![The top ten countries investing in India are
Mauritius, Singapore,
Japan, U.K
Netherlands, United States,
Germany, Cyprus,
France and the UAE[1]. Some of the best investments are the
services sector, which was at the top in terms of FDI at $6.7 billion,
followed by telecoms at $6.2 billion and computer hardware and
software at $6.2 billion.., the Netherlands, United States, Germany,
Cyprus, France and the UAE[1]. Some of the best investments are
the services sector, which was at the top in terms of FDI at $6.7
billion, followed by telecoms at $6.2 billion and computer hardware
and software at $6.2 billion.](https://image.slidesharecdn.com/null-220905083722-54551d07/85/null-pptx-52-320.jpg)
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- 1. Globalization and economy Concept definitions origin process causes objectives dimensions advantages and disadvantages
- 5. Definitions • In geography, globalization is defined as the set of processes (economic, social, cultural, technological, institutional) that contribute to the relationship between societies and individuals around the world. It is a progressive process by which exchanges and flows between different parts of the world are intensified.
- 6. • Globalization means the speedup of movements and exchanges (of human beings, goods, and services, capital, technologies or cultural practices) all over the planet. One of the effects of globalization is that it promotes and increases interactions between different regions and populations around the globe.
- 7. • globalization can be defined as ” the increased interconnectedness and interdependence of peoples and countries. It is generally understood to include two inter-related elements: the opening of international borders to increasingly fast flows of goods, services, finance, people and ideas; and the changes in institutions and policies at national and international levels that facilitate or promote such flows.” WHO
- 8. • the increasing interdependence of world economies as a result of the growing scale of cross-border trade of commodities and services, the flow of international capital and the wide and rapid spread of technologies. It reflects the continuing expansion and mutual integration of market frontiers (…) and the rapid growing significance of information in all types of productive activities and marketization are the two major driving forces for economic globalization.”
- 9. Evolution of Globalization • For some people, this global phenomenon is inherent to human nature. Because of this, some say globalization begun about 60,000 years ago, at the beginning of human history. Throughout time, human societies’ exchanging trade has been growing. Since the old times, different civilizations have developed commercial trade routes and experienced cultural exchanges. And as well, the migratory phenomenon has also been contributing to these population exchanges. Especially nowadays, since traveling became quicker, more comfortable, and more affordable.
- 10. • This phenomenon has continued throughout history, notably through military conquests and exploration expeditions. But it wasn’t until technological advances in transportation and communication that globalization speeded up. It was particularly after the second half of the 20th century that world trades accelerated in such a dimension and speed that the term “globalization” started to be commonly used.
- 11. • Economic globalization: is the development of trade systems within transnational actors such as corporations or NGOs; • Financial globalization: can be linked with the rise of a global financial system with international financial exchanges and monetary exchanges. Stock markets, for instance, are a great example of the financially connected global world since when one stock market has a decline, it affects other markets negatively as well as the economy as a whole.
- 12. • Ecological globalization: accounts for the idea of considering planet Earth as a single global entity – a common good all societies should protect since the weather affects everyone and we are all protected by the same atmosphere. To this regard, it is often said that the poorest countries that have been polluting the least will suffer the most from climate change.
- 13. • Political globalization: the development and growing influence of international organizations such as the UN or WHO means governmental action takes place at an international level. There are other bodies operating a global level such as NGOs like Doctors without borders or Oxfam; • Sociological globalization: information moves almost in real-time, together with the interconnection and interdependence of events and their consequences. People move all the time too, mixing and integrating different societies; • Technological globalization: the phenomenon by which millions of people are interconnected thanks to the power of the digital world via platforms such as Facebook, Instagram, Skype or Youtube.
- 14. • The Benefits of Globalization • Globalization has benefits that cover many different areas. It reciprocally developed economies all over the world and increased cultural exchanges. It also allowed financial exchanges between companies, changing the paradigm of work. Many people are nowadays citizens of the world. The origin of goods became secondary and geographic distance is no longer a barrier for many services to happen. Let’s dig deeper.
- 15. • The Engine of Globalization – An Economic Example • The most visible impacts of globalization are definitely the ones affecting the economic world. Globalization has led to a sharp increase in trade and economic exchanges, but also to a multiplication of financial exchanges. • In the 1970s world economies opened up and the development of free trade policies accelerated the globalization phenomenon. Between 1950 and 2010, world exports increased 33-fold. This significantly contributed to increasing the interactions between different regions of the world.
- 16. • Globalization Benefits – A Financial Example • At the same time, finance also became globalized. From the 1980s, driven by neo-liberal policies, the world of finance gradually opened. Many states, particularly the US under Ronald Reagan and the UK under Margaret Thatcher introduced the famous “3D Policy”: Disintermediation, Decommissioning, Deregulation. • The idea was to simplify finance regulations, eliminate mediators and break down the barriers between the world’s financial centers. And the goal was to make it easier to exchange capital between the world’s financial players. This financial globalization has contributed to the rise of a global financial market in which contracts and capital exchanges have multiplied.
