Analyse the extent to which foreign capital inflow improved domestic business in India

Economics Assignment

Team Members

Name RRnoDINESH GOPINATH.P 120292601016

GAYATHRI.S 120292601022

GOKULA PRIYA.D 120292601025

HARIKUMAR.S 120292601027

MOHAMED VASEEM.A.M. 120292601043

MOHAMED TOUSEEF.H 120292601061

MOHAMED ASHFAQ.C.M. 120292601062

Contents:• Identifying net FDI and FII inflow of India• Which Nation invested more FDI in India • Sector-wise FDI investment in India • Correlation between GDP and FDI, Trade balance, Internet users • Conclusion

Identifying Net FDI and FII inflow of India

Years FDI – Y1(in Rs Billion) FII – Y2(in Rs Billion) GDP-X(in Rs Billion)

2006-07 349.10 0.124018 39532.76

2007-08 637.76 0.298945 45820.86

2008-09 1001.00 -0.17885 53035.67

2009-10 860.00 0.550055 60914.85

2010-11 429.00 0.585927 71574.12

2011-12 1032.00

Correlation 0.12 0.61

Low positive Fairly positive

From the correlation analysis GDP has a fairly positive relation with FII in the above table. Hence we infer that GDP increases with increase in FII to a certain extent.

Which Nation invested more FDI in India When we see the country wise investment, Mauritius holds the lions

share.Rank Country 2008-09 2009-10 2010-11 2011-12 2012-13 Aggregate

1 Mauritius 50794 42924 31,855 46,710 39,258 211541

2 Singapore 15727 8188 7,730 24,712 8,253 64610

3 UK 3840 1841 12,235 36,428 3,272 57616

4 Japan 1889 5197 7,063 14,089 8,614 36852

5 USA 8220 7577 5,353 5,347 2,054 28551

APRIL, 2000 TO NOVEMBER, 2012

Rank Countries Amount of Foreign Direct Investment Inflows(in rs Crores)

1 Mauritius 328,729.062 Singapore 85,840.613 United Kingdom 77,933.084 Japan 66,464.785 U.S.A 49,942.79

Sector-wise FDI investment in India Rank Sector 2008-09 2009-10 2010-11 2011-12 2012-13 Aggregate

1 Services Sector 28411 17074 15,053 24,656 19,794 104988

2Construction

Activities 8792 10543 7,552 15,236 5,539 47662

3Tele

communications 11727 11442 7,542 9,012 386 40109

4

Chemical (Excluding Fertilizers) 3427 1258 10,612 18,422 905 34624

5 Power 4382 6088 5,796 7,678 2,488 26432

1. Clearly, India has attracted significant overseas investment interest in services. 2. It has been the main destination for off shoring of most services as back-office processes, customer interaction, and technical support that’s the reason why we find Service sector at the top.3. Sectors like pharmaceuticals, cement industries, telecommunications which were not doing well in the past have picked up many investments in the past few years.

Correlation between GDP and FDI, Trade balance, Internet users

X Y1 Y2 Y3 yrsGDP FDI

In BillionTrade Bal =

Export - importInternet users

In BillionExports

In BillionImports

In Billion

45820.86 637.76 -3564.48 0.046 2008 6558.64 10123.12

53035.67 1001.00 -5336.81 0.05 2009 8407.55 13744.36

60914.85 860.00 -5182.02 0.063 2010 8455.34 13637.36

71574.12 429.00 -5405.45 0.082 2011 11429.22 16834.67

82326.52 1032.00 -8866.92 0.119 2012 14592.81 23459.73

Correlation 0.131242 -0.89 0.969004

Low and positive Highly Negative Highly Positive

1. From the above table the correlation analysis states that GDP increases with increase in the internet users.2. The FDI has very low positive relation with GDP.3. Trade balance doesn’t have a say at the GDP since it has been having a steep downward growth

Conclusion Comparing the correlation relationship of our analysis states that FII has a

fairly positive relationship GDP. FDI has a low positive relationship with GDP. By improving FDI which will in-turn complement local development efforts

in a number of ways, including boosting export competitiveness; generating employment and strengthening the skills base; enhancing technological capabilities and increasing financial resources for development for domestic business activities.

India's growth strategy has depended predominantly on domestic enterprises and domestic demand.

Growth in India slipped to a 9 year low in 2012 as persistent high inflation cut into consumer spending, power and political gridlock hampered meaningful economic reforms.

The Retail sectors 60% growth has come to the rescue.. The Domestic business(MSME) in India will be tested, the firms like Walmart

which comes into India with huge investments will surely put forth a challenge before the domestic players.

These Domestic business players should be optimistic and they should remember that these Huge foreign concerns were once small domestic firms.

Any Questions?

Source• http://www.internetworldstats.com/top20.htm• http://dbie.rbi.org.in/dbie/dbie.rbi?site=home• http://www.dipp.nic.in/english/sitesearch.aspx• http://www.sebi.gov.in/sebiweb/

Referred journals and research papers:1. Impact of foreign institutional investment on stock market.2. Net fii flows into India: a cause and effect study – by Maram srikanth and Braj Kishore3. Foreign investments in India – ISMR4. Foreign institutional investors: investment preferences in India by p. Krishna Prasanna5. UNCTAD training manual on statistics for fdi and the operations of Tncs - New york and

Geneva, 20096. structure of foreign direct investment in india during globalization period by

Dr.s. N. Babar, Dr. Khandare.7. India’s foreign direct investment: current status, issues and policy by Mohd. Shamim Ansari

Thankyou