FDI(Foreign Direct Investment)
Advantages:
FDI leads to increase in the productivity of the country.(GDP)
It is a long term investment made by any foreign country in the target country.
It brings job opportunities.
FDI is the major monetary source for economical development in India. Foreign companies invest directly in fast growing private Indian business to take benefits of cheaper wages and changing business environment in India. They either invest in partnership of an already existing company in the target nation, or they buy a company in the target company , or they open a new branch of their company on their own.
Economic liberalisation started in India in wake of the 1991 economic crisis and since then FDI has steadily increased in India.
According to the financial times India overtook China and USA as the top destination for the Foreign Direct Investment.
The government of India has amended FDI policy to increase FDI inflow .
The Make in India initiative in September 2014 has promoted FDI, under which 25 sectors were liberated further.
Today India has become the top destination for foreign direct investment.
India has received most of its FDI from Mauritius ,Singapore,Netherlands,Japan and the US.
There are two routes by which India gets FDI-
Automatic Route- By this route FDI is allowed without prior approval by Government or Reserve Bank of India.
Government Route- Prior approval by government is needed via this route.Foreign Investment Promotion Board is responsible agency to oversee this route.
The major sectors of FDI in India are-
Infrastructure- 10% of India’s GDP is based on construction activity.About 40% of the funds in this sector are funded by the private sector. 100% FDI under automatic route is permitted in construction sector for cities and townships.
Automotive-India is the 7th largest producer of vehicles in the world.100% FDI is permitted in this sector via automatic route. Automobile shares 7% of India’s GDP.
Pharmaceuticals- Indian pharmaceutical market is the third largest in the world in terms of volume and 13 in terms of value.100 % FDI is permitted in this sector.
Railways- 100% FDI is allowed under automatic route.A foreign investment of Rs90,000crore is expected for the Mumbai-Ahmedabad high speed corridor.
Today government has injected 100% FDI in Defence , Pharma, Civil Aviation.
Now most of the sectors would be under automatic approval route, except a small negative list. With these changes, India is now the most open economy in the world for FDI.
Employment and Economic Boost.
Development of Human Capital Resources- The attributes gained by training and sharing experience would increase the education and overall human capital of a country.
Resource Transfer-FDI allows resource transfer and other exchange of knowledge, where various countries are given access to new technologies and skills.
Increment in Income- Another big advantage of it is that it results in the increase of the target country’s income.
DISADVANTAGES
Hinderance to domestic Investment.
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