- 18. Benefits • Transfer of Technology • Better Services • Standardization of Living • Development of Infrastructure • Foreign Exchange Reserves • Economic Growth • Affordable Products • Contribution to World GDP Growth Rate • Extensions of Market
- 20. Benefits
- 21. Contd…
- 31. This shows the importance of exports to these developing economies. Since the mid-1980s, there has been a significant growth in exports as % of GDP, especially for countries like Vietnam, Korea and Thailand. Highest earners, who are in a position to negotiate higher wages. The World Bank found that between 1988 and 2008, the real income of the world’s top 1% of the world’s earners – went up by more than 60%. (World Bank) New middle class in emerging economies, who are experiencing rising real incomes Wealthy who can invest abroad and take advantage of lower tax rates. Multinational companies who can take advantage of tax breaks and lower cost labour abroad. For example, Amazon and Google have set up subsidiaries in countries like Ireland and Luxembourg to get lower tax rates. Also, production is increasingly globalised, e.g. Apple design in the US, but manufacture in China. Workers who gain employment in export industries. Consumers who benefit from lower prices. Greater movement of labour has made labour markets more flexible. For example, filling labour vacancies in health care with foreign born workers
- 32. Losers Unskilled manual labour who have seen a decline in employment opportunities with a structural change to the economy Average taxpayers who lose out from tax avoidance schemes of global multinationals. The environment which is experiencing global warming and loss of natural resources. Manufacturing sector in high-cost labour countries. Manufacturing companies in UK and US have seen a comparative decline as they struggle to compete with lower labour cost competitors. While top earners and the middle class have seen rising incomes, the World Bank found the poorest 5% of the world’s population have seen stagnant real incomes from the period 1988-2008. (World Bank) Developing economies who lack the infrastructure to developing exporting manufacturing sector. The agricultural sector has seen comparatively smaller growth in real earnings. Agricultural commodities have low-income elasticity of demand, so with rising real GDP, demand for agriculture does not rise a the same rate. Some countries have seen a ‘brain drain‘ as young skilled workers move to higher income countries. This is especially an issue for Eastern European economies which have seen a net outer migration to Western Europe. Net migration to Western Europe has created social pressures.
- 37. Types of FDI
- 46. Factors influencing Foreign Direct Investment in a Country Stability of the Government: ... Flexibility in the Government Policy: ... Pro-active measures of the Government to promote investment (infrastructure): ... Exchange rate stability: ... Tar policies and concessions: ... Scope of the market:
- 48. B
- 49. FDI AND INDIA
- 50. A stable government, strong economic growth, robust domestic demand, economic reforms and a young workforce are just some of the reasons that FDI investments are growing in India. Foreign direct investments into India means that companies overseas set up manufacturing facilities here, provide services and produce goods and do business here that earns them revenues, creates local jobs and provide tax inflow to the government.
- 52. The top ten countries investing in India are Mauritius, Singapore, Japan, U.K Netherlands, United States, Germany, Cyprus, France and the UAE[1]. Some of the best investments are the services sector, which was at the top in terms of FDI at $6.7 billion, followed by telecoms at $6.2 billion and computer hardware and software at $6.2 billion.., the Netherlands, United States, Germany, Cyprus, France and the UAE[1]. Some of the best investments are the services sector, which was at the top in terms of FDI at $6.7 billion, followed by telecoms at $6.2 billion and computer hardware and software at $6.2 billion.
- 54. Reasons for rise in FDI • The reason for the rise in FDI and its sustaining at the high levels is not far to seek. India’s macro fundamentals have improved. There is an upward pressure on inflation but that is due to rising crude prices. The economic growth at 7%-plus makes it one of the fastest growing economies in the world
- 55. Initiatives • Relaxation in FDI norms: • In real estate broking services, the government has done away with the need for approvals up to 100%. • Department of Revenue approvals will no longer be required for FDI proposals, easing the mechanism for FDI, which will now be cleared in 10 weeks of application. • The government has allowed 100% FDI in single brand retail through the automatic route. • FDI in defence is further sought to been enhanced to 51% through the automatic route from 49% now.
- 56. contd • A young and cheap labour force • We have all heard of India’s demographic dividend and it is true. With 47% of the population below the age of 25, India has one of the youngest populations in the world. This means a labour force that will be active and productive for a long time.
- 57. Contd.. • Size of the Market • India’s vast growing and consuming middle class, which is prepared to spend is a big lure for companies, which are seeing saturation points in developed countries. India is the third largest economy in the world in terms of purchasing power parity. There is a reason why large retail companies such as Amazon, Walmart and Apple are committed to the Indian market.
