Jun 8, 2018

What is Foreign Direct Investment, Understanding FDI


What is FDI?

FDI is an investment made into a country by a company located in another country. FDI stands for Foreign Direct Investment. It can be done either by purchasing stake in a company or by expanding the operation of an existing company within the country. FDI has played an important role in the economic growth of the country.

What are the Benefits of FDI in India

With Government supporting FDI has helped Indian economy to grow faster. The FDI approvals are generally done by the RBI (Reserve Bank of India) and Foreign Investment Promotion Board. The procedure is done fast so as to bring in large amounts of FDI into the country.

FDI - Sectors

The survey conducted reveals that maximum FDI approval has taken place in the sectors such as Pharmaceuticals, Electronics, Hardware, Information and Technology, Automobiles, Travel, Telecommunications etc. The Telecom Industry has been growing rapidly due to the FDI inflows as the international companies entering the market. The Telecommunication sector is noted to be one of the fastest growing industry in India.

Guidelines to Sectors

Guidelines have been issued to different sectors by the Government of India to increase the flow of FDI into the country. These sectors mainly includes the Banking, Tourism, Housing, etc. FDI is allowed in Financial Services including Credit Card Business. Foreign investors can buy up to 40% of the equity in Private Banks.
USA, UK, Germany, France, Japan, Switzerland, Singapore, Malaysia are some of the countries participating in FDI with India.

Why FDI in India?

Today, Indian market is one of the Developing Market in almost all sectors and potential for various Industries across the World. The advantages for FDI are:
  • The rise of the Indian economy.
  • Cheap Wages.
  • Tax Redemption.
  • India has majority of workers who are educated and most of them have the ability to speak English.
  • Increase in incentives to Foreign investments.
  • Growth and increased earnings in most sectors of business.
  • A huge market with high returns.

Prohibited Areas for FDI.

There are some FDI restricted area like the Arms Nuclear, Railways, Coal and Mining Industry, Gambling, Chit Fund Business, Lottery Business, etc.
These are some of the government restricted areas to safe guard and protect the interests of the nation. 

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