Portfolio Investment or FII Investment
The major constituents of Portfolio investment (FII investment) in India are:
Fund flows and resource mobilization by Indian companies through American Depository Receipts (ADRs) and Global Depository Receipts (GDRs). These inflows are indicative of robustness of Indian capital market and overall macroeconomic conditions.
Indian Scenario
After the economic reforms of 1991, FII investment or portfolio investment started to gain momentum in India. Within the 15 years of span FII investment multiplied by leaps and bounds. The pace of investment started to gear up in 1993 and in 2004-05 it shot up rapidly. In 2005-06, the inflow of foreign investment was US$68.1 billion whereas the outflow of this investment was US$55.6 billion. Thus India recorded net portfolio inflow of US$12.5 billion. The flows through GDRs/ ADRs and others, reached the level of US$2.6 billion in 2005-06.
Whereas FDI increased in 2006-07, the net portfolio investment declined from US$5.4 billion in April-September 2005 to US$1.6 billion in April-September 2006. This is due to the fact that while thee portfolio investment increased by US$21.2 billion (from US$27.5billion to US$48.7 billion), outflows increased even more by US$25.0 billion (from US$22.1 billion to US$47.1 billion), during the reference period. Thus the decline of FII investment was more than the increased FDI thereby resulting in a decline in foreign investment inflows between the first half of the previous year and current year.
As FII is one of the major instruments for attracting foreign investment in India, government is trying hard to persuade foreign investors to invest in India. With GDP growing over 8%, foreign investors too are making India as a preferred destination for investment. Government’s policy regarding investment policy is meant to make procedure simpler to attract FIIs. Some of the steps taken by the Government are mentioned below:
Indian Scenario
After the economic reforms of 1991, FII investment or portfolio investment started to gain momentum in India. Within the 15 years of span FII investment multiplied by leaps and bounds. The pace of investment started to gear up in 1993 and in 2004-05 it shot up rapidly. In 2005-06, the inflow of foreign investment was US$68.1 billion whereas the outflow of this investment was US$55.6 billion. Thus India recorded net portfolio inflow of US$12.5 billion. The flows through GDRs/ ADRs and others, reached the level of US$2.6 billion in 2005-06.
Whereas FDI increased in 2006-07, the net portfolio investment declined from US$5.4 billion in April-September 2005 to US$1.6 billion in April-September 2006. This is due to the fact that while thee portfolio investment increased by US$21.2 billion (from US$27.5billion to US$48.7 billion), outflows increased even more by US$25.0 billion (from US$22.1 billion to US$47.1 billion), during the reference period. Thus the decline of FII investment was more than the increased FDI thereby resulting in a decline in foreign investment inflows between the first half of the previous year and current year.
As FII is one of the major instruments for attracting foreign investment in India, government is trying hard to persuade foreign investors to invest in India. With GDP growing over 8%, foreign investors too are making India as a preferred destination for investment. Government’s policy regarding investment policy is meant to make procedure simpler to attract FIIs. Some of the steps taken by the Government are mentioned below:
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