Foreign Institutional Investors
Foreign institutional investor means an entity established or incorporated outside India which proposes to make investment in India. Positive tidings about the Indian economy combined with a fast-growing market have made India an attractive destination for foreign institutional investors.
Entry Options For FII
A foreign company planning to set up business operations in India has the following options:
Incorporated Entity
By incorporating a company under the Companies Act,1956 through
- Joint Ventures; or
- Wholly Owned Subsidiaries
Foreign equity in such Indian companies can be up to 100% depending on the requirements of the investor, subject to equity caps in respect of the area of activities under the Foreign Direct Investment (FDI) policy.
Unincorporated Entity
India is now the third most favoured destination for Foreign Direct Investment (FDI), behind China and the USA, according to an AT Kearney survey that tracked investor confidence among global executives to determine their order of preferences.
India is share of global FDI flows rose from 1.8 per cent in 1996 to 2.2 per cent in 1997.
Such offices can undertake activities permitted under the Foreign Exchange Management Regulations,2000.
Economic Figures
In 2004, FII investments crossed $9 billion, the highest in the history of Indian capital markets.
The total net investment for the year up to December 29 stood at US$9,072 million while foreign investors pumped in about US$2,113 million in December.
Korea and Taiwan have always been the biggest recipients of FII money. It was only in 2004 that India managed to receive the second highest FII inflow at over $8.5bn..
In 2005 FIIs invested more in Indian equities than in Korean or Taiwanese equities.