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Foreign Investments in India Types and Flows notes-CSEET

Foreign Investments in India Types and Flows notes-CSEET

Foreign Investments in India Types and Flows notes-CSEET:

ICSI CSEET: The Council of the ICSI has released a notice regarding CSEET on the day of the inauguration of ICSI Golden Jubilee Celebrations on 4th Oct 2017.

The Gazette Notification on the Company Secretaries (Amendment) Regulations, 2020 has been published on 3rd February 2020 in the Official Gazette of India and the same shall be applicable from the said date of publication.

Now ICSI Published a notice regarding CSEET Test which going to start from 2020 May.

We are now going to discuss the details of CSEET Paper-3 Economics and Business Environment notes – Foreign Investments in India Types and Flows

Foreign Investments in India Types and Flows

Foreign Investments in India Types and Flows

Foreign Investments in India Types and Flows notes:

Any investment that is made in India with the source of funding that is from outside of India is a foreign investment. By this definition, the investments that are made by Foreign Corporates, Foreign Nationals, as well as Non-Resident Indians would fall into the category of Foreign Investment.

Types of Foreign Investments

Funds from foreign country could be invested in shares, properties, ownership / management or collaboration. Based on this, Foreign Investments are classified as below.

Foreign Direct Investment (FDI)

Foreign Portfolio Investment (FPI)

Foreign Institutional Investment (FII)

Details on each of the foreign investment type can be found below:

Foreign Direct Investment (FDI)

FDI is an investment made by a company or individual who us an entity in one country, in the form of controlling ownership in business interests in another country. FDI could be in the form of either establishing business operations or by entering into joint ventures by mergers and acquisitions, building new facilities etc.

Foreign Portfolio Investment (FPI)

Foreign Portfolio Investment (FPI) is an investment by foreign entities and non-residents in Indian securities including shares, government bonds, corporate bonds, convertible securities, infrastructure securities etc. The intention is to ensure a controlling interest in India at an investment that is lower than FDI, with flexibility for entry and exit.

Foreign Institutional Investment (FII)

Foreign Institutional Investment (FPI) is an investment by foreign entities in securities, real property and other investment assets. Investors include mutual fund companies, hedge fund companies etc. The intention is not to take controlling interest, but to diversify portfolio ensuring hedging and to gain high returns with quick entry and exit.

Differences between FDI and FII

MeaningWhen a company situated in one country makes an investment in a company situated abroad, it is known as FDI.FII is when foreign companies make investments in the stock market of a country.
Entry and ExitDifficultEasy
What it brings?Long term capitalLong/Short term capital
Transfer ofFunds, resources, technology, strategies, know-how etc.Funds only


ConsequencesIncrease in country’s Gross Domestic Product (GDP)Increase in capital of the country
TargetSpecific CompanyNo such target, investment flows into the financial market
Control over a companyYesNo

Difference between FDI and FPI

MeaningFDI refers to the investment made by the foreign investors to obtain a substantial interest in the enterprise located in a different country.When an international investor, invests in the passive holdings of an enterprise of another country, i.e. investment in the financial asset, it is known as FPI.
Role of investorsActivePassive
Degree of controlHighVery less
TermLong termShort term
Management of ProjectsEfficientComparatively less efficient
Investment inPhysical assetsFinancial assets
Entry and exitDifficultRelatively easy
Results inTransfer of funds, technology and other resourcesCapital inflows

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