Foreign Investment in India Foreign capital is

Transcript:Foreign Investment in India Foreign capital is:
Foreign Investment in India Foreign capital is needed for a developing country to increase the rate of investment and for capital accumulation for further economic growth. For developed country it is needed to support sustainable development. Forms of foreign capital Foreign Direct Investment Foreign Portfolio Investment Depository Receipts Debt Capital Foreign Direct Investment It is the investment made by foreign individual or a firm in one country into business located in another country. Generally, FDI takes place when an investor establishes foreign business operations or acquires foreign business assets, including establishing ownership or controlling interest in a foreign company. Foreign Portfolio Investment It is the entry of funds into a country where foreigners deposit money in a country’s bank or make purchases in the country’s stock and bond markets. Depository Receipts These are a negotiable certificate issued by a bank representing share in a foreign company traded on a local stock exchange. These are in the form of American and Global ADR is a negotiable certificate issued by a US bank representing shares in a foreign stock is traded on US exchange. ADRs are denominated in US$ with the underlying security held by a US financial institution overseas. Global Depository Receipt are negotiable instrument issued by Depository Bank against the domestic shares of the issuing company. GDRs are listed and traded on one or more international exchanges, except USA. Debt Foreign capital These are loans from friendly governments, or multilateral institutions like IMF External commercial borrowing Remittances Foreign Currency deposits of non-resident citizens of the country. Foreign Direct Investment FDI can be made in a variety of ways, including the opening of a subsidiary or associate company in a foreign country, acquiring a controlling interest in an existing foreign company or by means of a merger or joint venture with a foreign company. Thus FDI is calculated to include all kinds of capital contributions such as the purchase of stocks as well as the reinvestment of earnings by a wholly owned company incorporated abroad and the lending of firms to a foreign subsidiary or branch. Types of FDI Greenfield Investments and Mergers and Acquisitions Horizontal and vertical investment Inward or outward investment According to WTO Greenfield Investment A Greenfield investment refers to a type of FDI where a company establishes a wholly new operation in a foreign country. It can be a new production or an expansion of the existing