What is FDI and how its take place
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Foreign direct investment (FDI) and foreign institutional investment (FII) play an important role in international trade. FDI refers to long-term investment in physical assets that leads to technology transfer and management inputs, while FII refers to short-term investment in financial assets aimed at capital gains. FDI has benefits like expanding employment, improving technology, and promoting economic growth, but can also negatively impact small businesses and domestic markets. The role of FDI in international trade was the topic of the presentation.
What is FDI and how its take place
- 1. PRESENTATION ON ROLE OF FDI IN INTERNATIONAL TRADE PRESENTED BY- VIKASH GUPTA GOPAL KUMAR GAURAV KUMAR RAHUL
- 2. WHAT IS FDI Foreign direct investment An investment made by a company or entity based in one country into a company or entity based in another country. OR A foreign direct investment is a controlling ownership in a business enterprise in one countryby an entity based in another country.
- 3. What is FII…? FII stands for Foreign Institutional investor. It refers to a company or an institution established outside India who makes an investment in the financial markets of India in the form of securities. To trade in the Indian equity market, the International investor must register with SEBI (Securities And Exchange Board Of India).
- 4. Difference between FDI and FII FDI 1. It is long-term investment 2. Investment in physical assets 3. Aim is to increase enterprise capacity or productivity or change management control 4. Leads to technology transfer, access to markets and management inputs 5. FDI flows into the primary market 6. Entry and exit is relatively difficult 7. FDI is eligible for profits of the company 8. Does not tend be speculative 9. Direct impact on employment of labor and wages 10.Abiding interest in mgt. FII 1. It is generally short-term investment 2. Investment in financial assets 3. Aim is to increase capital availability 4. FII results in only capital inflows 5. FII flows into the secondary market 6. Entry and exist is relatively easy 7. FII is eligible for capital gain 8. Tends to be speculative 9. No direct impact on employment of labour and wages 10.Fleeting interest in mgt.
- 5. Significances of Foreign investment -Expansion in Employement -Consumer benefit -Technological improvement -Import export -Growth in economy -Competition -Global Exposer -Global Relationship
- 6. How FDI takes place…? -By incorporating a wholly owned subsidiary or company anywhere. -By acquiring shares in an associated enterprise. -Through a merger or an acquisition of an unrelated enterprise. -Participating in an equity joint venture with another investor or enterprise.
- 7. BOP Effects of MNC .FDI brings both capital inflow and capital outflow. thus net balance of payment effect is important. .The greater the inflow the better for economy. .The greater the outflow the better the trade relations and the market. .The net of inflow & outflow should be maintained.
- 8. Growth & employment effects FDI by a company for:- -Utilization of resources. -Imm0bility of capital & technology from one industry to another. -Move operations to low wage country :- Horizontal & Vertical FDI. -Host country advantage -Inflow of capital & technology -Host country losses.
- 9. FDI Impact on economy -Defence -Retail -Power Generation -Computer/Telephone instruments hardware -Automobiles -Service: Construction etc.
- 10. POTENTIAL EFFECT OF FDI -The dramatic increase in FDI over the last decade has had at least three sources. First, technological improvements in communications, information processing and transportation/ -Second, the changing framework of international competition has led to the liberalisation of capital flows among developed countries, deregulation of key sectors such as telecommunications. -Third, developing countries are increasingly liberalising their regimes for inward foreign investment. These countries accounted for 37% of total FDI flows in 1997, an increase of20 percentage points since 1990. At present, one-third of the world’s FDI stock is located in developingcountries, although it remains heavily concentrated in a few of them.
- 11. Advantages of FDI -More consumer saving -Higher Remuneration for farmers -Increase in employment opportunities -Increase in government revenue
- 12. Disadvantage of FDI -Destruction of small entrepreneurs -Shrinking of jobs -No real benefit to farmers -Downfall of domestic market. -Increase unemployement.