FOREIGN DIRECT INVESTMENT

SUBMITTED TO : CHHAVI MAAM SUBMITTED BY: NEHA GOYAL ICG/2010/10657 BBM SEM V SEC A

Foreign direct investment refers to cross border investment made by a in one economy (the direct investor) with the objective of establishing a lasting interest in an enterprise (the direct investment enterprise) that is resident in a country other than that of the direct investor.

What is Foreign direct investment?

Foreign direct investment or FDI is any form of

investment that earns interests in enterprises which function outside of the domestic territory of the investor.

Need for Foreign direct investment

To take the advantage of cheaper wages in the country.
Special investment privileges such as tax exemption

offered by the country. To gain tariff-free access to the markets of the country or the region.

Types of Foreign direct investment

Portfolio investment Investment that does not involve obtaining a degree of control in a company
Foreign Direct Investment

Purchase of physical assets or a significant amount of the ownership (stock) of a company in another country to gain a measure of management control

FOREIGN DIRECT INVESTMENTS INFLOWS & OUTFLOWS IN ASIA

FOREIGN DIRECT INVESTMENTS INFLOWS IN INDIA

Reason for Foreign direct investment in India

Local market demand-86%
Low cost operations-29% Ease of marketing FDI-29% Labour availability-29% Entry of other players-24%

Political stability-24%
Time zone advantages-14%

Countries where India can invest

Russia Brazil

Taiwan
South Korea China panama

COUNTRIES WHICH INVEST FDI IN INDIA

Mauritius
Japan U.S.A.

Germany
Netherland Singapore France U.K

Benefits of FDI
Increase investment level and thereby income & employment Increase tax revenue of government Facilitates transfer of technology Encourage managerial revolution through professional management Increase exports and reduce import requirements Increase competition and break domestic monopolies Improves quality and reduces cost of inputs

Disadvantages of FDI
Flow to high profit areas rather than main concern areas Through their power and flexibility, MNC can undermine economic autonomy and control Sometimes interferes in the national politics
Sometimes engage in unfair and unethical trade practices Sometimes result in minimizing / eliminating competition and create monopolies or oligopolistic structures

Thank you