Foreign Direct Investment In India Assignment
Added on 2020-03-16
8 Pages2412 Words104 Views
"Evaluate the advantages and disadvantages of Foreign Direct Investment with particular reference to India”INTRODUCTIONForeign direct investment (FDI), as the name says is an venture into a company by a financierfrom an abroad country for which the foreign financier has control over the company acquired. As per the Organization of Economic Cooperation and Development (OECD), control means being the owner of more than ten percent of the total shareholding of the company. Those companies that make FDIs are named as Multinational companies (MNCs). An MNC can either invest directly by formation of a new company in itself in another country which is termed as Greenfield investment or through the purchasing of another firm which is situated abroad, termed as brownfield investment (Amadeo, 2017). The importance of FDIs cannot be under-estimated as they play a crucial role in the development of developing as well as emerging economies. These countries are of the view that in order to develop their home companies, they are in dire need of high end investors who would invest money as well as their experience would help them to inflate their sales across the borders as well. Although the developed economies also feel the need for FDIs, yetthe low income countries stand to gain more since there economies lack expertise which thesedeveloped economies already posses. In this essay, there would be a description of the advantages and disadvantages of foreign direct investment, with specific focus upon India being a low income country and how the country has benefitted as well as loss due to such aninvestment. ADVANTAGES OF FOREIGN DIRECT INVESTMENT
India falls within the category of a developing economy and hence has gained a lot due to the FDI that has happened. FDI not only is advantageous for the world economy but also for the people who are investing their money and the country who is receiving the money as well. The developing countries such as India which welcome the FDI can easily trade in the global market. Developing and low income economies generally have to face a lot of limitations when it comes to entering the foreign market, but such investments help them to deal with those restrictions easily. The situation for drawing volumes of FDI within India needs an examination of the determinants and implication of FDI in the Indian framework. The country has been able to develop its infrastructural facilities post the FDI entered the country. Due to the same the production of the capital goods have increased tremendously. Further to this, India is a country which lacks behind technology, until the FDI entered. It helped bring in newer technologies. India is mainly termed as an agricultural country and hence during the reign of Prime Minister Manmohan Singh,, FDI helped to formulate a new revenue model for the farmers. The technology which was being introduced would have helped the marketing of theagricultural produce. Due to the same, the retail chain led by Wal Mart was allowed to set up stores in India which would have benefitted the farmers as well (Chaturvedi, 2012). FDI also ensures that there is a steady flow of capital within the country, more importantly in the key and core segments. The country faces a limitation with regards capital both in monetary terms as well as in terms of raw materials. The said space is expected to met up with the help of FDI which would in turn ensu-re development of the economy as well. Post the economic reforms in the year 1991, the FDI surroundings in India has witnessed a dramatic change. There has been adequate stability and effective formation of various financial institutions specifically the money and government securities market. There has been a sudden surge in the incoming of the foreign banks within the countries, setting up
there branches all around the country and also the domestic banks are seen trying their luck inthe foreign waters (Anitha, 2012). The country’s political system has welcomed the FDI with open arms so much that they offer various investment schemes which are attractive along with policies which are acceptable by them. To the surprise, the country seems to offer one ofthe most moderate FDI establishment in Asia. The next advantage which a FDI offers to a country such as India which is low income category is the employment opportunities. India is a country which has one of the highest levels of poverty due to increased population and lack of work. However, with the introduction of FDI, the service sector has faced a boost which has provided a wide scope for the employment to many. The unemployed work force comprising of the educated lot has to some extent due to FDI has decreased since they were able to provide employment to some ofthe Indian workers (Wei & Balasubramanyam, 2004). Another very important role FDI had to play for India was the exchange rate. The Reserve Bank of India has been successfully ensuring stability in the exchange rate with the help of exchange control measures. However the same is possible if the supply of foreign investment is continuous. The country has been able to achieve the same and presently RBI is sitting in a very comfortable position wherein the foreign exchange reserve is that of more than one billion dollar (Dalal, 2011). Last but not the least, the FDI has been beneficial in the upliftment of the backward parts of the country. These FDIs have been able to nurture such areas by setting up manufacturing units due to which these areas are now termed as industrial units. The most striking example of the same is that of Hyundai, a South-Korean Multinational has set up its car unit in Sriperumbadur in India (Sekar, 2015). Further to this, India is one such country in Asia whichhas a large number of natural resources which was being wasted all these while till the FDI
End of preview
Want to access all the pages? Upload your documents or become a member.
Related Documents
Business Environment - Definitionlg...
|10
|2792
|19
International Business Assignment Samplelg...
|9
|4694
|354
Economics of Globalization: Outward Chinese FDI in Thailandlg...
|5
|987
|175
Article Review Template 2022lg...
|3
|1205
|55
FDIs have Positive Effect on Host Economy : Reportlg...
|7
|2099
|68
Foreign Direct Investment in Indialg...
|9
|2897
|410