- 58. Contd.. • Economic performance • Economic growth is strong and expected to sustain over the next two years. The domestic economy is strong enough to sustain demand and inflation rate, which is more than the target of 4%, still at manageable levels. Rising crude oil prices are a concern, but they are a concern all over the world.
- 59. Contd.. • Technological and innovation capabilities • The institutes of technology churn out some of the brightest engineering graduates in the region and this is a huge plus for companies who find a ready-made talent pool. The cream of the engineering talent are able to find an outlet to their creativity and innovative instincts while working in the labs of some of the global technology companies, which have set up their manufacturing facilities here.
- 60. FOREIGN PORTFOLIO INVESTMENT • Foreign portfolio investment (FPI) refers to the purchase of securities and other financial assets by investors from another country. Examples of foreign portfolio investments include stocks, bonds, mutual funds, exchange traded funds, American depositary receipts (ADRs), and global depositary receipts (GDRs).
- 61. Foreign Portfolio Investors (FPIs), Non-Resident Indians (NRIs), Overseas Citizens of India (OCIs), Foreign Central Banks, Multilateral Development Bank, Long term investors like Sovereign Wealth Funds (SWFs), Multilateral Agencies, Endowment Funds, Insurance Funds and Pension Funds
- 62. The primary benefits of foreign portfolio investment are: Portfolio diversification. ... International credit. ... Access to markets with different risk-return characteristics. .. . Increases the liquidity of domestic capital markets. . .. Promotes the development of equity markets. ... Volatile asset pricing. ... Jurisdictional risk.
- 63. What is FPI limit? The limits for FPI investment in Corporate bonds shall remain unchanged at 15% of outstanding stock of securities for FY 2021-22.
- 64. WHO IS A FOREIGN PORTFOLIO INVESTOR? An FPI means a person who satisfies the prescribed eligibility criteria and has been registered under the SEBI(Foreign Portfolio Investors) Regulations, 2014. All existing Foreign Institutional Investors (FIIs ) and Qualified Foreign Investors (QFIs), holding a valid certification of Registration are deemed to be FPIs, till the expiry of the block of three years for which they have paid fees as per the Securities and Exchange Board of India (Foreign Institutional Investors) Regulations, 1995.
- 65. Eligibility Of FPI - Should not be a person resident in India - Should be a resident of a country which is a signatory to bilateral Memorandum of Understanding with SEBI or should be a resident of a country whose securities market regulator is a signatory to International Organisation of Securities Commission’s Multilateral Memorandum of Understanding - Should not be resident of a country identified in the public statement of Financial Action Task Force ( FATF) as a) A jurisdiction having a strategic Anti-Money Laundering or Combating the Financing of Terrorism deficiencies to which counter measures apply, or b) a jurisdiction that has not made sufficient progress in addressing the deficiencies or has not committed to an action plan developed with the FATF to address the deficiencies
- 66. External Commercial Borrowings (ECB) refers to the debt shouldered by an eligible entity in India for solely commercial purposes, that has been extended by external sources, i.e. from any recognized entity outside India. These borrowings are expected to conform to norms and conditions put forth by the RBI. The ECBs fall under the umbrella of RBI regulations as postulated under the Master Direction - External Commercial Borrowings, Trade Credits and Structured Obligations (Master Direction), and the Foreign Exchange Management Act, 1999 (FEMA).
- 67. ECBs have proven to be instruments that greatly aid Indian firms and organizations in their efforts to raise funds from beyond India's borders, especially with regard to bringing in fresh investments. One might recognize that structures similar to ECBs include those of Foreign Currency Convertible Bonds (FCCBs) and Foreign Currency Exchangeable Bonds (FCEBs).
- 68. Availing of External Commercial Borrowing As of today, there exist two paths to raise funds by employing ECBs- the approval route, and the automatic route. There are a variety of eligibility regulations created by the government for availing of finance under the automatic route. These regulations are in relation to amounts, industry, the end-use of the funds, etc. Companies that desire to raise finance via ECB must necessarily meet these eligibility criteria; thereafter, funds can be raised without the need for approval.
- 69. The approval route, on the other hand, mandates that companies which fall under certain pre-specified sectors must obtain the RBI's or the government's explicit permission, prior to raising funds through External Commercial Borrowing. The RBI has issued circulars and formal guidelines, specifying the borrowing structure.
- 70. Eligible Borrowers and Recognized Lenders The ECBs come in two configurations: Foreign Currency ECB (FCY ECB) and Indian Currency ECB (INR ECB). Eligible borrowers could be a label that fits any entity that is eligible to seek Foreign Direct Investment (FDI). It can also include specific entities the likes of Port Trusts, Units in Special Economic Zones, Small Industries Development Bank of India and the EXIM Bank of India. The ECBs are to be obtained from 'recognized lenders'. These terms could refer to any entity that is a member of the International Organization of Securities Commissions (IOSCO) and Financial Action Task Force (FATF).