Foreign institutional investment, Macroeconomics

Foreign Institutional  Investment:

Foreign  investment flows in the balance of payments  (BOP) comprise FDI flows and portfolio flows. The latter consists of resources mobilised by Indian companies through American Depository Receipts  (ADRs) and  Global Depository Receipts  (GDRs). From the trends discernible therein, it follows that the net  inflow of investment from both the types of  investments was fluctuating till the year 2003. A clear picture, however, appears to be evident after 2004. 

Compared to FDI, FII or portfolio investment flows into the Indian economy were not one of the leading varieties of capital flows until 2003-04.  In  the aftermath of  the  1997 East Asian crisis, such flows had actually become net outflows. While there was a modest recovery in 1999-2000, languishing FII flows steadily declined in 2002-03. However, the years 2003-04 and 2004-05, have been remarkably robust years for such flows, Beginning from 1993-94, till 2002-03, the highest share of FII (net) flows in  total foreign investment inflows was recorded at  43.5  per  cent  in 1995-96. During 2003-04 and 2004-05,  their share shot up to 79.4  percent  and 68.2 percent, respectively, indicating the significant contribution being made by FII  investment to  the capital account  in recent years. During the year 2005-06, FII  investment has maintained  the healthy trends of the previous two years.

The acceleration in volume of FII inflows in recent years has drawn attention to whether India's capital account  is becoming increasingly dominated  by 'hot money' -  a phrase commonly, but incorrectly, used for describing FII flows  - given the tendency of such flows to suddenly reverse the direction in response to adverse market sentiments and precipitating  large capital outflows. While theoretically 'herd' behaviour by FIIs  and consequent withdrawal cannot be ruled out, such possibilities are  limited  if  the fundamentals  are strong,  the market is well regulated and the participants are mainly pension funds, life insurance companies and mutual  funds, which  are more involved with  longer  tern investments. Hence notwithstanding a quantum jump in volume of FII flows in recent years,  low  levels of short- term debt as a proportion of total external debt and adequate reserve coverage mitigate the risk of potential reversals.  

Posted Date: 11/9/2012 5:20:53 AM | Location : United States







Related Discussions:- Foreign institutional investment, Assignment Help, Ask Question on Foreign institutional investment, Get Answer, Expert's Help, Foreign institutional investment Discussions

Write discussion on Foreign institutional investment
Your posts are moderated
Related Questions
if we impose any rule and regulation on clasical model like not expoit polutionso what is effect on factor of clasical model

How unemployement increases by firm relocating production If unemployment increases in a specific city because of a firm relocating production, it's structural unemployment tha

1. Christopher has $200,000 to invest, and he is considering the following business opportunity. He would use his $200,000 to buy a mechanical self-service car wash. He'll earn $40

how large money is supply (M1)

difference between gdp at market price and nnp at factor cost

What is The law of comparative advantage The law of comparative advantage, though, suggests that it would be unwise of UK economy to try to replicate German model. First German

Use the laws of supply and demand to explain why the cost to heat our homes and businesses goes up in the winter time. Be sure to explain your answer fully. At least two paragraphs

A system of private property rights A. enhances economic growth by creating incentives to the Fed to maintain stable prices. B. enhances economic growth by increasing the pro

The elasticity of demand in the local hardware industry is -2, while in the video market it is. Which industry has a higher markup over marginal cost (as a percentage of price)?

What are the pros and cons of reducing dependence on outsourcing in order to fulfill social obligations toward stakeholders?