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Foreign Direct Investment

Development of any nation depends upon the economy of that particular nation. Today we will talk about the concept of FDI (Foreign Direct Investment) and tries to learn the role of FDI in indian context.

Toady in modern era supremacy of any nation does not depend upon the area and military power. Economy is the biggest criteria for the development of any nation. Now the war is of economy. Singapore , Hong Kong , Switzerland etc are some of the example of the dominance of economy in the world despite of their weak military power and smaller area.

What Is Foreign Direct Investment?

Foreign direct investment (FDI) is an investment made by a company or individual in one country in business interests in another country, in the form of either establishing business operations or acquiring business assets in the other country, such as ownership or controlling interest in a foreign company.

Foreign direct investments are commonly categorized as being horizontal, vertical or conglomerate in nature.

A horizontal direct investment : In this type of investment , investor establish the same type of business operation in  the foreign countries as it operates in its home country.

A vertical direct investment: A vertical investment is one in which different but related business activities from the investor’s main business are established or acquired in a foreign country.

A conglomerate type of foreign direct investment is one where a company or individual makes a foreign investment in a business that is unrelated to its existing business in its home country.

India open its economy in 1991 and now it has became one of the fastest growing economy in the world. In fact India has become on the most open economies in the world and its 92% FDI comes through the automatic route.

In India the Foreign Investment Promotion Board (FIPB) offers a single window clearance for applications on Foreign Direct Investment (FDI) that are under the approval route.Where as the sectors under automatic route do not require any prior approval from FIPB and are subject to only sectoral laws.

Present Indian Government concept of “Make in India” has open its market for the investment of more and more FDI in Indian economy. Indian PM has invited the foreign investors to invest in Indian market from the international arena. During FY2015, India received the maximum FDI equity inflows from Mauritius at US$ 9.03 billion, followed by Singapore (US$ 6.74 billion), Netherlands (US$ 3.43 billion), Japan (US$ 2.08 billion) and the US (US$ 1.82 billion).

There are some concern from investors point of view especially when they invest in Indian economy. Many Investors complained about the tax structure , Problem of bureaucracy , clearance at different stages , Infrastructure , Land acquisition and different government in center and state level are the main concern.

Present government has taken a lot of initiative for FDI reforms, a high-level meeting chaired by Prime Minister Narendra Modi, paved the way for companies such as Apple and microsoft to  set shop in India. In defence, foreign investment beyond 49 per cent (and upto 100 per cent) has been permitted through the government approval route, in cases resulting in access to modern technology in the country.

To promote the development of pharmaceutical sector, the government has permitted up to 74 per cent FDI under automatic route in existing pharmaceutical ventures. The government has permitted 100 per cent FDI in India-based airlines. However, a foreign carrier can only own upto 49 per cent stake in the venture, and the rest can come from a private investors including those based overseas. These are the some of the initiative taken by the present government to improve the economy of India and attract more and more FDI in India. Today India is competing with the whole world and especially with china in that circumstance India need to promote its economy and work on the concern of the Investors. India need to change from service sector to manufacturing sector.

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