LIMIT ON IT
IDR ( INDIAN DEPOSITORY RECEIPT):
INDIAN DEPOSITORY RECEIPT (IDR) IS A FINANCIAL INSTRUMENT DENOMINATED
IN INDIAN RUPEES IN THE FORM OF A DEPOSITORY RECEIPT. ... THE FOREIGN
COMPANY IDRS WILL DEPOSIT SHARES TO AN INDIAN DEPOSITORY. THE
DEPOSITORY WOULD ISSUE RECEIPTS TO INDIAN INVESTORS AGAINST THESE
SHARES.
PURCHASE OF OTHER SECURITIES BY FIIS QFIS AND LONG
TERM INVESTORS:
FIIS, QFIS, AND LONG TERM INVESTOR CAN INVEST ON REPATRIATION BASIS
IN THE GOVT. SECURITIES , TREASURY BILL, LISTED NON CONVERTIBLE
DEBENTURES , BONDS. LISTING OF SUCH NCDS IS COMMITTED TO BE DONE IN 15
DAYS OF SUCH INVESTMENT
INVESTMENT BY MULTILATERAL DEVELOPMENT BANKS:
MULTILATERAL DEVELOPMENT BANKS. A MULTILATERAL DEVELOPMENT
BANK (MDB) IS AN INSTITUTION, CREATED BY A GROUP OF COUNTRIES, THAT
PROVIDES FINANCING AND PROFESSIONAL ADVISING FOR THE PURPOSE
OF DEVELOPMENT. MDBS HAVE LARGE MEMBERSHIPS INCLUDING BOTH
DEVELOPED DONOR COUNTRIES AND DEVELOPING BORROWER COUNTRIES.
FOREIGN INVESTMENT IN INSTRUMENTS ISSUED BY BANKS
OF INDIA:
REGISTERED FIS AND NRIS CAN PURCHASE PERPETUAL DENT INSTRUMENTS AND
DEBT CAPITAL INSTRUMENTS, ISSUED BY BANK IN INDIA.
QUALIFIED FOREIGN INVESTOR INVESTMENT IN UNITS OF
DOMESTICS MUTUAL FUND:
THE QUALIFIED FOREIGN INVESTOR (QFI) IS SUB-CATEGORY OF FOREIGN
PORTFOLIO INVESTOR AND REFERS TO ANY FOREIGN INDIVIDUALS, GROUPS OR
ASSOCIATIONS, OR RESIDENT
A. DIRECT ROUTE
B. INDIRECT ROUTE
INFRASTRUCTURE ROUTE:
ROUTING IS ONE OF THE MOST IMPORTANT PARTS OF
THE INFRASTRUCTURE THAT KEEPS A NETWORK RUNNING, AND AS SUCH, IT IS
ABSOLUTELY CRITICAL TO TAKE THE NECESSARY MEASURES TO SECURE IT. ...
FORTUNATELY, PROTOCOLS LIKE BGP, IS-IS, OSPF, EIGRP AND RIPV2 PROVIDE A
SET OF TOOLS THAT HELP SECURE THE ROUTING INFRASTRUCTURE.
