Essential and Proposal of Foreign Direct PDF
Essential and Proposal of Foreign Direct PDF
ABSTRACT: Foreign Direct Investment (FDI) is considered as an essential factor of overall capital stream. It causes world
economic growth by investment opportunities. Emerging nation look for new fund sources for improving the country as the
foreign investors seek for new sources of investment. The Foreign Direct Investment both the sources of fund and new technology
in the developing country. FDI plays important role. It can boost output growth rate through improved work efficiency and also
increases the gross investment level, worked productivity and tax take and future output of the country. In recent days, the flow of
FDI in the current backdrop of overall slump in investment in the economy. Investment will reduce, if FDI falls, which in turn
will shrink employment generation which would cause a decline in the consumption level and downward trend in the savings.
Index Terms: FD, FDI, FII, GDR and FCCB
I. INTRODUCTION
India is one of the largest markets with high purchasing power. Lots of work to be done in the field of various sectors. It is
not possible for Indian government alone to developed world class infrastructure and other allied facilities because of huge
investment requirement. FDI in India has in a lot of ways enabled India to achieve a certain degree of financial stability, growth
and development. In order to create new & more jobs, FDI is the success mantra now. FDI no doubt is creating innovation in retail
sector but simultaneously it may pull down the local and domestic retailers of India which is surely a concern to worry about for
Indian government. It reduces the gap between farm prices and retail prices. Gives best management practices from all over the
world. Threats on organized and unorganized retail players. One of the most famous and striking feature of today’s globalised
world is the exponential growth of FDI in both developed and developing countries. In the last two decades the pace of FDI flows
are rising faster than almost all other indicators of economic activity worldwide. Developing countries, in particular, considered
FDI as the safest type of external finance as it not only supplement domestic savings, foreign reserves but promotes growth even
more through of technology, skills, increased innovative capacity, and domestic competition. Now a day, FDI has become an
instrument of international economic integration. Located in South Asia, India is the 7th largest, and the 2nd most populated
country in the world. India has long been known for the diversity of its culture, for the inclusiveness of its people and for the
convergence of geography. Today, the world’s largest democracy has come to the forefront as a global resource for industry in
manufacturing and services. Its pool of technical skills, its base of an English – speaking populace with an increasing disposable
income and its burgeoning market has all combined to enable India emerge as a viable partner to global industry. Recently,
investment opportunities in India are at a peak [1].
Creating as much of the biggest advantage of foreign direct investment as possible for host countries can be important, such
as technological spill, support for human capital formation, improved ease of use for competitive business
environments and contribution to international markets. Improved trade integration and business development can
also contribute to improving the environmental and social conditions of the host country by ensuring that foreign direct
investment is established as a new "clean" technology, rather than economic benefits, and a more socially responsible
business policy. All these rewards contribute to economic growth, which is an important means of reducing poverty in the
economy. However, it is difficult to accurately evaluate the economic breach of FDs. The benefits of foreign direct
investment (FDI) do not automatically increase in proportion between provinces, sectors and communities. These
benefits vary from country to country and are difficult to distinguish and assess [8].
II. FOREIGN INVESTMENT / CAPITAL CONCEPT
Foreign capital includes foreign capital and foreign capital. Foreign capital of the government consists of foreign
aid; foreign capital is foreign direct investment or indirect foreign investment. Foreign investments should channel the
reinforcement of financial resources such as technology and other achievements from one country to another. Foreign
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investments not only introduce capital, but also stimulate administrative power, technical knowledge,
technical personnel, product and production technology, and therefore require growth and pregnancy of infrastructure
and carry out secondary domestic investments. There are generally two types of foreign investment: foreign direct
investment (FDI) and foreign investment (FPI)[2].
Foreign direct investment: investors meet in a foreign country that tends to invest more. It generally exists in a form
that divides subsidiaries, acquires an interest in a self-sufficient company or establishes a joint venture in a foreign country.
The direct investment and management of the company generally had to be together. Foreign direct investment (FDI) is
guaranteed as an integral part of an open and successful international economic system and important development
mechanisms. In this context, this document examines the advantages of foreign direct investment as an essential component of a
successful and sustainable economic process and as part of the road to social mitigation[3].
Overseas investments in equities are for the benefit of almost profit from investments in company shares and financial
debt on foreign markets and do not constitute an excuse for business management. Foreign portfolio investments in
economic growth tend to form a capital market. Portfolio investments, large market flows; Direct financial support to
domestic companies without interest. When this investment arrives on the matchmaking market, it recommends
the question of capital appreciation, which can increase capital costs and reduce procurement costs. Portfolio investment
improves the liquidity of the stock market. Because portfolio investments lead to capital inflows in the short term; it creates
something unexpected from the foreign exchange market and stocks. In recent years, portfolio investments have been held to
stimulate more capital flows in the economy [4].
