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Assignment 2 IB - Edocx

The document defines foreign direct investment (FDI) as substantial, long-term investments made by companies or governments in foreign businesses. It provides examples of different types of FDI like acquiring stock, mergers and acquisitions, joint ventures, and starting subsidiaries. The document also differentiates between FDI, foreign portfolio investment (FPI), and foreign institutional investors (FII). It then provides a table showing India's FDI inflows from 2015 to 2021 in US dollars and as a percentage of GDP, with inflows generally increasing each

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Jai Singh
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36 views

Assignment 2 IB - Edocx

The document defines foreign direct investment (FDI) as substantial, long-term investments made by companies or governments in foreign businesses. It provides examples of different types of FDI like acquiring stock, mergers and acquisitions, joint ventures, and starting subsidiaries. The document also differentiates between FDI, foreign portfolio investment (FPI), and foreign institutional investors (FII). It then provides a table showing India's FDI inflows from 2015 to 2021 in US dollars and as a percentage of GDP, with inflows generally increasing each

Uploaded by

Jai Singh
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Que 1) What is FDI ? Explain different types of FDI with examples . Also
differentiate between FDI,FPI,AND FII

FDI stands for (Foreign direct investment) is an ownership stake in a foreign


company or project made by an investor, company, or government from another
country. Generally, the term is used to describe a business decision to acquire a
substantial stake in a foreign business or to buy it outright to expand operations
to a new region. The term is usually not used to describe a stock investment in a
foreign company alone. FDI is a key element in international economic
integration because it creates stable and long-lasting links between economies.

There are some of the famous ways of foreign direct investment

1)Acquiring voting stock in foreign company

2)Mergers and acquisitions

3)Joint ventures with foreign corporations

4)Starting a Subsidiary of a domestic firm in a foreign country

SOME OF THE IMPORTANT POINTS TO REMEMBER ABOUT FDI >

● Foreign direct investments (FDIs) are substantial, lasting investments made


by a company or government into a foreign concern.
● FDI investors typically take controlling positions in domestic firms or joint
ventures and are actively involved in their management.
● The investment may involve acquiring a source of materials, expanding a
company’s footprint, or developing a multinational presence.
● The top recipients of FDI over the past several years have been the United
States and China.

Types of FDI >

Foreign direct investments are commonly categorized as horizontal, vertical, or


conglomerate.
● With a horizontal FDI, a company establishes the same type of business
operation in a foreign country as it operates in its home country. A U.S.-
based cellphone provider buying a chain of phone stores in China is an
example. 
● In a vertical FDI, a business acquires a complementary business in another
country. For example, a U.S. manufacturer might acquire an interest in a
foreign company that supplies it with the raw materials it needs.
● In a conglomerate FDI, a company invests in a foreign business that is
unrelated to its core business. Because the investing company has no prior
experience in the foreign company’s area of expertise, this often takes the
form of a joint venture

Difference between FDI ,FPI & FII >

Foreign portfolio investment (FPI) is the addition of international assets to the


portfolio of a company, an institutional investor such as a pension fund, or an
individual investor. It is a form of portfolio diversification, achieved by purchasing
the stocks or bonds of a foreign company. Foreign direct investment (FDI) instead
requires a substantial and direct investment in, or the outright acquisition of, a
company based in another country, and not just their securities.

FDI is generally a larger commitment, made to enhance the growth of a company.


But both FPI and FDI are generally welcome, particularly in emerging nations.
Notably, FDI involves a greater responsibility to meet the regulations of the
country that hosts the company receiving the investment.

A foreign institutional investor (FII) is an investor or investment fund investing in a


country outside of the one in which it is registered or headquartered. The term
foreign institutional investor is probably most commonly used in India, where it
refers to outside entities investing in the nation's financial markets.The term is
also used officially in China .
Que 2 ) Draw a table depiciting the flow of foreign direct investment in
india since 2015 to 2021 . FDI approvals and actuals .

Year Inflows,US $ % of GDP


2015 $44.01B 2.09
2016 $44.46B 1.94
2017 $39.97B 1.51
2018 $42.12B 1.56
2019 $50.61B 1.79
2020 $64.36B 2.41
2021 $44.73B 1.41

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