Subject: Economic Reforms in India - Industrial Reforms (Part - Foreign Investments)
1. Introduction & Context
* This lecture continues from the previous video, focusing on the last aspect of the New Industrial Policy (నూతన పారిశ్రామిక విధాన తీర్మానం) decisions: Foreign Investments and Technology.
* Completing this topic concludes the Industrial Reforms (పారిశ్రామిక సంస్కరణలు) section.
* The main focus is Foreign Investments (విదేశీ పెట్టుబడులు).
2. Foreign Investments (విదేశీ పెట్టుబడులు)
* Definition: Investments flowing into India from other countries.
* Also known as Foreign Investments.
3. Types of Foreign Investment:
* Based on the nature of investment inflow, they are broadly categorized into two types:
* A. Foreign Institutional Investments (FII) (విదేశీ సంస్థాగత పెట్టుబడులు)
* B. Foreign Direct Investments (FDI) (విదేశీ ప్రత్యక్ష పెట్టుబడులు)
4. A. Foreign Institutional Investments (FII)
* Full Form: Foreign Institutional Investments.
* Mechanism:
* Foreign individuals or institutions invest in the Indian Stock Market (భారత స్టాక్ మార్కెట్).
* Done by purchasing shares (వాటాలు) of Indian companies.
* Typically occurs when international interest rates are low, and investors seek higher returns.
* Key Characteristic: Only capital flows in; investors/institutions do not establish a physical presence or directly participate in management/production.
* Other Names / Related Concepts:
* Foreign Portfolio Investment (FPI): Investors select specific stocks based on priority/potential (ప్రాధాన్యత), hence 'portfolio'. Often used interchangeably with FII in recent times.
* Butterfly Investments (బటర్ఫ్లై పెట్టుబడులు): Termed so because they can enter and exit the market quickly and in large volumes, similar to butterflies – indicating volatility. They come when conditions are favorable and leave quickly if instability arises.
* Footloose Investments (ఫూట్లూజ్ పెట్టుబడులు): Investments that are not tied down and can move easily across borders/markets (కాలు నిలవని పెట్టుబడులు - investments whose feet don't stay put).
* Equity Investments: As they involve buying equity shares of companies.
* Mechanisms/Instruments often associated with FII/FPI:
* ADR (American Depository Receipt): Receipts representing shares of a non-US company, traded on US stock exchanges. Facilitates US investment in foreign stocks.
* GDR (Global Depository Receipt): Similar to ADRs but traded on stock exchanges globally (outside the US as well). Helps companies raise capital internationally.
5. B. Foreign Direct Investments (FDI)
* Full Form: Foreign Direct Investments.
* Mechanism:
* Foreign individuals or institutions directly enter the Indian market.
* They establish a physical presence and/or participate directly in the production process (ఉత్పత్తి ప్రక్రియలో పాల్గొంటూ).
* Implies a longer-term interest and often involves management control or significant influence.
* Types of FDI:
* i. Green Field Investment (గ్రీన్ ఫీల్డ్ పెట్టుబడులు):
* Establishing a brand new company, factory, or operation from scratch in India.
* Example: A foreign company building a new manufacturing plant in India.
* Benefit for India: Creates new assets, employment, infrastructure, and increases production capacity. Generally considered more beneficial.
* ii. Brown Field Investment (బ్రౌన్ ఫీల్డ్ పెట్టుబడులు):
* Investing in or acquiring an existing Indian company or facility.
* Does not create new assets initially, mainly involves a change of ownership or management.
* Sub-Types:
* Acquisition (ఆక్విజిషన్): A foreign entity (often new to India) buys an existing Indian company.
* Merger (మెర్జర్): A foreign entity already operating in India acquires another Indian company and integrates (merges) it.
6. Policy Changes & Impact
* Pre-1991: Significant restrictions on foreign investment, often limiting foreign equity participation (e.g., below 50%).
* Post-1991 Reforms: Liberalization measures allowed higher FDI stakes, ranging from 51% up to 100% in many sectors.
* Primary Goal: Attract foreign capital, technology, and boost Foreign Exchange Reserves (విదేశీ మారకపు ద్రవ్యం) to prevent balance of payment crises like in 1991.
7. Key Statistics (As mentioned in the lecture - Dates are important):
* **India's Rank in Receiving FDI (ANKITAD Report, 2022-23 data):** 8th Globally.
* Top 3: USA, China, Singapore.
* **India's Rank in Foreign Exchange Reserves (Feb 2024 data):** 4th Globally.
* Approx. $628 Billion USD mentioned (actual figure was slightly different, use with caution).
* Top countries mentioned: China, Japan, Switzerland.
* **India's Rank in Receiving Green Field FDI:** 3rd Globally.
* Top 2: USA, UK.
* **Cumulative FDI Inflow (April 2000 - Dec 2023):** Approx. $971.5 Billion USD.
* **FDI Inflow in Recent Years (Approx. 2014-2023):** Approx. $449 Billion USD (mentioned as ~67% of cumulative since 2000).
* **Recent Yearly FDI+FII Inflows (Billion USD):**
* 2018-19: $62.3 Bn
* 2019-20: $74.4 Bn
* 2020-21: $81.97 Bn
* 2021-22: $83.5 Bn
* 2022-23: $71 Bn (or $71.3 Bn mentioned)
* 2023-24 (Apr-Sep): $33 Bn
* **Top Source Countries for FDI into India (2023-24 data):**
* 1. Mauritius (26%)
* 2. Singapore (23%)
* 3. USA
* 4. Netherlands
* 5. Japan
* **Top Indian States Receiving FDI (2023-24 data):**
* 1. Maharashtra (~30%)
* 2. Karnataka (~22%)
* 3. Gujarat (~17%)
* 4. Delhi (~13%)
* 5. Tamil Nadu (~5%)
* **Top Sectors Receiving FDI in India (2023-24 data):**
* 1. Services Sector (Banking, Insurance, NBFCs, etc.) (~16%)
* 2. Computer Software & Hardware (~15%)
* 3. Trading (~6%)
* 4. Telecommunications (~6%)
* 5. Automobile Industry (~5%)
8. Conclusion
* Foreign investments (both FII/FPI and FDI) are crucial for India's economy, especially for foreign exchange reserves.
* Liberalization policies post-1991 have significantly increased these inflows.
* Green field FDI is generally preferred for its developmental impact.
* The next video will cover reforms related to Foreign Trade (విదేశీ వ్యాపారం).
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