Recent World Trade and Foreign Investment Trends

Presented By:- Chirag Bansal MBA 1st (F) 120425729

FII (Foreign Institutional Investor)

Foreign Institutional Investor means an entity established or incorporated outside India which proposes to make investment in India. FII denotes all those investors or investment companies that are not located within the territory of the country in which they are investing. The term is used most commonly in India to refer to outside companies investing in the financial markets of India. International institutional investors must register with the Securities and Exchange Board of India to participate in the market.

Need for FII

1. Infrastructure Renewal 2. Bridge the technological gap 3. Optimum utilization of resources 4. Balancing the balance of payment position

Who can get registered as FII?

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. Pension Funds Mutual Funds Investment Trusts Banks Insurance Companies / Reinsurance Company Foreign Central Banks Foreign Governmental Agencies Sovereign Wealth Funds International/ Multilateral organization/ agency University Funds (Serving public interests) Endowments (Serving public interests) Foundations (Serving public interests) Charitable Trusts / Charitable Societies (Serving public interests)

Why Foreign Institutional Investors Invest In INDIA

1. Market Size 2. Liberalized Trade Policy 3. Labor Costs and Productivity 4. Political Scenario 5. Infrastructure 6. Incentives and Operating Conditions 7. Disinvestment Policy

FII Inflow In Asia in 2012

 The cumulative inflows from foreign institutional investors (FIIs) have crossed the $23-billion mark in the current calendar year. This is the highest-ever inflow in one calendar year since 2010 and the second-highest in the last 14 years.

FII Investment Data

FII Investment INR crores Financial Year 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13* Total * As on February 28, 2013 Equity 13 5,127 4,796 6,942 8,546 5,267 -717 9,670 10,207 8,072 2,527 39,960 44,123 48,801 25,236 53,404 -47,706 110,221 110,121 43,738 130,284 618,628 Debt 0 0 0 0 29 691 -867 453 -273 690 162 5,805 1,759 -7,334 5,605 12,775 1,895 32,438 36,317 49,988 22,539 162,672 Total 13 5,127 4,796 6,942 8,575 5,958 -1,584 10,122 9,933 8,763 2,689 45,765 45,881 41,467 30,840 66,179 -45,811 142,658 146,438 93,726 153,448 781,925

Foreign Direct Investment (FDI)

Is the process whereby residents of one country (the source country) acquire ownership of assets for the purpose of controlling the production, distribution, and other activities of a firm in another country (the host country). The international monetary funds balance of payment manual defines FDI as an investment that is made to acquire a lasting interest in an enterprise operating in an economy other than that of the investor. The investors purpose being to have an effective voice in the management of the enterprise.

The Importance Of Foreign Direct Investment

FDI plays a major role in developing countries like India. They act as a long term source of capital as well as a source of advanced and developed technologies. The investors also bring along best global practices of management. As large amount of capital comes in through these investments more and more industries are set up. This helps in increasing employment. FDI also helps in promoting international trade.

Advantages of FDI
Economic growth Trade Employment and skill levels Technology diffusion and knowledge transfer Linkages and spillover to domestic firms Improves trade.(supply increases)

Disadvantages of FDI
It affects small vendors.(Recent Wal-Mart issue)(Domestic market suffers) Prices of goods likely to rise.(No guarantee of reasonable price) long-run balance of payment position of the Indian economy is risked when the investor manages to recover its initial outlay. Lot of procedures and products may not be in tune with Indian preferences.(People think this as threat but i don't know much about it) Inflation Risk(because you don't understand the underlying intentions of the country or firm making the investment)

FDI Projects Into Asia-Pacific

FDI Facts
Foreign investment was introduced in 1991 under Foreign Exchange Management Act (FEMA), driven by then finance minister Manmohan Singh. The country had attracted FDI of $34.62 billion in 2011, according to the department of industrial policy and promotion data. India has attracted foreign direct investment (FDI) of $22.78 billion in 2012, a decline of 34 per cent over the previous year due to global economic uncertainties.

Top 7 Countries-wise Inflow of FDI In India

14% 6% 41% 10% Mauritius Singapore U.S.A Cyprus Japan

Netherlands
8% 5% 16% United Kingdom

Difference between FDI (Foreign Direct Investment) and FII (Foreign institutional investors)
FDI is long term investment FDI investment in physical assets In FDI deals with primary market FDI directly impact on employment and wages Aim of FDI is for increase capacity and productivity of enterprises FII is for short term In FII investment in financial market FII deals with secondary market FII there is no impact on employment and wages Aim of FII only increase the capital flow

Trends in Indias World Trade

Exports by Principal Commodities

Sales
20.40%

Petroleum (Crude & Products)

Gems & Jewellery Transport Equipments

46.90% 16.30%

Machinery and Instruments

Drugs Pharmaceuticals & Fine Chemicals

7.80% 4% 4.60%

Top Five Commodities of Export by Growth 20102011 & 2011-2012

Share of Top Five Principal Commodities in Indias Imports 2011-2012 (April-October)

Destinations of Indias Exports for 2011-2012 (April-October)

Source of Indias Imports for 2011-2012 (April-October)

Conclusion
As the world turns into a global village, India has jumped ahead of its peer countries due to its investment opportunities, huge growth potential and favorable business environment. In the process, it has become a hub of Foreign Direct Investment (FDI). The steady growth of foreign investment for the past few years has become one of the pivotal factors in determining the step of growth of the economy. Foreign investment in India is a vital growth driver for India Inc. The infusion of foreign funds has largely stimulated the growth of the Indian economy and with the government further liberalizing and streamlining foreign investment policies and procedures, it will hopefully play a crucial role even in the times to come.