Foreign direct investment or commonly known as FDI has been a controversial issue in international economics some are in favor of it and some are against it. Foreign direct investment or FDI is an investment in a business by investors from another country from which the foreign investor has control over the company invested, the organization of economic cooperation and development OECD defines control of 10% or more of the business.
B businesses that make a foreign direct investment are often called multinational corporations or MNCs or multinational Enterprises or MNEs. A foreign investor may make a direct investment or by creating a new foreign investment which is called Greenfield investment or acquisition or investment in an existing foreign form which is called as brownfield investment.
Advantages Of FDI
The first advantage of FDI is economic development stimulation foreign direct investment can stimulate the target country’s economic growth by creating a more conducive environment for investors and as well as the local Industries.
FDI can be a tremendous social external capital for a developing country which can lead to further economic development. The second advantage of FDI is increasing employment foreign direct investment creates new jobs as investors build new companies in the target country and get more opportunities in the income and handling the more power of local population to economic post.
For example if a large factory is constructed in a small developing country the investing company will typically have to utilize at least some local labor equipment and material to assemble,this will result in new jobs and foreign money being pumped into the economy once the factory constructed the factory will have to hire local employees and will probably utilize at least some local materials and services this will create further jobs and maybe even more new businesses. These new jobs mean that locals have more money to spend thereby creating even more jobs.
The third advantage of FDI is the increase in tax revenues with increasing economic activity due to FD RD tax revenue of the government in the target achieved will also increase after the factory has been constructed using this provides by the FDI all the products manufacturer in the country known over Texas will be imposed on factory employees income and purchases and Taxes all the increment.
The fourth advantage of FDI is the development of human capital resources. This advantage brought about India’s development of human capital resources which is also one significant advantage. The fifth advantage is the increment in income with more job and higher wages been national income; the growth of the economy also increases.
FDI In India
India is the seventh largest country by area and the second most populous country in the world, in the world of economy, India is the third largest in the world as measured by purchasing power with an average growth rate of approximately 7% over last two decades.
Also, it has a large and growing middle-class increasing rate of domestic consumption that makes it an important market. It has a strong fundamental growth and many people qualified people are present in India that can be a great help in the future. By all things, it can become a great investment market.
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