Introduction to

Foreign Capital
Foreign capital refers to the funds and investments that
originate from investors in one country and are then
invested in another. This influx of capital is crucial for
economies, especially those in developing nations, as it
promotes growth, infrastructure development, and job
creation. It introduces new technologies and expertise,
leading to enhanced productivity and competitiveness. In
this presentation, we will explore the various facets of
foreign capital, including its types, importance, advantages,
disadvantages, and the regulatory framework governing
- Byinvestments.
such Nihal Malviya
Jaiveer Singh
Nakul Singh
Definition and Importance of Foreign C
Foreign capital refers to money brought in from other countries for
investment. It is important because it provides funding that can help boost
economic growth, especially in developing nations with limited savings.
Foreign investment supports infrastructure, job creation, and innovation. It
can also help local businesses improve their practices and adopt new
technologies, leading to overall economic improvement.

1 Stimulates Economic Growth 2 Employment Generation

Foreign capital contributes to a It leads to the creation of jobs,
higher rate of economic growth by enhancing local employment
providing available funds for opportunities and reducing
investment in various sectors. unemployment rates.

3 Increased Productivity
Foreign investments often bring advanced technology and expertise, resulting in
higher productivity levels.
Life Cycle Of Foreign Capital
Types of Foreign Capital
Foreign Direct Foreign Portfolio Other Forms/Foreign Aid
Investment (FDI) Investment (FPI)
Other forms of foreign capital
FDI involves long-term FPI refers to investments include foreign loans and
investments where foreign made in financial assets such international assistance. Such
entities invest directly in as stocks and bonds. This type funding can be essential for
facilities and operations in the of investment is typically more projects that require
host country. This can include liquid compared to FDI. significant upfront investment.
building new businesses or
acquiring existing ones.
Features Foreign Direct Investment (

1 Long-Term Investment
FDI is considered a long-term investment. Investors commit capital to
foreign businesses with the intention of maintaining a long-term
relationship and profiting from the sustained growth of the company or
economy.
2 Physical Presence
FDI often requires establishing a physical presence in the foreign country,
such as setting up factories, offices, or facilities. This could be through the
creation of new businesses (Greenfield investment) or the acquisition of
existing companies (Brownfield investment).

3 Transfer of Technology and Expertise

FDI often leads to the transfer of technology, managerial know-how, skills,
and best practices from the investing country to the host country. This can
contribute to innovation and efficiency in the host country's industries.
 Features Foreign Portfolio Investment (FPI)

1. Liquidity
……………………..
•FPI offers high liquidity as investors can quickly buy or sell foreign assets. This
flexibility allows investors to easily exit their positions.

2. No Direct Control

•Unlike Foreign Direct Investment (FDI), FPI does not give investors direct control or
influence over the operations or management of the foreign companies they invest in.

3. Diversification

•FPI allows investors to diversify their investment portfolio across different countries and
regions, spreading risk by not being confined to one economy.
Advantages of Foreign Capital
Economic Growth Job Creation
Foreign capital accelerates economic development as By investing in local companies or creating new
it introduces additional resources that lead to businesses, foreign capital generates numerous job
improved infrastructures, such as roads, schools, and opportunities, benefiting the overall society.
hospitals.

Technology Transfer Access to Global Markets

Investment from foreign entities often comes with Foreign capital can enhance a country's access to
advanced technology and managerial expertise which international markets, creating a stronger export base
can improve productivity in the local economy. for local products.
Disadvantages of
Foreign Capital
1 Economic 2 Market Volatility
Dependency
Rapid withdrawals
Countries may can cause significant
become reliant on market disruptions,
foreign capital, affecting local
leading to economies and
vulnerabilities in employment.
economic policy and
sovereign decisions.
Profit Repatriation
3
Foreign investors often repatriate profits, which can
limit the positive economic impacts on the host
country.
Regulatory Framework for
Foreign Capital
1 Legislation
Nations implement laws to regulate foreign investments,
ensuring that they align with the country's economic goals
and regulations.

2 Incentives
Various incentives such as tax holidays and investment
protections are provided to encourage foreign investment.

3 Monitoring
Regulatory bodies are tasked with monitoring foreign
investments to mitigate risks and ensure compliance with
local laws.
Case Studies of Foreign Capital Investment
Technology Sector Infrastructure Projects Agriculture

Case studies in technology Foreign investments in Investments in agriculture

demonstrate how foreign infrastructure such as enhance productivity through
investments can lead to highways and bridges have modern techniques and
advancements in innovation transformed local economies, sustainable practices, boosting
and the establishment of tech improving connectivity and food security.
hubs in developing nations. access to markets.
Major Companies whom invested in our country
and companies they have invested in
TYPE:-INVESTMENT MANAGEMENT FIRM
HEADQUARTERS:-NEW YORK CITY, USA
INVESTED IN:- TATA CONSUTANCY COMPANY

TYPE:-MULTINATIONAL CONGLOMERATE
HEADQUARTERS:-TOKYO, JAPAN
INVESTED IN:-FLIPCART ,OYO ROOMS & PAYTM

TYPE:-ASSET MANAGEMENT FIRM

HEADQUARTERS:-MALVERN, USA
INVESTED IN:-HDFC & RELIANCE
 Case Studies of Foreign Capital
Investments
Case Study: India’s IT Sector Growth (1990s-Present)
After the implementation of LPG law under the leadership of Prime Minister Shri P V Narasimha Rao
and Finance Minister Dr. Manmohan Singh.

In the 1990s, India opened up its economy to foreign capital and investment, marking a significant shift from
protectionist policies to a more liberalized approach. This change included economic reforms that eased restrictions on
foreign investment and encouraged the growth of private enterprises.

One of the most notable successes was the rise of India's information technology (IT) sector. Foreign capital played a
crucial role in this transformation. Multinational companies like IBM, Accenture, and Microsoft invested heavily in
India, establishing development centers and forming partnerships with Indian IT firms.

The influx of foreign investment helped Indian IT companies, such as Infosys and Tata Consultancy Services (TCS), scale
rapidly and gain international prominence. These companies became global leaders in software services and IT
consulting, contributing significantly to India’s GDP growth. The sector created millions of jobs, enhanced technological
capabilities, and positioned India as a major player in the global technology landscape.

India's IT boom demonstrates how foreign capital, combined with strategic economic reforms, can drive sectoral
growth, enhance global competitiveness, and provide widespread economic benefits.
 Case Studies of Foreign Capital
Investments
Case Study: Sri Lanka’s Sovereign Debt Crisis (2020-2022)

Sri Lanka's sovereign debt crisis began to intensify in 2020, exacerbated by the
COVID-19 pandemic and pre-existing economic mismanagement. The country, heavily
reliant on tourism and foreign loans, faced a severe economic downturn as tourism
revenues collapsed and debt obligations became unmanageable. The government’s
inability to service foreign debt led to a default in 2022. This financial crisis resulted in
widespread shortages of essential goods, including food and fuel, and severe
inflation. Massive public protests erupted, leading to political instability and the
resignation of the president. Sri Lanka’s crisis highlights the dangers of excessive
foreign borrowing, vulnerability to global economic shocks, and the importance of
sound economic management and diversified revenue sources to avoid such crises.
Conclusion and Key Takeaways
1 Diversification of Capital
2 Comprehensive 3 Strategic Regulations
Understanding
Foreign capital is essential Implementing strategic
for enhancing the It is important to regulations can maximize
diversity of financial understand the various the benefits while
resources available for types of foreign capital to mitigating the risks
investment. make informed associated with foreign
investment decisions. investment.
THANK YOU