DETAILS ABOUT FII AND FDI.HOW THEY OPERATE.HOW MUCH THEY ARE IMPORTANT FOR A COUNTRY ECONOMY.HOW MUCH IMPORTANT FDI AND FII ARE FOR INDIAN ECONOMY
Foreign Institutional Investor (FII):
A foreign institutional investor (FII) is an investor or investment fund that invests outside of the country in which it is registered or based. The word foreign institutional investor is possibly used most frequently in India, where it refers to outside entities investing in the financial markets of the country. The word is officially used in China, too.
There is a very important role for international institutional investors in any economy. These are the major companies like investment banks, mutual funds, etc, that invest a lot of money in the Indian markets. The business trend to push upward and vice-versa with the acquisition of securities by these major players. We are exerting heavy impact on overall economic inflows.
Foreign Portfolio Investment (FPI):
Investment in foreign portfolios (FPIs) is made up of securities and other financial assets owned by investors in another country. It does not include full control of the assets of a company to the buyer and is fairly liquid depending on market fluctuations. In addition to foreign direct investment ( FDI), FPI is one of the most common ways of investing in an overseas economy. Both FDI and FPI are impassive
Investment in the portfolio includes making and maintaining a hands-off – or passive – investment in shares, made with the expectation of a return. These securities can include stocks, American depositary receipts (ADRs), or global depositary receipts of companies headquartered outside the investor’s nation, in foreign portfolio investment. Also requires holding bonds or other debts issued by those entities or foreign governments, mutual funds or exchange-traded funds (ETFs) that invest in international or international securities.
HOW MUCH THEY ARE IMPORTANT IN COUNTRY ECONOMY:
- Strengthened equity flows
- With their financial base, FIIs have a stronger demand for equity than the debt. The economy’s opening to FIIs has been FIIs aligned with the agreed preference for non-debt generating international inflows over foreign debt.
- Enhanced equity flow helps strengthen capital markets and helps create an investment gap.
- Control uncertainty, and manage risks.
- FII inflows aid in the production of financial innovation and hedging instruments
- FIIs as professional bodies of asset managers and financial analysts enhance financial brand competition and effectiveness
- Growth of the stock market is helping economic development.
- Corporate governance changed.
- FDI Capital Provides:
- FDI eliminates the restriction on the balance of payments:
- FDI brings expertise in technology, management and marketing to:
- FDI supports host-developing country exports:
- FDI is delivering increased employment:
HOW MUCH IMPORTANT FDI AND FII ARE FOR INDIAN ECONOMY
Before the start of Dr Manmohan Singh’s economic reforms in the early ’90s, there was barely any hope of bringing foreign direct investment into India.
In India after independence, the scenario of doing business is quite difficult, even though these reforms have been introduced. It is almost very difficult to start a company because of the various approvals that need to be obtained. Yet now they’ve changed the situation.
Foreign investment has a unique benefit over all forms of investment by bringing the foreign exchange into India which will boost the economy.
- Sets up employment:
- Bring’s know-how:
- Access to Global Funding:
Some of the countries with the highest volume of foreign institutional investments are those with developing economies, which generally give investors a greater potential for growth than mature economies. This is one reason that FIIs are commonly found in India, which has to invest in a high-growth economy and attractive individual corporations. In India, all FIIs must register with the Securities and attractive single companies to invest in. To participate in the market, all FIIs in India must register with the Securities and Exchange Board of India ( SEBI).
FII AND FDI As far as FDA is concerned, it does not have a direct connection with the stock market but helps to provide opponents to industries such as technological development and also to provide management skills and employability skills with greater performance. On the other hand. FII is directly linked to stock markets. However, both of these inflows contribute greatly to increasing the size of the stock markets, enhancing transparency, technology, information standard, investor protection, operational standards;