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
ihave real gdp per capita for all countries in world .. how can i calculate world real gdp per capita by using the data.

What are the two main costs of economic growth The two main costs of economic growth are resource depletion and environmental damage. Economic activity needs factor inp


You operate your own small building company and have decided to bid on a government contract to build a pedestrian walkway in a national park during the coming winter. The walkway

You make a monthly deposit of $1,000 into a saving account for the next 10 years. How much can you withdraw immediately after your last deposit if your saving account pays 6% per y

Give an example of a current event opportunity cost that includes graphs

nature, development and function of money.

The LM-curve in the AS-AD model  The LM-curve will shift upwards (downward) when P is increases (decreases) in the AS-AD model is moved L

Long Run Equilibrium:Graphical Analysis In the long run the natural rate of output is the level of output to which the economy will tend to adjust in the long run. This indicat

List and briefly describe the principal causes of high population growth in developing countries and the major consequences.