Types of Foreign Capital

FDI (Foreign direct Investment) FPI(Foreign Portfolio Investment) FII (Foreign Institutional Investment) ECB(External Commercial Borrowings) ADR/GDR( Depository Receipts)

FDI Vs FPI
Long Term in nature than FPI. Control and controlling & Interest in management in its Policies.

Why study FDI??

Raises concerns and consequences of Foreign Ownership. Offers the possibility of channeling Resources to the developing countries.

Types of FDI
(A) For Source Country

Horizontal FDI Vertical FDI Conglomerate FDI

(B) For Host Country

Import substituting Export increasing Government Initiated

Sequence to develop a Foreign Market for its products.

*Step 3 and 4 requires FDI

Forms of FDI
Greenfield Investment Cross Border Mergers and Acquisitions (M & A) Joint Ventures
* Brownfield Investment : Investments are formally an

acquisition resembling greenfield investment but the investor replaces the plant , labour and the product line of the firm.

Top Investing Countries

2% 4% 4% 3% 2% Mauritius

5%
7%

Singapore
USA UK

9%

Netherlands Japan

11% 53%

Cyprus
Germany UAE France

Log of GDP = 4.12 + 0.466 Log of FDI

6.2 6.1 6 5.9 5.8 5.7 5.6 5.5 5.4 5.3 5.2 2 2.5 3 Log of FDI 3.5 4

Log of GDP