The GDR and the FCCB are investments in which Indian companies have appeared on the European market to circulate foreign
capital by reducing foreign investments in Indian securities [5].
The need for foreign capital for developing countries such as India can arise for the following reasons:
(a) Domestic capital lacks the qualities necessary for economic growth and must invite foreign capital. Because less
developed countries want to be industrialized in a short time, it is necessary to substantially increase the level of
investment.
(b) This again requires a high level of cost savings. Nevertheless, due to the general poverty of the population, the
savings are often very low. Thus the difference in resources between investments and savings.
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© 2018 IJRAR December 2018, Volume 5, Issue 04 www.ijrar.org (E-ISSN 2348-1269, P- ISSN 2349-5138)
(c) Developed countries are technically equivalent to developed countries. It meets the technological acceptance
requirements of developed countries. Such technology is usually supplied with foreign capital when it comes in the
form of private foreign investment or foreign cooperation.
(d) The foreign affairs sector has few production factors, such as technical know-how and business knowledge, which are
equally indispensable for economic development
(e) Non-developed countries need much more revenue than exports in the early stages of economic development. As a
result, the balance of payments is generally uncomfortable. This leads to a gap between exchange rate income and
consumption. Foreign capital offers a short-term solution to the problem.
(f) Private foreign investors state that foreign investments contribute to new technology, better management and better
organization, superior marketing and sometimes cheap financing [6].
Table.5.1 Ranking of Sector wise FDI inflows in India since April 2000- Dec 2016
Service Sector 1
Telecommunication 2
Construction Activities 5
Automobile Industry 7
Metallurgical Industry 8
Power 9
The Sector wise Analysis of FDI Inflow in India reveals that maximum FDI has taken place in the service sector including
the telecommunication, information technology, travel and many others. The service sector is followed by the computer
hardware and software in terms of FDI. High volumes of FDI take place in telecommunication, real estate, construction,
power, automobiles, etc [7][9].
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VI. CONCLUSION
On the basis of above research and discussion FDI has both positive and negative impact on India Economy.
Government should promote FDI and in order to lower down its negative impact it should have redesigned framework for the
local players. Government should encourage FDI on gradual basis depending on products from one area to other Product
category wise clauses should be developed to allow FDI. India needs inflows to drive investment in infrastructure, a lack of
which is often cited as restricting the country’s economic growth. Investment is also needed to expand capacity and
technology in sectors such as autos and steel, as well as to offset a big current account deficit. In a nutshell, FDI should be
encouraged with strict feasible and mutually beneficial regulations. “Better Investment Climate” Need of the Hour. The aim
of this plan is to put the main channels for foreign direct investment first in order to have a substantial and prominent
impact on the economic development of the host country. It is essential to distinguish that FDI is not all bad, because
you like everything in the same picture. Discriminatory discussions address the negative impact of FDI flows on the
state economy.
REFERENCES
[1] Baldwin R.E. (1979) Determinants of Trade and Foreign Investment, The Review of Economics and Statistics,
61: 69p.
[2] Chandra A.P. (2009) Trends and Patterns of Foreign Direct Investments in Asia: A Comparative
Perspective, The Journal of Applied Economic Research 3(4): 365-408p.
[3] Debroy B. (1992) Trade Policy Reforms in India, Foreign Trade Review, 15(3):120-135p.
[4] Duttaray M., (2003) The Relation between Foreign Direct Investment and Growth: Casuality and Mechanisms,
Indian Journal of Economics, 7: 15p
[5] Naresh Guduru ,2012 Impact of FDI Flows on Indian Economy Two Day National Conference on Strategic Implications
of FDI in retailing (SIFiR-2012) organized by Department of Commerce & Business Management. March-2013 Page
No:306-311(ISBN:978-93-5097-3493)
[6] Naresh Guduru ,2016 FDI Policies and Licensed Sectors in India The International Journal’s Research Journal of
Social Sciences & Management - Vol. . 6 No 7 November ,2016, Page No100 - 111.
[7] Naresh Guduru, 2015 Economic Determinants And Impact Of Forign Direct Investment In India : An Empirical and
Theoretical Review in Prest Globalization Scenario 2nd International conference on Emerging Trends in Management
Engineering, Technology and Social Sciences 29th June 2015. vol 3 ,Issue 3(I)July – Sep 2015 –Page No 62-68 ISSN
2322-0899
[8] G.Naresh , Nuzhath Aijaz Shilpa Strategic implications of FDI in Retailing Impact of Fdi Flows On Indian
Economy bajaj page no.306-311
[9] Andreas Johnson: The Effects of FDI Inflows on Host Country Economic Growth, Published January 2006.
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