Definition of Foreign Capital Flows

Foreign Capital Flows

With the globalization of financial market private capital has now been moving around the world in search of highest returns. Capital crosses boarder of a country more easily than labor. The growth in the flow of foreign capital has become possible only because investment policies in the western countries have changed to allow higher investments, including portfolio investments abroad. The structural adjustments, following economic reforms, reduction in budget deficits, restructuring of public sector, relaxation of trade and exchange controls etc., have created a favorable climate for capital inflows into many developing countries like India.

Capital owners are, first and foremost looking for good returns and at the same time they are deeply concerned with risks. The attractions for them are:

Good in fracture

A reliable and skilled lab our force,

Guarantees of their right to repatriate both income and capital

Social and political stability.

A tradition of prudent fiscal management and

Deep links with global markets.

Foreign capital inflow may broadly be classified into three types

Portfolio investment by foreign institutional investors.

Direct foreign investments.

Capital raised by domestic companies through euro-issues